A specter to paraphrase the opening line of The Communist Manifesto is haunting America. That specter is the economics profession itself.
Economics has become immersed in arcane modeling. Modeling does not really work well as even the cognoscenti sotto voce admit. Consider for example at the New York Feds excellent Liberty Street Economics: Choosing the Right Policy in Real Time (Why Thats Not Easy). This essay concludes with refreshing integrity and candor:
In the end we have shown that policy analysis in the very oversimplified world of DSGE Dynamic Stochastic General Equilibrium models is a pretty difficult business. Contrary to what it may sometimes appear from listening to talking heads deciding which policy is best is very rarely a slam dunk.
Dynamic Stochastic General Equilibrium models? Economics has come to resemble more the model-based pseudoscience of astrology more than the observation-based science of astronomy.
As Prof. Reuven Brenner recently noted in Asia Times:
Most people are unaware of the fact that rulers perceived astrology for almost a century as science - pretty much as some perceive macro-economics these days. Monarchs such as Charles I as well as the learned and the nobility relied on Councils of Astrological Advisers. Books presenting complex geometrical calculations linked to positions of stars legitimized analyses and forecasts.
...
Abruptly after a century in part due to Galileos telescope destroying the science of political lies and hierarchies built on them the astrological edifice disappeared in a puff - or so it appeared.
Except that macro-economics is now its modern incarnation: Only instead of stars macro-economists look at aggregates gathered religiously by governments statistical agencies - never mind if the country has a dictatorial regime be it left right or anything in between or has large black markets as Italy and Greece do where tax evasion has long been the main national sport. So let us first forget about this macro stuff whose beginnings are almost a century old and offer a simple alternative for shedding light on the situation today and on possible solutions hopefully demolish this modern pseudo-science once and for all.
The most popular book demystifying economics of the 20th century was Henry Hazlitts Economics in One Lesson. It sold a million copies.
Now for the 21st century comes John Tamny Political Economy editor at Forbes editor of RealClearMarkets.com (and a friend) again to muck out the Augean stables. Tamny has published a splendid new book: Popular Economics: What the Rolling Stones Downton Abbey and LeBron James Can Teach You About Economics. It reportedly already is going into its second printing. May it like Hazlitts classic sell a million copies!
If (admittedly a big If) even a single presidential aspirant reads it and takes it to heart Popular Economics could prove a significant factor in restoring what proto-Supply-Sider John F. Kennedy said at the dedication of Greers Ferry Dam: A rising tide lifts all the boats....
Big If yet theres hope. As I have argued here that great transformations in areas such economic growth policy almost always in the modern era have originated in the House of Representatives. I spend a great deal of time inside the Congress and am delighted to report that Tamnys Popular Economics is written in the terms that Members of Congress speak and think. (Bonus points to Tamny for his many and extensive sports stories the kind of stuff people actually talk about on Capitol Hill when the cameras are off.)
Tamny loves to be provocative. Hes good at it. He exalts income inequality. He celebrates (organic rather than government-exacerbated) recessions. Tamny does an especially good job at stripping the bark off the fallacy that career civil servants somehow are smarter or nobler than entrepreneurs and executives in the private sector.
I myself spent several years as a career civil servant in the U.S. Department of Energy. From personal experience I admit to having become not a whit smarter once sworn to uphold the Constitution and issued the laminated badge. Nor were any of my colleagues made of the stuff of Platos philosopher-kings. Mere mortals all!
Some of Tamnys jousts easily could be taken out of context and used by Progressives and other dirigistes to satirize his positions. Yet his points to any fair reader are clear:
Recessions are the cure for whats wrong with an economy. They cleanse it of the bad businesses bad investments and labor mis-matches that got it in trouble in the first place. When the 1920-1921 recession hit a wise political class sat back and did nothing other than lower taxes slightly and slash spending. Unemployment dropped from 11.2 percent in 1921 to 1.7 percent by 1923 and the Roaring 20s took off.
Contrast that fast near-10 drop in unemployment with the record of the protracted Great Recession and soggy recovery in which we are still mired courtesy of the economic policies of both the George W. Bush and Barack Obama administrations.
Tamny covers a lot of ground in this book thoroughly covering the Big Four economic policies. Done right these support the achievement of equitable prosperity. Done wrong these mire us in stagnation and income immobility.
