Old strategy: our policies will increase economic growth! New strategy: economic growth is a poor measurement of well-being.
There are so many things wrong with Alana Semuels’s article at Atlantic that I hardly know where to start. Why does Atlantic have people who clearly know little or nothing about economics, policy, politics, or government writing about economics, policy, politics, or government?
Here’s a true statement from the article but it almost gets lost in the fog:
Without growth, said Gordon, the Northwestern economist, if the country wanted to add those programs within its existing budget, it would have to cut something else or raise taxes. “There’s always a demand for more services, whether there’s growth or not. Growth gives you the funding to pay for it,†Gordon said. This goes for paying Social Security and Medicare, too, which are funded through taxes. As the population ages and more people receive Social Security, the economy needs to grow so their benefits can be paid for, he said.
If you’re going to support a government that subsidizes ever more services, you need to accept less growth. Look up deadweight loss. It is not possible for philosopher-kings to produce greater wellbeing for people than they can provide for themselves. They do not have the information to do it and, indeed, the mere attempt obscures the information they need. The Soviet Union did not fail because the Soviets were stupid. The Chinese did not remain impoverished until they adopted some level of a market system because of official corruption or some sort of plot against them. It was because it could be no other way.
When growth becomes low enough, in order to start providing higher subsidies to some people you’ve got to start taking them away from others. And at some point the people who are losing their subsidies will become very, very unhappy.
All of this is vastly complicated by our byzantine and perverse system. We do not tax the rich and give the proceeds to the poor. We tax the rich to give the proceeds to a different group of the rich. We justify this by saying it’s to help the poor. We also tax the poor to give the proceeds to the rich. We use a variety of dubious pretexts to explain that.
Bottom line: growth is better than no growth. Our problem isn’t that we’re growing too fast or that we’re spoiled by growth that’s been too fast. Our problem is that the benefits of growth are being realized by so small a group of people. Solve that problem before you start rationalizing slow growth.
Is it because economics is about 90% bullshit? Evidently even the alleged economics experts know squat relative to where we’re headed and how we should go about getting there. Why do we continue to defer to this unready academic priesthood?
I’m genuinely curious how many economists writing, say, 25 years ago, predicted that the biggest issue we would face is growing inequality. Because what I kept hearing was that deficits were going to kill us all, not that we’d end up with a tiny overclass and a bunch of Morlocks below. Did some significant percentage of the ‘experts’ predict the specific state we’re in? If not, then why the hell are we still listening to them? How many times does Nostradamus have to be wrong before we just go ahead and hang him?
Try thinking about it a different way, Michael. Economics gives us confidence that if we drive east from Chicago on Interstate 80/90, we’ll reach Cleveland. It doesn’t tell us when. That’s not useless. It just doesn’t give us all of the information we might want.
It’s better than thinking that if we drive north from Chicago we’ll get to Cleveland. That’s what people who are completely ignorant of economics tell us. Worse still, they rely on what others tell them with no ability to evaluate its credibility. And that’s my complaint about the article.
“I’m genuinely curious how many economists writing, say, 25 years ago, predicted that the biggest issue we would face is growing inequality.”
Try predicted 40 years ago. By economists and futurists. I remember reading Future Shock as a teen and thinking to myself the only solution to this issue was to become an educated generalist and adaptable. Those who couldn’t or wouldn’t would be left more and more behind. Income inequality was inevitable. Later, after reading economists of the philosophical persuasion believing the private sector inherently more productive than the pubLic sector, (deadweight loss as Dave likes to say) it became obvious that government expansion would inevitably turn into a vehicle for power to be gained by those most clever at the government game. —-> income inequality.
The left has always, and in recent years, the right, seems to spend all its time in denial about government and trying to fiddle with the system or just be the ones in charge. Supposed virtuous types they.
It really isn’t hard to figure out or predict. And here’s a prediction. If Clinton wins tomorrow it’s the Queen of government corruption, and more of the same. Either that or I have to avail myself of those damned good (damned good !!) speeches she and her husband give.
“I’m genuinely curious how many economists writing, say, 25 years ago, predicted that the biggest issue we would face is growing inequality. ”
Most conservative economists and libertarians still think inequality either isn’t worse than in the past or is not a problem.
“Look up deadweight loss. ”
Look up Somalia. It is clear that too little government is also bad for growth. Somewhere between no government and government controlling everything is where we need to be. I am not sure where that should be.
Steve
You know I’m not an anarcho-capitalist, steve. I don’t think we were better off in 1900 than we are now. The pertinent question is whether right now we’re suffering from inadequate government. I’m not looking for the platonic ideal level of government.
While I agree that too little government creates problems, I don’t think there’s much of a case that we’re suffering from that. Even Canada has enacted a law requiring each new regulation be matched by an offsetting reduction in regulation of roughly equivalent cost.
The Federal Register presently runs to nearly 82,000 pages and every state, county, and city government has its own laws and regulations.
“Look up Somalia. It is clear that too little government is also bad for growth. ”
For some reason there is this persistent myth that Somalia is “ungoverned” or whatever equivalent terms I’ve heard over the years. Usually the people stating that don’t know anything about Somalia. There is governance there – lots of it actually, it just isn’t anything that most westerners understand much less bother to learn about.
You know what else is bad for growth? Decades of civil war, shitty geography, near constant foreign intervention for almost 1/2 a century, ~20% of the population displaced, borders cobbled together by no-nothings at Potsdam. Yes, the result is a notable lack of what we would call national institutions. Why? because it was ever really a country to begin with. It would never have existed outside the big post-WWII map redrawing and the Cold War. It would have fallen apart much sooner had it not been for Siad Barre and support first by the Soviets and then the US. Barri died and – surprise! – Somalia just happened to enter its civil war in 1991.
But that is all irrelevant because what’s going on in “Somalia” has ZERO relevance to US economics. Deadweight loss in Somalia is literally bodies on (or in) the ground and it’s not because of a lack of governance, it’s because competing political communities (ie. governments) are using violence to settle disputes with all the consequences that entails.
I’m wondering if anyone understands what’s going on with Clinton.
Her staggering episode in NY was pawned off as pneumonia. But there is a video of her being walked from her plane to a car tonight and she looks staggering drunk. I can’t imagine she’s drunk – she’s going to give a speech at midnight and I doubt she will appear slurring words. But that shuffling, unsteady gait was not something you see, even in aging people with balance problems, or even older people having just gotten up after a long period of sitting just trying to get their legs under them. It’s profound. She looks like she’d have gone down without Bill’s help. What the hell?
http://www.nationalreview.com/article/441830/washington-dc-wealthy-metro-area-taxpayer-federal-government-salaries
I’m genuinely curious how many economists writing, say, 25 years ago, predicted that the biggest issue we would face is growing inequality. Because what I kept hearing was that deficits were going to kill us all, not that we’d end up with a tiny overclass and a bunch of Morlocks below
I’m no economist but these two situations (the one predicted and the current reality) certainly aren’t mutually exclusive. It seems likely to me that deficits were unsustainable without the kind of policies that have benefitted the wealthy at the expense of the middle class. The prognosticators weren’t wrong, we’re just not at the endpoint yet.
30 years ago they were predicting an increase in income inequality for as far in the future as they cared to predict.
To me, it looks like she drinks too much . sometimes, she’s at the right level , others , doing without, or in others, on the brink of low blood sugar common in alcoholics.
I think though, the debates would be hard for her without a glass in her hand, I didn’t see one.