All good points but it is Krugman’s failure to take seriously the fraud part of Black’s post. The killing of innocents was only roughly a weighted third of Black’s observations the rest were and a I quote “elites have eliminated any accountability for themselves for criminal wrongdoing, we’ve tortured and assassinated people, and the response to massive economic suffering and related criminal fraud has been to give lots of free money to the people who caused it all.” To which we might add all observations and behavioural assumptions not contained in your average off the shelf DSGE model: pimped out new Keynesian style or not.
Why does that matter? Because it allows us to elide what the real problems facing macroeconomic policy makers and politicians are. Problems, I should add, which cannot be corrected by markets as the private market actors were their cause. The problem with most economic models from RBC through to Minsky is that they do not have that crucial Machiavelli function.
To be fair it is not hard to construct a Machiavelli function from the insights of Smith, Marx or Minsky but it rarely if ever is. So what is the Machiavelli function? The Machiavelli function is something akin to political rent seeking but pushes way beyond it into the realm of embedded, systematic corruption, of the body politic. Its remedy goes beyond simple regulatory reform and involves a near complete restructuring of the state’s (the Sovereign, we the people) relationship with private interests.
Some people like illustrations to animate a case. I am a people pleaser. Imagine a medieval town in which the great families of the town all have formidable defensive towers. So formidable in fact they match the defensive capacities of the the municipal prince. Imagine also that the great families have taken to internecine low level warfare to settle their disputes because they know their defensive power is on par with the power of the municipal judiciary (the prince) and thus even when the prince intervenes to settle their disputes neither disputant has a short term rational reason to respect the decision of the prince.
What then is a prince to do? Machiavelli’s solution was as simple as it was elegant: force the the leading families to raise their towers to the ground leaving them at the mercy of the defences of the prince. The leading families would thus have to stay in the good graces of the prince for fear of being left defenceless.
Obama not only missed the chance to tear down the towers of the leading citizens of his republic, his administration reworded them and thereby increased their defensive capabilities rendering the prince that much more prostrated.
Had he been motivated by, had economists like Krugman been aware of, the Machiavelli function, they would have done the opposite and then could have campaigned on the need for basic ethical reforms in order to hinder the routine predilections of the leading families of the republic to engage in political rent seeking.
In short, for reform to even begin the leading families need to be sucked through the eye of a needle.
post script: I should say all of these observations equally apply to the the MMT school and non violent revolutionary forms of socialism and libertarianism .