Tamny tackles taxes regulation trade and money. He does so by reference to popular culture making lucid that which in the hands of less gifted writers often is dull and dry. (Not for nothing did Carlyle call economics the dismal science.)
Heres an example of how Tamny subtracts the dismal from the science:
Politicians may raise by taxes the cost of work for their citizens but if the cost is too high those citizens wont stick around to be fleeced especially when theyre well-to-do. ... Keith Richards and the Rolling Stones did just that. (Quoting Richards:)
The last thing I think the powers that be expected when they hit us with super-tax is that wed say fine well leave. Well be another one not paying tax to you. They just didnt factor that in. It made us bigger than ever and it produced Exile on Main St. which was maybe the best thing we did. They didnt believe wed be able to continue as we were if we didnt live in England. And in all honesty we were very doubtful too. We didnt know if we would make it but if we didnt try what would we do? Sit in England and theyd give us a penny out of every pound we earned? We had no desire to be closed down. And we upped and went to France.
Tamny especially impresses with the clarity around the matter of money to which he devotes five full chapters. For example:
In The Wealth of Nations-the masterpiece that laid the groundwork for the rise of modern capitalism-Adam Smith observed that the sole use of money is to circulate consumable goods. That was a throwaway line for no serious thinker had ever considered money as anything but a measure. Money came into existence because men needed a way to measure the value both of their production and of the consumable goods they sought in exchange for the fruits of their labor. Smith was stating the obvious.
Smith would laugh at all the commentary in the media today about the need for a strong dollar or a weaker dollar to boost exports or the importance of convincing the Chinese to boost the value of the yuan. To Smith that would be the equivalent of saying increase the length of the meter or shorten the minute or because Kim Jong-Un is bothered by his diminutive five-foot-six- inch stature there is a need to devalue the foot so the North Korean dictator can stand ten feet tall. Just as the foot is never long or shot money should be neither strong nor weak. The foot is a standardized tool to measure actual things and money should have the same constancy.
Popular Economics has attracted great praise from many of the leading public intellectuals dedicated to economic growth (as well as from no less than George Will). Steve Forbes in his excellent Foreword says it best: By breaking the mold of what modern economics has become and by explaining in an engaging way what economics truly is Tamny has done humanity an inestimable service.
Buy Popular Economics.
Be provoked.
A specter to paraphrase the opening line of The Communist Manifesto is haunting America. That specter is the economics profession itself.
Economics has become immersed in arcane modeling. Modeling does not really work well as even the cognoscenti sotto voce admit. Consider for example at the New York Feds excellent Liberty Street Economics: Choosing the Right Policy in Real Time (Why Thats Not Easy). This essay concludes with refreshing integrity and candor:
In the end we have shown that policy analysis in the very oversimplified world of DSGE Dynamic Stochastic General Equilibrium models is a pretty difficult business. Contrary to what it may sometimes appear from listening to talking heads deciding which policy is best is very rarely a slam dunk.
Dynamic Stochastic General Equilibrium models? Economics has come to resemble more the model-based pseudoscience of astrology more than the observation-based science of astronomy.
As Prof. Reuven Brenner recently noted in Asia Times:
Most people are unaware of the fact that rulers perceived astrology for almost a century as science - pretty much as some perceive macro-economics these days. Monarchs such as Charles I as well as the learned and the nobility relied on Councils of Astrological Advisers. Books presenting complex geometrical calculations linked to positions of stars legitimized analyses and forecasts.
...
Abruptly after a century in part due to Galileos telescope destroying the science of political lies and hierarchies built on them the astrological edifice disappeared in a puff - or so it appeared.
Except that macro-economics is now its modern incarnation: Only instead of stars macro-economists look at aggregates gathered religiously by governments statistical agencies - never mind if the country has a dictatorial regime be it left right or anything in between or has large black markets as Italy and Greece do where tax evasion has long been the main national sport. So let us first forget about this macro stuff whose beginnings are almost a century old and offer a simple alternative for shedding light on the situation today and on possible solutions hopefully demolish this modern pseudo-science once and for all.
The most popular book demystifying economics of the 20th century was Henry Hazlitts Economics in One Lesson. It sold a million copies.
Now for the 21st century comes John Tamny Political Economy editor at Forbes editor of RealClearMarkets.com (and a friend) again to muck out the Augean stables. Tamny has published a splendid new book: Popular Economics: What the Rolling Stones Downton Abbey and LeBron James Can Teach You About Economics. It reportedly already is going into its second printing. May it like Hazlitts classic sell a million copies!
