Thomas Friedman has a crazy dream:

Which is why I wake up every morning hoping to read this story: “President Obama announced today that he had invited the country’s 20 leading bankers, 20 leading industrialists, 20 top market economists and the Democratic and Republican leaders in the House and Senate to join him and his team at Camp David. ‘We will not come down from the mountain until we have forged a common, transparent strategy for getting us out of this banking crisis,’ the president said, as he boarded his helicopter.”

Brendan Nyhan responds:

From a practical perspective, it’s not clear that a banking policy exists that “20 leading bankers, 20 leading industrialists, 20 top market economists and the Democratic and Republican leaders in the House and Senate” would unanimously prefer to the status quo. More importantly, why would we assume that such a policy is best? There’s no reason (beyond wishful thinking) to imagine that bipartisan compromises are always optimal, particularly on technical issues like banking policy.

Beyond the bipartisanship, in the real world this would be in practice a recipe for rule-by-CEO. A key constraint on the decision-making would need to be that it served the personal financial interests of the 20 “leading bankers” and “leading industrialists” (whatever that might mean) and there’s no reason to think that would serve the public interest. It would be interesting to speculate about what would happen if you held a meeting with all those people and gave them some kind of truth serum that made them speak honestly and bargain in good faith, but that’s not going to happen. Instead, the way the system works is that Obama and has team will need to craft a response and will need to take responsibility for its success or failure.

For the past few days, I’ve been reading Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George Akerlof and Robert Shiller. I’ve also been feeling like over the same time span, the Obama administration has shifted its public rhetoric in the direction Akerlof and Shiller would suggest. Turns out this is not a coincidence. Michael Scherer reports:

White House Budget Director Peter Orszag is a numbers guy, a propeller head as President Obama would say. But as David Von Drehle and I write in this week’s print version of TIME, Orszag has been spending his time recently reading not about spreadsheets, but about psychology. In particular, he has been reading a new book by the economists George Akerlof and Robert Shiller called “Animal Spirits: How Human Psychology Drives The Economy, and Why It Matters For Global Capitalism.” [...]

The White House is trying to recreate a sense of confidence by pointing out all the measurements that suggest the sudden loss of confidence may be causing the same irrational result that the confidence bubble created. Of course, the White House must walk a delicate line here, for even the smartest people in the Washington do not know when the markets will stop sinking. No one can predict the animal spirits. As Obama said Thursday, “The market is going to be responding to all this information out there and, you know, the whole issue of animal spirits in the marketplace and when suddenly a rally catches, you know, you guys know that better than I do. But my focus has to be on the long term. And my long-term projections are highly optimistic — if we take care of some of these long-term structural problems.”

Reading: It’s fundamental.

I agree, broadly speaking, with Ross Douthat’s point that the grand economic argument between left and right is not something that you can “resolve” with “proof” or better empirical results. But I think this conclusion is garbage:

How much do you prize equality and ease of life? The more you do, the more you’ll favor a European approach to the relationship between state and society. How much do you prize voluntarism, entrepreneurship, and the value of lives oriented around service to one’s family, and to God? The more you do, the more you’ll find to like in the American arrangement. Where this debate is concerned, I’m proud to stand with Charles Murray – but I don’t think that we should labor under the false hope that scientific advances are going to tilt the argument dramatically in our direction.

Left out of here is what the right always loves to leave out of discussions of economic policy choices: interest. If you’re poor in the United States and you live in a neighborhood where poor people can afford to live, you will almost certainly be living in a neighborhood that’s much more dangerous than the neighborhoods in which poor Dutch people live. You’ll also find yourself living in a country that’s much less friendly to the interests of people who can’t afford a car than is the Netherlands. Conversely, if a European executive meets an American executive and feels a twinge of jealousy, it’s not for the American’s greater level of “entrepreneurship” it’s for the fact that the U.S. social model leaves top executives much richer than European executives. In Finland, low-end wages are higher than they are in the United States. This is great for relatively low-skill Finnish people. But it also means that there are many fewer mid-price restaurants in Helsinki than in a typical American city, which is bad for the sort of upper middle class professionals (or Americans on a trip) who are likely to patronize such restaurants.

In the US and in Europe, income level is fairly predictive of voting behavior and this is neither a coincidence nor the reflection of an abstract disagreement about the value of “voluntarism.” It reflects the fact that politics is, among other things, a concrete contest over concrete economic interests. In a broad sense, both the American and European models work quite well compared to living standards enjoyed in other parts of the world. But in comparison, the models work differently for different kinds of people because different people have different interests. I don’t think, for example, that America’s high child poverty rate reflects American preference for “service to one’s family” over “ease of life.”