For years, Republicans have been trying to create a large investor class with policies like private Social Security accounts, medical savings accounts and education vouchers.
These policies were based on the belief that investors are careful, rational actors who make optimal decisions. There was little allowance made for the frailty of the decision-making process, let alone the mass delusions that led to the current crack-up.
Democrats also have an unfaced crisis. Democratic discussions of the stimulus package also rest on a mechanical, dehumanized view of the economy. You pump in a certain amount of money and “the economy” spits out a certain number of jobs. Democratic economists issue highly specific accounts of multiplier effects – whether a dollar of spending creates $1.20 or $1.40 of economic activity.
But an economy is a society of trust and faith. A recession is a mental event, and every recession has its own unique spirit. This recession was caused by deep imbalances and is propelled by a cascade of fundamental insecurities.
RE: “These policies were based on the belief that investors are careful, rational actors who make optimal decisions.”
No, those policies were based on its being both a moral good and a pragmatic good to allow people to spend their own money, rather than the State do so. People are most certainly not always “careful” or “rational” creatures who only take “sure risks” — otherwise, this country would not have been settled, nor would their have been people in covered wagons moving out West through snow, Indians, and no water.
Thanks for the clarity Sarah. The fog machines are doing their work. Your words are like a beacon.