Yes, the road ahead looks difficult. But this is no time to abandon our faith in the capacity for enterprises and markets free of oppressive state intervention to reinvent ourselves and bounce back. Human ingenuity will prevail, confidence will eventually return and the wheels of commerce will spin again. There is too much evidence that the world, despite periodic setbacks, continues to progress.

He parses this intriguing paragraph thus:

Interesting isn’t it. The defence of free market capitalism depends on faith not on reason. Reason cannot do the job any more given the global financial crisis and its aftershocks on the economy. So faith is called in to plug the gaps.

Of course, faith was always a big component of economic liberalism. Enlightenment doctrines (and Marxism is another), having toppled God from his epistemological throne as the prime cause, took on some of the characteristics of the theism they thought they’d banished. So economic science has always been contaminated by ideology. Normative values such as “progress” and “ingenuity” underpin a worldview which partakes in blindness as well as insight. Now that a leap of faith is required to defend one’s choice of belief, we’re beginning to see this aspect of economic liberalism in plain view. We’re being asked to sign up to a metaphysics.

Coincidentally, John Quiggin has posted the inaugural number in a promised series of observations about economic doctrines which have been discredited by the Global Financial Crisis. First cab off the rank – the efficient markets hypothesis. His conclusion?

Once the EMH is abandoned, it seems likely that markets will do better than governments in planning investments in some cases (those where a good judgement of consumer demand is important, for example) and worse in others (those requiring long-term planning, for example). The logical implication is that a mixed economy will outperform both central planning and laissez faire, as was indeed the experience of the 20th century.

If we follow Quiggin in his reasoning, we’re effectively aligning ourselves with the sceptical and reflexive reasoning which is another legacy of the Enlightenment. It’s not as much fun as blind declarations of faith in the face of contrary evidence, and sorting folks into friends and enemies, the saved and the damned, but it’s a much better basis for managing an economy which needs to fulfil multiple objectives – including those of social justice.

Update: The second in Quiggin’s series – refuting the case for privatisation.

Update: This post now has a sequel.