By Gerald Friedman, Professor of Economics, University of Massachusetts, Amherst. Originally published at the Institute for New Economic Thinking website
Orthodox macroeconomics has become a place where visions die and hopes are banished, for both liberals and conservatives
When I conducted an assessment of Senator Bernie Sanders’ economic proposals and found that they could produce robust growth, the negative reaction among powerful liberal economists was swift and vehement. How much, I wondered, did this reflect personal disappointment being rationalized into a political economy of despair? Professional economists tend to embrace an economic theory that government can do little more than fuss around the edges. From that stance, what do they have to offer ordinary people for whom the economy is not working? Not a whole lot.
It has certainly been a rough seven years for the liberal economists in the Obama Administration. Economic recovery has been slow, the slowest in the post-World War II era. Ambitious programs for reform of social insurance programs (such as unemployment insurance) and for public investment have been scaled back, and back. Yes, there is much that these economists who served Obama can be proud of: more people have health insurance, and the economy did not collapse. But the constant slog must have taken a toll. Having experienced so many compromises and disappointments, perhaps it is easier to say to those who expect more that it just can’t happen. There is comfort in the Thatcherite phrase: There Is No Alternative (TINA).
The angry reaction to my report revealed that by some combination of rationalization and the dominance of neoclassical microeconomics since the 1970s, liberal economists have virtually abandoned Keynesian economics, which supported the notion that governments can and must intervene in the economy to ensure the best results for society. These economists went back to pre-Keynesian thinking, where price fluctuations are supposed to equilibrate supply and demand at full employment with an optimal distribution of good and services. The very suggestion that government action can result in increases in growth rates or wages is now taken to be obviously wrong. Adopting the language of neoclassical micro welfare economics, everything is already as good as can be — all that government can do is to make it worse. Criticisms of the orthodox model and its policies are deemed worthy of scorn, to be dismissed tout court because they are obviously at variance not only with textbook economics, but with what we need to believe to rationalize failure.
The Closing of the Economists’ Mind
The reaction to my paper — the casual and precipitous conclusion that it must be wrong because it projects a sharply higher rate of GDP growth — comes from the assumption that the economy is already at full employment and capacity output. It is assumed that were output significantly below full employment, then prices would fall to equilibrate the two. This is the political counsel of despair. It is based on classical economic theory and the underlying acceptance of Say’s Law of Markets (named for the great Classical economist Jean-Baptiste Say), which says that total supply of goods and services and the total demand for goods and services will always be equal. The shoe market creates the right amount of demand for shoes — it works out so neatly that the true measure of the supply of shoes, of potential output, can be taken by measuring actual output. This concept is used as a justification for laissez-faire economics, and the view that the market mechanism finds a harmonious equilibrium. It explains why even in the depths of the economic crisis, Christina Romer, former Chair of the Council of Economic Advisers in the Obama administration, who was always skeptical of fiscal policy and Keynesian economics, and why Jared Bernstein, former Chief Economist and Economic Adviser to Vice President Joseph Biden under Obama, who should have known better, wrote that the economy would return on its own to full employment. They predicted, quite wrongly, that the proposed Obama stimulus would accelerate this recovery by 6 months.
The return of Say’s Law has distorted the way liberal policy elites view the economy. Consider the Congressional Budget Office’s (CBO) decision in 2014 to explain away years of slow growth by dramatically revising downwards its estimate of potential output. No longer do we have an output gap of 9 percent; instead the gap was redefined as only 2 percent because the real level of capacity is reevaluated as the level actually produced on the assumption that we must be at full employment. And how do we know that we are at full employment? Because we are producing the capacity level of output.
CBO has similarly downgraded estimates of potential GDP growth with historically low rates of labor force growth and slow productivity growth; instead of the 3 percent average annual growth of the 1959-2007 period, or the 4 percent growth 1947-73, we are to expect no more than 2 percent growth. While there is some referencing of demographic changes, these estimates conveniently align future growth projections with the otherwise-disappointing recent growth performance. This reevaluation says to policy elites, “Hey, we are doing as well as can be expected.” To the general public it says, “Sorry, nothing more can be done for you.” TINA.
The Economics and Politics of Despair
There is, of course, a politics as well as a psychology to this economic theory. If nothing much can be done, if things are as good as they can be, it is irresponsible even to suggest to the general public that we try to do something about our economic ills. The role of economists and other policy elites (Paul Krugman is fond of the term “wonks”) is to explain to the general public why they should be reconciled with stagnant incomes, and to rebuke those, like myself, who say otherwise before we raise false hopes that can only be disappointed. But this approach leaves liberals like Hillary Clinton with few policy options to offer in response to the siren call of demagogues like Donald Trump. And it makes the work of self-proclaimed “responsible” elite economists that much more pressing. They have to work even harder to persuade the public that nothing can be done to head off the challenge of Trump and other irresponsible politicians who capitalize on the electorate’s appetite for change. They have to slap down critics like myself. “Responsible” elite economists have to keep the party of “good arithmetic” from overpromising at all costs.
