Wednesday, August 19, 2015

Macroeconomics

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I’m not boasting, but I feel that I’m qualified to expound on such a weighty subject because of my extensive background in the field. I've studied both microeconomics and macroeconomics for an entire semester each at a local community college. Macroeconomics is the big picture view of the economy; what sort of economic system is the best for keeping us fat and happy, or lean and grumpy if that's what you're into.


After much pondering and wailing and gnashing of teeth, I’ve drawn two conclusions. First, when you encounter the phrase, “Most economists say...,” immediately check to see if your wallet is secure and turn your bonkercockie detector all the way up. In 2009, Econ Journal Watch, “....a forum about economics research and the economics profession,” published the results of a survey of economists to determine areas of consensus (and disagreement) among members of the prestigious American Economics Association, est. 1885. This study, and others since, point to broad areas of consensus, at least on certain economic questions.  


Unfortunately, by the sixth paragraph we’re told to take all this with a grain of salt because there are all sorts of variables that might render a given supposed consensus, in a given situation, false.      


“Economics,” as defined by Wikipedia, “is the social science that analyzes the production, distribution, and consumption of goods and services.” Carefully note the phrase social science. We place a lot of faith in the physical sciences because in theory (pun intended) it’s possible to produce the same results from a given experiment, done the exact same way, every time. Mainstream economists go to a great deal of trouble to collect and analyze the available data about a specific economic question, build computer models, draw graphs and solve equations. Then they come up with different answers and fight over them. For example:


Douglas W. Elmendorf, PhD, director of the Congressional Budget Office from 1.22.09 until 3.31.15, has carefully examined the data and has determined, unequivocally, that the Obama stimulus program worked.


J.D. Foster, PhD., former senior fellow at the Heritage Foundation, former Associate Director of the OMB and currently deputy chief economist at the U.S Chamber of Commerce  has carefully examined the data and has determined, unequivocally, that the Obama stimulus program failed.

"THERE ISN’T ANY RELIABLE INCONTROVERTIBLE EVIDENCE TO DECISIVELY CONFIRM EITHER SIDE’S VIEWS is everything that’s wrong about macroeconomics and the people who write about it." So says Russ Roberts, one of my heroes. He was specifically talking about Keynesian v. Austrian economics but his statement still holds true in this context. I won't bore you by detailing each sides position. I'm sure you're sick of your favorite media sources endless analyses of Keynesian economic policies and why our The Gubmint embraces them. I'm just relieved we can still count on the Fourth Estate to do its job (GRIN).
A current economic issue that affects us all just now is the debate over what policies will get our sluggish economy back on track. There are well meaning, intelligent folks advocating everything from anarcho-capitalism to the squishy middle to a European-style welfare state (social democracy) to communism. The system we have in the USA is described as a mixed economy, a free market system but with no shortage of (over) regulation and a hefty dash (and growing) of welfare state. This leads me to my second conclusion. I apologize in advance to anyone that is expecting me to light the nation's path out of the darkness. I do have an opinion, but opinions, as they say, are like...noses, everyone has one. We’re drowning in opinions and information. The information age makes it possible for any old fart, like myself for example, to at least potentially join the deluge. Irony alert: Access to virtually unlimited information and opinions makes the “old school” notion that we need people and institutions we can rely on to act as information filters more important than ever. When it comes to economics my filter is, “Economics In One Lesson”  written by Henry Hazlitt and published in 1946.


The one lesson is, “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups” (my emphasis). Note the phrase, “art of economics.”


The (slim) book expands on this lesson without a single graph or equation. It’s easily available in its original form as well as in updated versions. When I’m king (oh crap, there he goes again) you will have to demonstrate familiarity with this book to get out of high school. Folks that disagree with Hazlitt’s conclusions should study it because if you can’t make a convincing argument as to why a given conclusion is wrong, his simple logic will crush you. But you want to know the truth, right? You’re not just out to promote an agenda or confirm your biases, right?


©Mark Mehlmauer 2015


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