Re-reading Paul Krugman on our rulers’ weird addiction to austerity policies that clearly aren’t working, I was struck by his comment that the failure to anticipate the banking crisis was “a relatively minor sin”. Economies are complicated, ever-changing entities; it was understandable that few economists realized the extent to which short-term lending and securitization of assets such as subprime mortgages had recreated the old risks that deposit insurance and bank regulation were created to control. But, says Krugman,

what happened next—the way policymakers turned their back on practically everything economists had learned about how to deal with depressions, the way elite opinion seized on anything that could be used to justify austerity—was a much greater sin. The financial crisis of 2008 was a surprise, and happened very fast; but we’ve been stuck in a regime of slow growth and desperately high unemployment for years now. And during all that time policymakers have been ignoring the lessons of theory and history.

It’s a terrible story, mainly because of the immense suffering that has resulted from these policy errors. It’s also deeply worrying for those who like to believe that knowledge can make a positive difference in the world. To the extent that policymakers and elite opinion in general have made use of economic analysis at all, they have, as the saying goes, done so the way a drunkard uses a lamppost: for support, not illumination. Papers and economists who told the elite what it wanted to hear were celebrated, despite plenty of evidence that they were wrong; critics were ignored, no matter how often they got it right.

The Reinhart-Rogoff debacle has raised some hopes among the critics that logic and evidence are finally beginning to matter. But the truth is that it’s too soon to tell whether the grip of austerity economics on policy will relax significantly in the face of these revelations. For now, the broader message of the past few years remains just how little good comes from understanding.

For those who believe that our democracies are still capable of managing societies in an equitable way, this resistance to evidence and reason must be pretty worrying. To those of us who suspect that the system is irretrievably rigged in favour of certain powerful interests, however, it just confirms our suspicions. This obduracy is a feature, not a bug.