Were the orthodox classical economists correct, then of course their politics would follow. But what if they are wrong? What if government action could, in fact, raise growth rates or narrow disparities? What would be the expected value of a higher GDP growth rate? Would it be worth some academic debate, even if it leaked into the public realm? Might this debate even serve a socially useful function by giving voters an alternative to the xenophobic political economy of Donald Trump? Many Americans believe that government action can improve economic conditions, especially for workers, and many of these support Trump because they see him as the only candidate who is even willing to consider government action to help working Americans. These voters can look long and hard at the “responsible” Clinton platform for some policy, for any policy to raise growth rates and narrow income disparities. But they won’t find it, because policy elites have closed their minds to the possibility of change.
An Agenda for Further Research?
I admit that I have always lived surrounded by people who agree with me. At Columbia, Harvard, and now Amherst, Massachusetts, I have sought friends and colleagues who largely agree with me. While I enjoy the comfort that comes from an affirming community, it may be that I was not well served by the homogeneity of views. While I knew intellectually that the mainstream had abandoned Keynes and reembraced Say’s Law, I didn’t take this shift seriously. It seemed too absurd to me; honestly, I thought they were only kidding. Since I have spent most of my life refuting classical economics, and since my colleagues and friends agreed with me, I assumed that everyone did.
Had I included some mainstream economists in my narrow social circle, then I would have been better prepared for the substantive reaction to my report. On the other hand, as an intellectual activity, I was well served by the debate because it forced me to deal with ideas that I had previously rejected only too casually. I was helped in this by some of the orthodox folks who expressed second thoughts about my work (such as Kevin Drum). I am grateful to the Christina Romer and her husband David Romer, and to Justin Wolfers because, while they remain firmly opposed to my work, they took the time to explain their approach and helped me to articulate my own views more clearly. Our respectful exchanges allowed me to help them to understand the points of divergence in our models and gave me insight into the nature of my own approach.
This engagement of alternative visions could be a useful basis for the type of rethinking of macroeconomics favored even by some who remain in the orthodox camp, such as Olivier Blanchard, former chief economist at the International Monetary Fund,.
The debate has identified certain areas for empirical investigation that might help us not only to choose between the models but perhaps to find times and places where one or the other approach may be more useful. At a minimum, we have a research agenda for many graduate student papers and dissertations.
- The strength of Verdoorn’s Law associating productivity growth with economic growth rates and the level of labor shortage.
- The impact of pro-growth government investment policies – including investment in Research and Development as well as investments in roads, bridges, and other public utilities.
- The investment accelerator and its role in fiscal stimulus, or in theories of secular stagnation.
- The determinants of changes in labor force participation and the effect of increasing employment opportunities.
- Responsiveness of immigration, especially undocumented, to labor demand.
- The sensitivity of US imports to economic growth, an issue complicated by the international role of the dollar.
Restoring Controversy to Economics
Controversy reflects the disagreements and uncertainty that alone can lead to intellectual progress. It is time to inject some of these into orthodox macroeconomics. We have been ill-served by a smugly sure macroeconomics both in imagination and policy. Amazingly, the crisis of 2007-9 has left intact the dominant pseudo-Keynesian orthodoxy; maybe the kerfuffle around my report will help to open some space for constructive dialog in a profession that has clearly grown too complacent.
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Gerald Friedman says he has spent his lifetime refuting classical economics. Yet classical economics had a focus on the problem of rent and rent seeking – the private capture of unearned income, first and foremost from land and resources. Housing costs (land prices) rise faster than wages. This is the Law of Rent. This is a major component driving wealth inequality. Working people have to then go deeper into mortgage debt to own a home. Renters spent a lifetime working to pay up to 50% of earnings for housing. Thus banks and landlords capture the rent, that really should be socialized via land value taxes while wages and production should be fully privatized (untaxed.) Much of the massive accumulation of wealth of the 1% is from rent / unearned income. Untaxing wages and production while socializing the rent (estimated as up to one third of GDP!) enables a distributive or rather “pre-distributive” justice whereas the attempt to tax high incomes is redistributive. Best to have a fair system at root rather than to try to rectify the injustice later via redistribution. Gerald Friedman, are you familiar with this economics approach to how we can harness the economy in order to have a market economy that is BOTH fair and free?
Unfortunately I think you are too optimistic. Even in areas of science where there are no political implications to one’s conclusions, people become wedded to their paradigms and quite close minded and even nasty in their debates. Read accounts of the debate over what caused the extinction of the dinosaurs.
Some physicist once said that quantum mechanics triumphed as the old physicists died off. Now imagine how it would be if most scientific theories were directly linked somehow to wealth distribution and government policy. Or suppose the geocentric theory was used to justify low tax rates for billionaires. Copernicus would still be portrayed as a crackpot.
I have no idea if Professor Friedman’s theories are correct. I just wouldn’t hold my breath waiting for most mainstream economists to give them a fair hearing. Professor Friedman might think the Romers were respectful, but in the press accounts I saw it was portrayed as the Romers taking the time to discredit his paper in detail.
