Home > The Economics Profession > Economists pretending to know

Economists pretending to know

from Lars Syll

economists pretend to know

We are storytellers, operating much of the time in worlds of make believe. We do not find that the realm of imagination and ideas is an alternative to, or retreat from, practical reality. On the contrary, it is the only way we have found to think seriously about reality. In a way, there is nothing more to this method than maintaining the conviction … that imagination and ideas matter … there is no practical alternative”

Robert Lucas (1988) What Economists Do

Sounds great, doesn’t it? And here’s an example of the outcome of that serious think about reality …

lucIn summary, it does not appear possible, even in principle, to classify individual unemployed people as either voluntarily or involuntarily unemployed depending on the characteristics of the decision problems they face. One cannot, even conceptually, arrive at a usable definition of full employment as a state in which no involuntary unemployment exists.

The difficulties are not the measurement error problems which necessarily arise in applied economics. They arise because the “thing” to be measured does not exist.

  1. graccibros
    March 2, 2015 at 1:33 pm

    Thanks Lars. Interesting post. If you think about all the economic “constructs” around full employment and I think you have to include perhaps even today, its imagined link to inflation – well, how much human suffering had been caused, supported by these constructs.

    So let me leave you with the realities of certain “good” circumstances: The U.S. economy, 1940-1945, yes, “mobilization” that brought full employment to a jobs-starved nation, pulling in people whom perhaps never thought of themselves as ever part of the workforce, blacks and women breaking new ground. And perhaps 1966-1969, and again the late 1990’s…isn’t it interesting that none of these situations would be considered “normal,” all had serious distortions, causal factors that we would not want to repeat, but here’s the lesson: it doesn’t seem we have achieved it from straight out conscious, positive construction of the full employment goal and the policy means.

    And in its dire absence: consider the case of Mexico’s descent, and the inner city ghetto of the US: both accompanied by much violence, outside the walls and inside now the prisons. And the “rise of women” in the US and the “end of men,” tracking the acceptance of how rising levels of women in the workforce and the descent of the blue collar male…and the spiral of violence towards women? (Very apparent in Mexico too).

    Some important eddies swirling around the main current of missing full employment as economists retrace the history of Western philosophy, the ongoing battle which I hear in the attempts to pin down a definition, the battle between determinism and active human agency…when things go wrong, as surely they have, who do we blame? The Right the absence of good characters (skills and education and self discipline) the Left (no longer except outside the mainstream of the profession) the power of the dynamics inside capitalism itself, as old as Marx and resurfacing, mutedly, in Piketty’s musings. Piketty straddling the fence between insider and outsider, so far doing a pretty good job of it, perhaps angering the left with his attempts at the causal dynamics of capitalism (will they ever be pinned down?)

  2. graccibros
    March 2, 2015 at 5:15 pm

    I wanted to give credit where it is due to James A. Morone’s “Hellfire Nation: The Politics of Sin in American History.” (2003).

    Secular economists should not be put off by the title because like it or not we can’t seem to shake the Protestant Reformation’s hold of individualism and character coloring many categories of economic behavior of even…policy formulation. Witness the long history of Speenhamland and Poor Law “reform” in England, the subject of much historical digging in Karl Polanyi’s increasingly appreciated book from 1944, “The Great Transformation,” with the implications for American labor/welfare policy…and Greek and German dynamics (virtuous hard working North – sinless vs. lazy corrupt South – sinful) a discussion continued in Block and Somers new book on Polanyi – “The Power of Market Fundamentalism.” And aren’t work/job policy reforms “labor market reforms” at the heart of neoliberalism’s conditionalities – the list’s of how nation’s citizens are to behave, their rights and obligations under austerity. Let’s be frank: work harder for less, like the Germans, Americans and Chinese unless your skills and merits (virtues) entitle you to higher pay…

    You cannot escape these dynamics in most of the key policy areas governing the formulation of employment strategies…the size and nature of the welfare state…and attitudes towards work.

    These themes are also on my mind because I was astounded – and impressed when I saw “Hellfire Nation” cited in the sources and the implications discussed by none other than Yanis Varoufakis at this long post at Naked Capitalism before he went into the negotiating hot seat he currently occupies: http://www.nakedcapitalism.com/2014/02/yanis-varoufakis-can-internet-democratize-capitalism.html

    Do I still have to indicate that Morone’s book could help explain to even Paul Krugman his head scratching and bewilderment as he yet again laments the neoliberal austerity crowd’s turning depressed economy discussions into “a morality play.” Yes, Paul, right or wrong, it certainly takes that character, and Morone tells you why, supplemented by Polanyi.

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