26.8.19

WOULD THAT OUR DISCIPLINE WERE THAT POWERFUL.

Author Binyamin Appelbaum seeks to "Blame Economists for the Mess We’re In."  It runs in the same New York Times that recently sought to blame all of today's social problems on slavery, which might be a digression, and it's an excerpt from the author's forthcoming The Economist's Hour, which might be worth a read.

I mean, if you're going to peddle monocausal explanations, why not?
President Franklin Delano Roosevelt dismissed John Maynard Keynes, the most important economist of his generation, as an impractical “mathematician.” President Eisenhower, in his farewell address, urged Americans to keep technocrats from power. Congress rarely consulted economists; regulatory agencies were led and staffed by lawyers; courts wrote off economic evidence as irrelevant.
I hope the author provides context: the Solow-Samuelson approach to macroeconomic policy treats the New Deal, and to an extent, the War, as Keynesian ideas not fully realized.  Those regulatory agencies that preserved cartels and those antitrust rulings that protected competitors at the expense of competition might well have provided policy economists of assorted stripes with some of their greatest victories.
But a revolution was coming. As the quarter century of growth that followed World War II sputtered to a close, economists moved into the halls of power, instructing policymakers that growth could be revived by minimizing government’s role in managing the economy. They also warned that a society that sought to limit inequality would pay a price in the form of less growth. In the words of a British acolyte of this new economics, the world needed “more millionaires and more bankrupts.”
This passage, too, elides a lot of evolution in the history of economic thought. The trade-off between equity and efficiency wasn't just something the Chicago market fundamentalists pushed; the Okun-Phillips tradeoff of unemployment and inequality was part of the tool-kit of the heirs to Keynes who as late as 1972 were of the view that the U.S. economy might be fine-tuned.

That "sputtering to a close" of the quarter century of growth might well have been the end of the Victory Dividend following the destruction of European and East Asian productive capacity that was abetted by Stalin and Mao strangling initiative throughout the Communist bloc.  The Best and The Brightest might have been more modest about their hopes of fine-tuning the economy, of winning limited wars in Asia, in renewing the urbs and fighting poverty, and the rest of the world might have caught up anyway.  That The Best and The Brightest continued to believe in their magic even as the magic wore off only prepared the way for what followed.
In the four decades between 1969 and 2008, economists played a leading role in slashing taxation of the wealthy and in curbing public investment. They supervised the deregulation of major sectors, including transportation and communications. They lionized big business, defending the concentration of corporate power, even as they demonized trade unions and opposed worker protections like minimum wage laws. Economists even persuaded policymakers to assign a dollar value to human life — around $10 million in 2019 — to assess whether regulations were worthwhile.
That's one way of looking at forty years of policy evolution, but it credits economists with far too much, and there's too much polemic to be useful.  Oh, and to carp about assigning values to lives: we don't grade-separate all roads that school buses use from railroad tracks, and there is something called quality-adjusted life years involved in allocating medical procedures.

Something else to contemplate: what sort of portable computer might you carry around if telephony were still a regulated environment?

To return to my theme: would that economists were this powerful.
The revolution, like so many revolutions, went too far. Growth slowed and inequality soared, with devastating consequences. Perhaps the starkest measure of the failure of our economic policies is that the average American’s life expectancy is in decline, as inequalities of wealth have become inequalities of health. Life expectancy rose for the wealthiest 20 percent of Americans between 1980 and 2010. Over the same three decades, life expectancy declined for the poorest 20 percent of Americans. Shockingly, the difference in average life expectancy between poor and wealthy women widened from 3.9 years to 13.6 years.
Whether importing migrants from the third world and deinstitutionalizing crazy people and legalizing some drugs had some effect remains for additional research.
Rising inequality also is straining the health of liberal democracy. The idea of “we the people” is fading because, in this era of yawning inequality, there is less we share in common. As a result, it is harder to build support for the kinds of policies necessary to deliver broad-based prosperity in the long term, like public investment in education and infrastructure.
"Public" education is in the hands of the boutique multiculturalists, where it hasn't deteriorated into participation-trophy grading, and "infrastructure" often means "road socialism," leading inevitably to state-subsidized traffic jams. Perhaps the best thing for the government to do is to go away.

For Mr Appelbaum, though, sending the virtue signal is more important than understanding the issues.
The most important figure, however, was Milton Friedman, an elfin libertarian who refused to take a job in Washington, but whose writings and exhortations seized the imagination of policymakers. Friedman offered an appealingly simple answer for the nation’s problems: Government should get out of the way. He joked that if bureaucrats gained control of the Sahara, there would soon be a shortage of sand.

He won his first big victory in an unlikely battle, helping to persuade President Nixon to end military conscription in 1973. Friedman and other economists showed that a military comprised solely of volunteers, recruited by offering market-rate wages, was financially viable as well as politically preferable.
A commander who has unlimited use of conscripted soldiers doesn't have to be as careful of soldiers' lives as the commander of a volunteer army, and a nation-state that relies on volunteers has to recognize that people will be less likely to sign up, and they will resist re-enlisting, if that state is committing troops to futile nation-building efforts. That might be one reason Mr Trump is president.

With the new crop of graduate students arriving in the academic departments, the good news is there is no shortage of interesting research questions.
But much of the fault lies in ourselves, in our collective decision to embrace policies that prioritized efficiency and encouraged the concentration of wealth, and to neglect policies that equalized opportunity and distributed rewards. The rise of economics is a primary reason for the rise of inequality.
I suspect there's plenty of blame to go around in finding that missing equal opportunity, including the Times's best-seller list, and the U. S. News college rankings.

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