If (admittedly a big If) even a single presidential aspirant reads it and takes it to heart Popular Economics could prove a significant factor in restoring what proto-Supply-Sider John F. Kennedy said at the dedication of Greers Ferry Dam: A rising tide lifts all the boats....
Big If yet theres hope. As I have argued here that great transformations in areas such economic growth policy almost always in the modern era have originated in the House of Representatives. I spend a great deal of time inside the Congress and am delighted to report that Tamnys Popular Economics is written in the terms that Members of Congress speak and think. (Bonus points to Tamny for his many and extensive sports stories the kind of stuff people actually talk about on Capitol Hill when the cameras are off.)
Tamny loves to be provocative. Hes good at it. He exalts income inequality. He celebrates (organic rather than government-exacerbated) recessions. Tamny does an especially good job at stripping the bark off the fallacy that career civil servants somehow are smarter or nobler than entrepreneurs and executives in the private sector.
I myself spent several years as a career civil servant in the U.S. Department of Energy. From personal experience I admit to having become not a whit smarter once sworn to uphold the Constitution and issued the laminated badge. Nor were any of my colleagues made of the stuff of Platos philosopher-kings. Mere mortals all!
Some of Tamnys jousts easily could be taken out of context and used by Progressives and other dirigistes to satirize his positions. Yet his points to any fair reader are clear:
Recessions are the cure for whats wrong with an economy. They cleanse it of the bad businesses bad investments and labor mis-matches that got it in trouble in the first place. When the 1920-1921 recession hit a wise political class sat back and did nothing other than lower taxes slightly and slash spending. Unemployment dropped from 11.2 percent in 1921 to 1.7 percent by 1923 and the Roaring 20s took off.
Contrast that fast near-10 drop in unemployment with the record of the protracted Great Recession and soggy recovery in which we are still mired courtesy of the economic policies of both the George W. Bush and Barack Obama administrations.
Tamny covers a lot of ground in this book thoroughly covering the Big Four economic policies. Done right these support the achievement of equitable prosperity. Done wrong these mire us in stagnation and income immobility.
Tamny tackles taxes regulation trade and money. He does so by reference to popular culture making lucid that which in the hands of less gifted writers often is dull and dry. (Not for nothing did Carlyle call economics the dismal science.)
Heres an example of how Tamny subtracts the dismal from the science:
Politicians may raise by taxes the cost of work for their citizens but if the cost is too high those citizens wont stick around to be fleeced especially when theyre well-to-do. ... Keith Richards and the Rolling Stones did just that. (Quoting Richards:)
The last thing I think the powers that be expected when they hit us with super-tax is that wed say fine well leave. Well be another one not paying tax to you. They just didnt factor that in. It made us bigger than ever and it produced Exile on Main St. which was maybe the best thing we did. They didnt believe wed be able to continue as we were if we didnt live in England. And in all honesty we were very doubtful too. We didnt know if we would make it but if we didnt try what would we do? Sit in England and theyd give us a penny out of every pound we earned? We had no desire to be closed down. And we upped and went to France.
Tamny especially impresses with the clarity around the matter of money to which he devotes five full chapters. For example:
In The Wealth of Nations-the masterpiece that laid the groundwork for the rise of modern capitalism-Adam Smith observed that the sole use of money is to circulate consumable goods. That was a throwaway line for no serious thinker had ever considered money as anything but a measure. Money came into existence because men needed a way to measure the value both of their production and of the consumable goods they sought in exchange for the fruits of their labor. Smith was stating the obvious.
Smith would laugh at all the commentary in the media today about the need for a strong dollar or a weaker dollar to boost exports or the importance of convincing the Chinese to boost the value of the yuan. To Smith that would be the equivalent of saying increase the length of the meter or shorten the minute or because Kim Jong-Un is bothered by his diminutive five-foot-six- inch stature there is a need to devalue the foot so the North Korean dictator can stand ten feet tall. Just as the foot is never long or shot money should be neither strong nor weak. The foot is a standardized tool to measure actual things and money should have the same constancy.
Popular Economics has attracted great praise from many of the leading public intellectuals dedicated to economic growth (as well as from no less than George Will). Steve Forbes in his excellent Foreword says it best: By breaking the mold of what modern economics has become and by explaining in an engaging way what economics truly is Tamny has done humanity an inestimable service.
Buy Popular Economics.
Be provoked.