I agree. To compound this problem further, I’d add that neoclassical economics has created an indestructible paradigm that claims to explains everything. Their vision is beyond what any 19th century theorists could imagine in scope. Neoclassical economists not only claims to explain macroeconomic patterns but why people commit crime, how politicians get elected (I’m looking at you too mainstream political science), why people get married, why schools look the way they do and on and on and on. Worse still, this has bled into other fields, policy circles, journalists. So, seeing beyond this is tough if the neoclassical laws (or whatever) can be seen in everyday life.
So .. you want to create loans …
Who takes out loans … when the economy sucks? Little folks are tapped out.
So … that leaves the big people.
Image a pie chart. One small slice represents loans to little people. The other slice represents the big folks’ loans.
Now grow the whole pie while holding the little people’s slice steady. What happens to the big people’s slice?
Inequality in “wealth” distribution isn’t a bug … it’s a feature. It certainly was and is prognosticatable.
Who needs capital when debt never has to be repaid and insolvency is only a matter of liquidity — solvable by adding more debt.
“Liberal economists have much to be proud of,” then lists “more Americans have health insurance” as a mark of pride.
Credentialed people telling us we should thank their compadres for “giving” the rest of us such a deal?
And maybe I could suggest that the word “Power” in the Naked Capitalism banner logo be moved up to the first position? Since there’s all this palaver about various theories and theorems of economics, and now a YOOGE lot of text about Who Gets To Be President (nominal titular front person for all the real elements of the power structure that defines and effectuated what gets referred to and made “serious” under the moniker “policy,” the figurehead onto which “the hopes and fears of all the years” get projected while the real world turns). But when one gets down to it, it’s all pretty clearly about which individuals and small sets of individuals have the raw power to fokk over the rest of us, subjugate us and take our stuff, live lives of asymptotically increasing personal pleasure, immune to consequences, and then die, full of years and comforted by the care of nurses and physicians and aides, off into the void with a last middle-finger “Apres moi, le deluge. Bwahahahaha…” While the various theorists and “practicing economists” tune their models to the key of Who Has The Most Money, in their comfortable towers…
My personal working hypothesis is that there ain’t no fixing any of it, because in that phrase I learned growing up in the Chicago realm, “the fix is in” and too many people at various strata in the Jungle are “invested” in The Way Things Operate. Deck chairs on the Titanic, and all that. And who gets seats in the lifeboats first, again? When by design, there are not enough lifeboats to start with (costs money and cuts ROI, you know) and the first-infers will be using oars and pocket knives and fists to batter and slash the drowning mopes back into the cold dark sea…
I hate to say it, but did you see Friedman’s confession that he hangs with like-minded people? That probably means other academics…who have health insurance. People who have insurance and whose social circle consists mainly of people who have jobs have no idea how bad it is out there. Also he is in Mass, and Romneycare appears to have worked better than Obamacare. So he may be incorrectly extrapolating.
Or he may feel rhetorically the need to say Something Nice.
Yes, I noted the “hangs with his bros” acknowledgement. He says it pretty bluntly, for an academic and “economist.” Nice of him to give a nod to the “economics” of progressive “policies,” that maybe something “fairer” would be nice and all. Not exactly the kind of fire in the belly that Mother Jones had, and that is mandatory if there’s ever going to be a rollback of the neoliberal apocalypse in any noticeable way. But it was a sort of interesting spasm of conscience, maybe, and a tiny smidgen of what the old DFHs call “consciousness raising?” Not that the way the institutions work, it has a prayer of becoming the axis of the Narrative…
Keeping in mind that the predators and parasites are on message and on task and on duty 24/7, figuring out new ways to take more of everything “all nice and legal,” while the most of us are having to slave for them to “earn” the “privilege” (not a “right,” whatever that is any more) to just a basic survival. What our bodies are up to, trying to stay alive, keep going to work, taking care of our families and all, while the cancer eats ever more of our living resources…
Romneycare may have worked better FOR HIM, or he has some private health coverage?
And I agree with all the other points you note. I hope he didn’t strain anything, patting his compadres on the back. What a wonderful club (and I ain’t in it, maybe you ain’t either…)
The problem with nice people is that they all too often get steam-rolled by a-holes because they can’t seem to get it through their noggins that not everyone else is nice like they are. Saying something nice about the person who treated you like crap is just so, so typical.
I do appreciate that this guy is trying to bring a little more sanity to the economics discipline, but he, like everyone else, is hopelessly embedded in his own perspective on reality. The quip about health insurance really nails it. In his world, health insurance is a useful thing, not a millstone around your neck. It’s not his fault, it’s just human psychology: we assume that whatever situation surrounds us is normal.
However, this does bring us to an important point, that is almost never brought up, which is that expecting professional intellectuals be able to understand poverty is a losing proposition. And if you can’t understand it, how are you going to be able to do anything about it? If you don’t understand the realities of being poor w/ an O-care bronze plan, you might just think that it’s a good thing for poor people to have. And, of course, the lengths to which one is willing to go in the name of poverty alleviation — the extent of what a person will consider reasonable — is directly correlated with one’s personal experience of poverty. What an out-of-work machinist thinks is reasonable as a gov’t poverty alleviation measure is going to be quite different than what a financially secure, tenured economics professor is going to be willing to consider.
