While the Reinhart-Rogoff fiasco is fresh in our minds, it’s worth recalling the other paper that swept through the ranks of the VSPs, briefly becoming orthodoxy, what everyone knew, until people took a hard look at the data.
In case you don't know, the Reinhart-Rogoff fiasco is the discovery that the empirical data justifying the current fiscal austerity policy is based on... a mistake. R&R forgot to add up one column of data in their Excel spreadsheet.
Krugman points out that basic, old-fashioned economic theory accurately predicted everything that has happened, and told us years ago that repeating the policy of the 1930's would lead to a repeat of the 1930's. Yet all of this was ignored in favor of radical new economic theories that said... well, that basically said what the rentiers wanted to hear.
Krugman also points out that nothing will change. The mere fact that their economic theory has been shown to be unrelated to the facts will have no impact, because they didn't choose the policy based on facts in the first place (or at least, not based on facts they care to share). This is the hallmark of religion and ideology: immunity to disproof by facts. All those libertarians going on about Atlas Shrugged don't seem to understand: they're the bad guys, the ones Francios Antonio spent 27 pages railing against on the radio. They're the ones who want everything to just keep working even while they impose their ideology.
The conspiracy is real. It is a confederation of dunces, of people who choose to believe in an ideology not so much of selfishness as of independence; a fantasy world where the words "no man is an island" have never been written; an alternate reality where the madness of crowds doesn't exist; where people are not social animals with a 250,000 year evolutionary history of complete social interdependence for their survival.
They wanted to believe in the fantasy of complete self-determination. In that way they are no different than Oprah's "The Secret" crowd, New Agers who believe that life is scripted, or Calvinists who believe that God gave each person a fully-formed immortal soul at conception so pure that only laziness allows it to be corrupted by the material world.
It's the same old battle as we have ever fought: the will to believe vs. reality. And at its root is the same old rot: what we want vs what we can have. Selfish desire vs. maturity.