In an attempt to keep derp from taking root, Noah Smith wrote a post on conservative economic arguments since the crisis, where he analyses a popular conservative position and sees how accurate it turned out.
After plowing through six argument, Noah (correctly) judges that the conservatives have an awful track record with economic predictions. Which is rather unfortunate for the country.
You should read the post in full.
I do however, think that Noah was a bit too nice in awarding 50% accuracy rating to the “deficits must be cut in the crisis” argument, as Europe’s brush with austerity has pretty conclusively shown deficit reduction to be a horrid idea in a crisis. But I suppose Noah wanted to throw conservatives a bone by looking further into the future, where after the economy has completely the conservative position of deficit reduction would be be in accordance to Keynesian fiscal policy,
Also, I might also be a bit more lenient on the conservatives with the “Fannie & Freddie cause the crisis” argument, since while they were not the causes of the crisis, the government had to bail them out.
Noah Smith on phlogistonomics:
This clearly illustrates the perils of engaging in what I like to call “phlogistonomics” (a term coined by Matt Yglesias). The method goes like this:
Step 1: Take some hard-to-understand phenomenon, like economic growth. Explain the parts you can explain with standard economics (capital, labor, prices, etc.). What’s left – the part that really drives the model – is the phlogiston.
Step 2: Label the phlogiston. Make sure you choose a name that refers to something people in general already believe in. “Culture” is great. “Confidence” works too, as do “institutions”, “technology”, “power”,”the true desires of the Fed”, and of course, “irrational expectations” (the favorite of us behavioral finance types, hehe).
Step 3: Act like you know exactly how the phlogiston behaves. Predict its effects based on commonly held national/ethnic/gender stereotypes (“Greece is in trouble because Greeks are lazy!”), or your political beliefs (“Obama the Kenyan Muslim socialist is killing business confidence!”), or any plausible-sounding story that plays to popular prejudices, preconceptions, fears, or hopes.
You really should read this whole post; at the very least, so you can avoid making phlogistonomic-based arguments. Specifically so you can avoid making a similarly poor “culture”-based argument on China as David Altman did.
However, should you find yourself in a situation where you must make a phlogistonomic argument, please, please make sure its a correct one.