Perspective matters and all knowledge is “situated.” So long as we continue to rely on academics for information about the world, we will remain blind to every reality that is not visible from the academy.
diptherio
April 21, 2016 at 12:00 pm
I tend to agree with you.
The fact that not one acknowledgment of fraud and inequality with regard to the problem of the economy is the dog that didn’t bark. Indeed, look at the endless yammering about getting the economy growing – the absolute refusal to even posit that the problem isn’t that we need higher rates of growth, but maybe, just maybe, we need more equal rates of distribution.
I don’t want to mischaracterize the man’s proposal, but in the environment of the last 30 years at least, when hasn’t there been schemes to stimulate growth, and get the economy moving, and that didn’t consist in sum total of tax cuts, tax avoidance, and other tax schemes that benefits to 99.999% of the plan the 0.001%???
The event horizon problem, hoping it doesn’t reach them until after they are dead and gone. And commiserate with the po folks in the meantime.
At least Yves provides some oxygen.
I do think we need some economists on our side who are not totally corrupted. Friedman seems to fall into this category. (So do the good folks at EPI.) What we don’t need, and I think Friedman would agree here, is economists driving the agenda (sorry PK). But we are deep down a “progressive” meritocratic rabbit hole that will take some doing to climb out of.
I dunno. Maybe all we need is Michael Hudson.
I mean, that incrementalism thingy — how’s it workin’ for ya?
This has been an interesting debate but it is time to recognize that it is all taking place within relatively narrow ideological confines. It would be great to see at least one Marxist variant on the same issues. For example how does a policy which defines 5% unemployment as full employment serve the needs of employers and not employees? How about taking a critique of Say’s Law in the direction of moving away from the market gods altogether?
I think there is a partial misreading going on. Friedman hangs out with fellow heterodox economists at Amherst–yes, he is comfortable, but he was naively surprised at the attacks he received from more mainstream ” liberal” economists. In fact he still seems naive– he is praising the Romers for interacting with him, seemingly oblivious that Krugman and others saw that Romer paper as a humiliating refutation of everything he wrote. Krugman basically portrayed him first as an intellectually corrupt person seeking attention and then as an incompetent who got his math wrong.
These people are not up for a civil debate about the intellectual foundations of macroeconomics–they wanted to smack down the heterodox economist and the Sanders campaign good and hard. That’s all it was on their part.
Friedman either believes or wants to believe that those that dismissed him are intellectually honest and redeemable–they are not. They are agents of the status quo and the 1% who dominate it. Says Law was shown to be invalid by the Great Depression. It is Panglossian nonsense that anyone who had eyes to see would discount as an archaic irrelevance. People use it and stick to it because it lets everyone in positions of wealth and power off the hook to do anything for those without wealth and power.
Friedman, like most academics, was probably flattered as hell that the Romers paid attention to him (goodness knows that we all chronically need to be noticed and taken seriously by “our betters”, and academics are pathetic enough to assume that people with better jobs are their betters). He thinks that these issues are abstractions that can be “proven” and then once proven would compel everyone to jump on the truthful bandwagon. That, alas, is rubbish. Ideas hold sway because those who hold them are powerful enough to make sure that they hold sway. It’s an ugly reality I’ve rejected for most of my life but have sadly come around to in the last few years.
Or maybe he is just a good guy who thinks politeness is a virtue. If you have been following the “debate” he set off with his analysis of Sanders’ economic proposals, it does not support your claim that he is “naive” and “pathetic.”
My comment about his naivete applies only to his notion of how scientific theories change.
I definitely think Friedman is a good guy who wants civil debate. I think he gives too much credit to mainstream economists if he thinks they want the same.
I think you missed his subtle digs at Krugman. And pretty much the entire piece is implicitly aimed at Krugman.
I especially like Friedman’s line about who Krugman obliviously calls “wonks”.
I noticed his hanging out remark, too, and feel similarly. But I would add that if he believes that scientific theory changes the way he thinks it does, he needs to read Thomas Kuhn’s Structure of Scientific Revolutions and Imre Lakatos. Friedman is incredibly naive in this respect. I also took note of Donald’s comment that the Romers were taking the opportunity to do him in, which is the feeling I had as well.
Neoclassicals — bringe on the leeches, thee economy is sicke…
leeches = austerity
or is it
leeches = bankers and the investor class
Instead of assuming why people are against his ideas he should actually ask them why… he would be surprised…
In theory, I believe government can help, in practice I’m not sure we have the right people leading the country. Those we have right now are stuck with the status quo ideology or a very energy intensive view of GDP growth.
In theory, I believe GDP could grow drastically, in practice I believe we ate stuck on energy intensive consumerism and individualism which is hitting a wall… Global population has exploded from 3.5B to 7B since the beginning of this monetary system. The US is still probably consuming at least 40% of world resources and energy with 5% of the population. Logically, this consumption begs to get redistributed yet all I see is more development generating even more entropy. We currently do not separate good GDP from bad GDP so it is hard to believe government or business will make the right decisions when most everyone in power is still stuck on the old paradigm.
