Trump and Economics
from Peter Radford
I don’t want to spend much time on Trump and his version of economics primarily because I am not sure what it is. Nor, I think, does he.
One thing worth mentioning is that there is an unprecedented disconnect between the economics profession and the incoming President. Just about every economist I know says that Trump will be bad for the economy, and that the best we can hope for is that his notoriously poor attention span will prevent him from doing much.
For a much more detailed discussion of this disconnect go and read Justin Wolfers article in the New York Times.
What intrigues me is that this near complete separation between the economics profession, of all political persuasions, and the incoming administration is in stark contrast to that between Trump and both Wall Street and small business owners.
Is this because Wall Street and small business has a better handle on the economy? Or is it because they are deluded and are thus in for an ugly surprise?
There’s a part of me that would argue that Wall Street and small business are better informed than economists are about the economy. This opinion is based on my continued amazement at the extraordinarily strange convolutions that economics puts itself through in order to “prove” its various propositions. They are, frankly, absurd. So much so that any conclusions economists draw from their mathematics ought be taken with bucket loads of salt. Economists are steadfastly incapable and unwilling to amend their ideas and are still stuck in major reconsideration mode after the real world repudiation of their confidence and theories that the Great Recession represented. Suffice to say that were I a politician trying to steer the ship of state through these turbulent times, the last place I would look for economic advice is to a profession that still — despite the evidence — builds its theories on the quicksands of rationality, perfect information and so on.
Those ideas have been debunked by serious scientists a long time ago. Economics, though, appears determined to become ever more irrelevant.
This is not to say that there aren’t plenty of economists who have begun to cleave away from the mainstream. The problem is that those folk are poorly represented in the halls of the most prestigious institutions and are thus unlikely to get called upon to give advice. There is a real world economics out there, it isn’t coherent, and it isn’t in the major text books. Let’s hope it makes more progress during the next few years. Or else the demise of economics will simply accelerate.
I am more and more of the opinion that the economics profession is, itself, a barrier to strong economic growth based as it is on ideas and concepts that relate to industrial economies the likes of which we haven’t seen for decades. That, and the complete inability to deal with realities such as uncertainty, real world human behavior, and so on, make mainstream economics an exercise in self-reflection rather than a serious attempt to understand the world. In terms of a self-reflective activity it is a brilliant and exhilarating discipline. In terms of a place to go for understanding real human economic activity, not so much.
But that’s an old discussion we need not reprise. Economics is what it is. Relevant or not it still is held in esteem by many who do not grasp its almost satirical qualities.
And the total snub given to the profession by the incoming administration is simply further confirmation of the way in which the last few years have dealt a body blow to its intellectual reputation.
Do we honestly think that Wall Street or small business owners have a better grasp of the actual economy?
Wall Street absolutely not. It is driven by whims, fads, herd instincts, and other strange forces. Plus it is entirely self-interested and self-obsessed. Wall Street cares not one jot about the economy except what profit opportunities lie within it.
This, of course, is a classic case of the self-interest that is supposed to underlie the “hidden hand” of free markets: isn’t all that market magic driven by such venal instincts? The disconnect being, naturally, that economists have convinced themselves that market magic will drive out the naughty people and that only the virtuous — in a self-interested way — will survive. Except that naughty people seem to thrive. In abundance. As in the financial melt down of 2007.
Venal is venal. It takes the naivety of economics to make it pure.
No wonder Trump, who surely recognizes venal when he sees it, has no time for economics.