I have a soft spot in my heart for economics. I am, by no means, an economist; however, at some point during an undergrad Econ 101 course (in a large auditorium, it seems, somewhere in the SWKT) I had an “a-ha!” moment. I suddenly saw economics as a field that actually had some predictive power for the world.
I swing more towards the Austrian school of economics; however, my experience is more as a consumer than a producer, and I know just enough to understand what economists are talking about (usually). Especially as I look at public policy proposals, I like to remind myself something that Keynes once said about human nature and our ability to control the future:
Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”
His philosophical opposite–Hayek–was no more sanguine about human nature:
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
However, even economist are human, and even they have blind spots. Think of the ever repeated “all things being held equal…”
With that in mind, prepare for a few of those blind spots, brought to you by Tyler Cowen, himself an economist. To be fair, he’s spelled out “common mistakes” by both left and right leaning economists. Check the full lists at his website. I’ve only noted a few of them here below (the numbers are as they appear in his list, which is why they are missing numbers).
Mistakes by Right Leaning Economists
1. There is excess fear of inflation and hyperinflation in the current economic environment. Further there is often an excess estimate of the costs of inflation in the two to five percent range.
2. We know much less about the causes and drivers of economic growth than we like to admit, and when pushed on this issue we fall back to citing relatively simple cases with extreme differences, such as East vs. West Germany.
5. I’m all for Health Savings Accounts, but unless done on a Singaporean scale, and with lots of forced savings, they’re not a health care plan to significantly benefit most Americans. There is less of a coherent health care plan, coming from this side, than one might like to think.
9. The role of market failure in the recent financial crisis is underestimated. It is also believed that we can somehow commit to a policy of no future bailouts. Promoting that myth will make future bailouts more likely.
8. The story of steady and significant economic progress for most Americans is accepted too readily.
10. Relying on liability law, whether or not it is a good idea, is not intrinsically more pro-market, more libertarian, or less interventionist.
Mistakes by Left Leaning Economists
1. Suggesting that money matters in politics far more than the peer-reviewed evidence indicates.
2. Evaluating government spending on a program-by-program basis, rather than viewing the budget as a series of integrated accounts. Cross check with the phrase “Social Security,” or for use to take many discretionary spending cuts off the table.
4. Sins of omission: there are plenty of bad policies, such as occupational licensing, which fail to come under much attack from the left. Sometimes this is because the critique would run counter to the narrative of needing more government or needing more regulation.
5. Significantly overestimating the quality of the political economy of an America with more powerful labor unions and underestimating the history of labor unions as racist, corrupt, protectionist, and obstructions to positive change.
6. Overestimating the efficacy of fiscal policy, underestimating the power of monetary policy, and sometimes ignoring or neglecting how the two interact (“the monetary authority moves last”).
10. A willingness to think that one has “done one’s best” in the realm of policy, and to blame subsequent policy failures on Republican implementation, rather than admitting that a policy which cannot be implemented by both political parties is perhaps not a good policy in the first place.
11. Use of a strong moral argument for universal health care coverage, combined with a fairly practical, hard-headed approach to the scope of the mandate, and not realizing the tension between the two. Failure to indicate where the “bleeding heart” argument actually should stop and at what margins we should (and will) let non-elderly people die, if only stochastically.
In case you are wondering, ‘stochastically’ means ‘random.’
Thoughts? Do you agree? Should there be others on this list? What are your blind spots in economic policy?
(h/t to the Volokh Conspiracy)
- Economist: ‘Beauty Is Not Synonymous With Truth’ (npr.org)
- Advice For Economists (andrewsullivan.theatlantic.com)
- Common Mistakes Economists Make, As Seen By Marginal Revolutions (doubleplusundead.com)
- Common mistakes of left-wing economists? (marginalrevolution.com)
- “Common mistakes made by economists” (marginalrevolution.com)