In theory, resources are unlimited as they are an externality in most models. Most of these models were conceived when world population was much smaller, colonialism was in full swing and resources were everywhere to be plundered. In practice we have powerful people protecting old industries and environmental degradation that is still being denied.
And the fact that probably none of the above qualitative variables are in his model leads me to believe that his model is also wrong.
When more people in ivory towers reach out to people instead of assuming, then I’ll be more optimistic.
I got the distinct feeling that Friedman was not just being polite, he was being passive-aggressive. He suggests areas of research because he knows there are obvious answers and they swing in his favor. His modesty is like a trap. It would be very interesting to have some economists do research in common-speak and address the evolution of the concepts of both Demand and Government. And answer the question, Did starving the government in order to drown it in the bathtub have an ulterior motive – that of shrinking demand to manageable proportions? And why is the only acceptable demand for the neoliberals demand for cheeseburgers? Why don’t they quantify demand for education, health care, etc – because if they did they would find a market so big that it could never be met in a thousand years… or maybe that is their whole reason for killing socialism – to maintain their shabby, slow, inequitable markets.
Passive-aggressive – a clever idea.
Don’t you mean that it could only fail to be met with their solution set, not that it couldn’t be met by any solution set?
Remember (as regards those self-described econs like Friedman), Bernanke needed a quick seminar on just what the heck those credit derivatives were about before he went before congress.
Remember, before Greenspan was appointed to head the Fed, he was just a month or two from living on the streets.
Remember, pretty much everything Prof. Michael Hudson predicted has come to pass.
So, basically what you are saying is “economics” is a bunch of bullshit? Seems fair enough. Maybe we need to start over.
Maybe start here:
They hang the man and flog the woman
That steal the goose from off the Common,
But let the greater villain loose
That steals the Common from the goose.
The law demands that we atone
When we take things we do not own.
But leaves the Lords and Ladies fine
Who take things that are yours and mine.
The law locks up the man or woman
Who steals the goose from off the Common,
And geese will still a Common lack
‘Til they go and steal it back.
— English folk poem, c. 1764
I have posted this before, but everywhere I look, it seems to fit.
I read another version once.
The law be quick to seize the felon
who steals the goose from off the Common,
But lets the greater felon loose
who steals the Common from the goose.
That’s probably about as close to I don’t know as you are going to get, and having worked those vaunted elevators at Amherst I can Say that’s quite an admission. Wonders never cease. Maybe we’ll get an admission from someone over at Smith next, or heaven forbid, Montpelier, where lady Johnson runs the show. Poor Fuld, not quite recycled yet.
I don’t know is a great answer, and a good place to start. Why can none of the major cultures sustain reproduction. We have far more food, clothing, housing and energy than we could ever use. So why are people living on the street, looking at empty buildings.
If I have a 3000 square ft home, why don’t I build some nice young hard working couple a place to live. Why don’t I do something constructive.
Why does wall street control all development on the margin. If RE can finance itself, why can’t people. What is everyone waiting for. Exactly who must approve a change in behavior,
For everyone else to follow.
The habits of thought are so thoroughly baked in, aren’t they? “…build some nice young HARD WORKING couple a place to live”? Like /Henry Ford, “generosity” for hard work, only to the deserving as he defined it, having found the keys to the Model T and the enormous power that generated, and only to the ones that toe the corporate line, or those tiny few who luck into a Zuckerberg/Dimon/Shkreli/Kissinger/Clinton niche…
“In as much as ye have done these things unto the least of these my brethren, ye have done them unto me…” But sharing and generosity extend only to those we deem “worthy,” as in hard working? I know, I’m teeing off on a trifle and no doubt being too hard on ke. Who no doubt does much that is constructive, in the sense that decent people who value comity and survival would understand the word…
What is the real fundamental nature of political-economic relations? The organizing principle? Some honest agreement on that, based on as broad a parsing of all the details of how we humans treat and interact with each other, and what we do in and to our habitable environment, might point to what outcomes can actually be expected and might be reasonably hoped for and worked toward and re-engineered into the monad we call “the political economy.”
In the meantime, at the grittiest of granular levels, THIS is what a large and cancerous part of that political economy is “profitably” up to today: http://www.defenseindustrydaily.com/ And here’s a snapshot of what the end product looks like: https://m.youtube.com/watch?v=EUFUdSlJ-EY Those once were gardens and shops and places where hard working young couples and their children lived…
I’m wishful that humanity writ large can “do better,” but have seen enough to come to the tentative conclusion that what we are collectively doing is all there is, the best there is, and it ain’t going to get any better. “Baked in,” like the “I GOT MINE, TOO BAD FOR THE REST OF YOU SUCKERS” condition of the atmosphere that sustained and protected us while a few of us fokked it up and Lived Large on the “profits” that are just externalities. Badness all around, with interstitial and often just tribal or fortuitous bits of decency… Or like the Gates Foundation, “fixing” global education to suit whose interests, again?
All I can do is help those I can, and relative to investment in others, I have found no better way. Experiences vary, and each has a right to opinion.
Mine is certainly no more valid than others, and I have always found that most talk and do nothing. As a parent, my experience is that you have until about sixth grade, and then the critters are going to do what they are going to do, and work is heavily penalized everywhere, as part of empire conditioning.
Without children and work, there is nothing to distribute.
My wife is the Christian, they took her child, and she’s still a Christian. Quite rare in this world of ours. Wealth depends upon definition.
These days, being a Christian makes you unfit to parent.
The intelligence is being fixed to the policy. That pretty much sums it up, whether it be economics, climate denier science, tax cuts paying for themselves, etc. When Mr. Friedman opens by acknowledging that today’s economists have little to offer ordinary people, he should have simply stated that our economy has been rigged for the rich. He says it but won’t say it.
The politics of despair is this: the progressing decline of the vast majority of Americans personal economic opportunity must continue in order to finance the tax cuts for the wealthiest, finance the wars, and support greater corporate profits. The government of the United States has captured by those whose singular policy is to harness government for the enrichment of a narrow class of our population, our economic royalty. Money and riches are their birthright.
The politics of despair has much less to do with economics than it does with the decline of democracy in America, if you define democracy as having the government reflect the will of the people, or as is stated in the Constitution, promote the general welfare.Today’s economists are largely the courtiers to our gilded royalty. Their beliefs and their policies are fungible and always modify in a direction that best serves the rich.
Science, engineering, and math, combined with empirical observation have been the foundation of my professional career, and I know what scientifically based predictive modeling is. Broadly, it’s not economic because, as noted by Friedman above, the field of economics fails with respect to objectivity. As a whole, economists are not scientists, they are not objective, and the field of economics is certainly not a science as it exists today. As practiced, economics apparently begins first with a system of beliefs which often have no measurable or historic basis of support. And for these belief driven economists, who dominate the course of our nation’s actions, economics is more numerology or religion than reality, but with unfortunate real world consequences, and to our detriment as a nation.
So do I. I also know what happens when the system being modeled is chaotic.
A thousand thanks for your highly intelligent, learned and articulate comments.
There are dozens of places to look for descriptions of chaotic systems. Try google.
Short version: Not predictable in timing and final state.
My issues with economic modeling have to do with the assumptions applied within the models which, in effect, direct their results. Those I refer to as beliefs. When you have predictive economic models that when fed historic date consistently fail the most common form of calibration, which is to report what actually did occur, then you have junk. When others have models that do calibrate to historic data, and also are more reflective of ongoing, real time occurrences, but are dismissed because their assumptive parameters do not conform to conservative economic orthodoxy, you have a profession which has demonstrated it values its beliefs over objective analysis. That is the case with conservative economists.
Parametric manipulation to produce desired results in modeling is nothing new. Reinhart and Rogoff come to mind. But to repeat what Friedman said above:
The “assumption of full employment” is introduced into the calculations, not because it is true, as any sentient living person in this economy knows, but because it is necessary to affirm their beliefs and produce the answers they desire. It is junk, B.S., not objective, certainly not science.
Complexity and chaotic have nothing to do with it.
It seems that growth refers to both real growth in gdp and growth in productivity. But that growth seems to get conflated with population growth. I would like to see the population growth aspect explored more specifically in relation to how we evaluate overall growth. Not to mention, growth in what kind of good or service?
It is interesting that Friedman writes “But this approach leaves liberals like Hillary Clinton with few policy options to offer in response to the siren call of demagogues like Donald Trump.”
I do not view HRC as an (economic) liberal as the current economic order has worked well for her.
Her liberal nature is manifest only in legislated, economically low cost, social issues that do not harm her campaign funding base..
But then I believe history will be dismissive of almost the entire economics profession when climate change hits with a vengeance and the world realizes economic growth based on hydrocarbon consumption had a very high price..
For some context, it might helpful to review some of Friedman’s other recent writings. Perhaps he is out of touch, personally, as a result of his social and professional circle. Still, opinions of Dr. Friedman based solely on the recent debate between himself and the Liberal Gang of Five may not be valid. These are provided for reference. All appeared on the Dollars and Sense web page.
http://www.dollarsandsense.org/archives/2016/0316friedman.html
http://www.dollarsandsense.org/archives/2015/1115friedman.html (this is very closely related to the stuff that triggered the current debate in the first place)
http://www.dollarsandsense.org/archives/2016/0116friedman.html
Out of touch? I believe the proper thought would be is he even in the ball game?
We don’t need ‘professional’/academic economists to tell us TINA and we live in the best of all possible worlds.
What a waste of resources, we can definitively do something: remove economics departments from universities, remove policy positions held up by economists, advisor’s etc.
If the best they can offer/do is tell us “TINA” is a gigantic exercise in resource wasting, and should meet the fate of professions which are no longer socially useful, disappearing into the void.
Maybe when they are thrown out to the cold world outside of the ivory towers, as the rest of us, they will have something more useful to say than the product of their mental masturbations? They may become more creative instead of regurgitating the same meme’s product of group-think and eco chambers? Maybe… But is too cosy and comfortable being part of the aristocratic intellectual class supported for the entertainment and agenda of the oligarchic elites.
Your colleagues have reverted to Say’s law, and abandoned Keynes, because that provides a rationale for their recommendations.
Because this is the US, I’m positive that their pay is tied to making those recommendations – fulfilling their duty to their paymasters, or to their Bosses.
Their Personal Security is tied to telling the Boss what the Boss wants to hear, or what the Boss wants said.
Ah, highly credentialed (almost typed “educated”) people who still don’t know the difference between philosophy & science – that ol’ physics envy thing rears its goofy head. (Or, at least if they do know, they can’t admit it as it would endanger their positions as Very Serious People).
I dropped Econ. as my major in my senior year because of this nonsense.
My father made a very good living as a salesman. He could “sell air conditioners to Eskimos” as the old saying goes. Overcoming objections (even reasonable ones) is a talent, an art.
Our ruling politicians are sales people. Economists musings are just material to be used for the sales pitch.
We hold Adam Smith in great esteem, the champion of free trade, perhaps we should listen to what else he has to say:
“But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin.”
Exactly the opposite of today’s thinking, what does he mean?
When rates of profit are very high, capitalism is cannibalising itself by:
1) Not engaging in long term investment for the future
2) Paying insufficient wages to maintain demand for its products and services
Spot on Adam Smith, time to start listening.
KYrocky, April 21, 2016 10:03 AM (above)
More of a problem than that. Even valid critiques and refutations from within the profession have been brushed aside and ignored for decades.
https://weapedagogy.wordpress.com/2016/04/18/the-education-of-an-economist/
What else to expect from irrational dogma, coupled with voodoo and entrail analysis?
I only follow the top economics/financial thinkers (Prof. Michael Hudson, Prof. Michael Perelman, Samir Amin, etc.) so I admit to being somewhat unfamiliar with this fellow, Friedman, but please allow me to clarify something amid all the various (and probably extraneous) stuff he mentioned: since 1997, income growth has all gone to the top 10%, completely skipping the bottom 90%.
From 1997 (start date of full-on Fantasy Finance) to 2007, $23 trillion in securitized debt was sold.
From 2007 to 2009, US households lost an estimated $17 trillion in assets, and there was a $6 trillion loss over in Europe ($17 trillion plus $6 trillion equals $23 trillion).
So they profit from the creation and selling of debt-based financial instruments (which also affords them ever more control over money creation) and then that debt is covered by financial collapse.
Got it?
Got it. A massive pump and dump by finance parasites.
No matter whether or not economics is a science, it is not a useful science to consult in making important policy decisions. Economists should be excluded from any role in policy making and they should be replaced by actuaries and data analysts. As a science wannabe, economics is not ready for prime time. If economics is a science, then it is a barren science that has offered little of value since the ideas of John Maynard Keynes. But even if it is a nascent science it is at the stage of searching for its Galileo—perhaps even for its Archimedes.
I have tried to understand economics. I have taken a class, I have read a few books, including Paul Krugman’s 940-page textbook, and it just does not make sense to me. Max Tegmark is from Denmark, and like many of us he made a stab at picking a career when he graduated from high school. Here is what he wrote:
Tegmark decided to become a physicist and is author or coauthor of more than two hundred technical papers, twelve of which have been cited more than five hundred times. He holds a Ph.D. from the University of California, Berkeley, and is a physics professor at MIT. I applaud Tegmark’s wish to make “our planet a better place,” and I agree with his description of economics as being “a form of intellectual prostitution.” I wish I had thought of it.
Another scientist, more famous than Tegmark, was Albert Einstein. He shared Tegmark’s wish to make the world a better place, and he believed that the economic scourge of capitalism produced more evil than good. He was inclined toward socialism which is a dirty word in America today, but based on my reading of his views I think he was more inclined toward any system that worked for the common good. In any case, he wondered if the field of economics would be useful in designing a government of the future. In 1949 he wrote:
There is nothing more to say.
If you want to gain some insight into economics, you might want to start with Smith and Max-Neef’s “Economics Unmasked” and/or Steve Keen’s “Debunking Economics”.
I read Krugman, Stiglitz, Reich, Alperovitz, Galbraith, Friedman and a host of others – pretty useless all.
Jack Rasmus, Michael Hudson, David Harvey and Bill Black are a few other names to pay attention to.
Umass was the primary resting place for the diaspora of the great Harvard/URPE purge of 1970’s. Sam Bowles took the Mass Pike out with a number of other grad students-in-line-for-professorships. As I recall Galbraith the elder and Leontiev voted to support the radicals and Arrow and several other Harvard faculty voted the 86. The place is a blessing.
Somebody should write a book about this occurrence. I firmly believe that this incident was, as Yogi used to say “…the fork in the road…”
It seems that Arrow was another of the 5 that voted to give Bowles tenure in 1973, along with Galbraith, Leontiev and Albert Hirschman. But they lost 19-5. So Bowles and crew packed up for UMass. Meanwhile:
From a good blog post: HOW ECONOMICS BECAME A SCIENCE that gets its facts mostly from this paper (pdf):
Tiago Mata (2009): Migrations and Boundary Work: Harvard, Radical Economists, and the Committee on Political Discrimination
Anyway, the upshot is that the complaints of today regarding economics all played out in the early 1970s, and the a$$holes won.
Hi Left in…
Thanks for the dope…and the link.
“political economy”
Oh how I long for the day when this phrase will one day be used correctly, like it was in days gone by.
I came here, when it began, to teach the 7 to nine year olds AI. Yves built the perfect filter / preamp. Those kids, a little navy, are now teenagers ripening with passion. The proof is in the pudding, your life’s work, and if I did no more than help one child learn to defend him or in the case of four daughters, themselves from the stupidity of empire, I will have done more than most these days. You marry the person you want your children to be, which gets baked into the mitochondria. That dark DNA, what most losing that childhood sense of wonder fail to see, is far more important.
My one choice in life is my wife, and I can live with that. For those of you not here five years and back didn’t meet my wife. In my culture, you are judged first by your choice of spouse, and then by the ability to train your children to employ the empire as a counterweight, effectively winding a Springer wheel.
Everything has right to culture, and I won’t be the one confiscating your children, which happens here by the millions every year, and supposed to give a flying f about some banker stealing from old people. It’s called war. The physical war is a derivative of the intellectual, which is a derivative of the spiritual, however you define it with your life.
My opinion is nothing more than vapor. My wife got on me to share more than the science. I don’t know fiddly about people, because my focus is family and how I can improve their environment.
While I knew intellectually that the mainstream had abandoned Keynes and reembraced Say’s Law, I didn’t take this shift seriously. It seemed too absurd to me; honestly, I thought they were only kidding.
So, in essence, the economists sitting at the policy table have regressed 200 years.
The role of economists and other policy elites (Paul Krugman is fond of the term “wonks”) is to explain to the general public why they should be reconciled with stagnant incomes . . .
I am fond of the term “useless eaters”.
I have yet to hear any useless eater explain how, for practical purposes, 100% of consumer electronics end up being made in one country, China. Economically and logically, it seems totally demented to me, but it is what it is.
How do their models explain that? Is that part of econxplaining why the general public should be reconciled with stagnant wages?
The devastating result of the joke his buddies played on him, is paid by the little people.
So, on top of that Tesla 3 phase, you have variable FREQUENCY drive, setting speed by adjusting frequency. The limits are quantum, not physical, which is trapped by the resulting time.
Get rid of those Mickey mouse Asian carp, and get yourself an old 80s vfd. Add another piece of linkage.
Wow. Einstein, Einstein said, “You can’t go wrong if your goals are correct.” In the Ivory tower the goal is to understand the system as indicated from evidence culled from actual events.
It is not necessarily about making anything happen.
Scientists are more often depressed than engineers because scientists believe from the evidence the universe will get cold and stop.
An engineer would build a heater.
Now they can build a Warp drive ship pulled in a real nothing there to something there where you are there to the other slow, or fast light constant universe. (RSD) How would one universe be different from another when physics is physics?
Petroski put Financial Engineering in the discipline. The goal of the individual financial engineers is to keep a job engineering something that puts money in the bank account. -Since they learned from Meyer Lansky no one is supposed to see the treasury, that’s what they do. Panama, The Caymans, the system allows for moving the treasury to the shoe closet. -Emilia Marcos.
The political Leader? They are all supposed to be a Moses. “Let my people go.”
You can do something fancy, but marching is most effective. -Rockets, fancy, system? March to make changes? Yes. Police come and beat the stragglers. March in the middle.
There is someplace to set down roots. “Food is big. Food is going to be big.” Chris Hedges. The electric car is more like a horse, so far.
Who is it that you want to make rich?, and what is rich? “Life of the mind.” William Shirer. – Keep mind and body together?
Nuremberg: The individual is responsible regardless of the system. “Just doing my job.”
The Financial Engineer is what the Great Leader wants more than he wants an economist. McNamara. McNamara believed in standardization.
So then, we get the one size fits all. Make the F 35 do everything. Give everybody a tomato all the time wherever they are.
William Godwin: Government has two responsibilities: Defense and Education. Neither one ought be part of a for profit system.
The goal of the government is to keep your people safe, & make them smart.
Democracy? I already have a vote. This is fantastic!
Some kings are better than other kings. If I did not have a vote, I’d have to march to get it. The system is good, everybody has a vote, except the poor. If they vote too much they would vote not to be ignorant and poor.
Watch this!
“In the late 1930s, Hansen argued that “secular stagnation” had set in so the American economy would never grow rapidly again because all the growth ingredients had played out, including technological innovation and population growth. The only solution, he argued, was constant, large-scale deficit spending by the federal government.
The thesis was highly controversial, as critics, such as George Terborgh, attacked Hansen as a pessimist and defeatist. Hansen replied that secular stagnation was just another name for Keynes’s underemployment equilibrium. However, the sustained economic growth beginning in 1940 undercut Hansen’s predictions and his stagnation model was forgotten.”
https://en.wikipedia.org/wiki/Alvin_Hansen#Stagnation