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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.

But really?

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.

  1. antireifier
    January 17, 2017 at 2:31 am

    Seems to me that Economics is really irrelevant. People should make the best decisions that they can. When Economists are able to predict outcomes then maybe it is time to listen to them and pay attention. I believe that in some ways that is what Jim Stanford said in his recent article about immutability.

  2. January 17, 2017 at 3:30 am

    Trump only has time for himself and has a knack for making other people pay attention to all his bla-bla.

  3. January 17, 2017 at 4:45 am

    I agree with Radford: I think the President-select has no idea about economic policy.

    Not unlike a predatory corporation, I see opportunity in the chaos presented by the President-select. We must become opportunists but, unlike the predators, we take the opportunity to build small-d democratic power during a time — at least the next 4 years — of political ferment. We channel that ferment into a constructive force.

    The opportunity is this: To craft, frame and present a practical, technically credible economic package for the next 8 years and beyond. We can step into this vacuum and be heard. We find democratic solidarity around the crafted idea, we carefully frame it in concise ordinary English, we promote, we educate, we act to build power. We do not react to the President-select or his parasite advisors.

    Perhaps the idea sounds naïve or idealistic. Not at all: being assertive is good for mental health; the intent is to focus a community of those directly affected around a practical proposal; and we have enough reaction across the political spectrum to fire a power plant or two. I have no time or energy to squabble about the 2016 selection (I’m 81).

    I feel mixed dismay and hope as I ponder the economic proposals of some wonderful people. Each of the economists I’ve read lately — Jamie Galbraith, Dean Baker, Michael Hudson, Steve Keen, Randall Wray, David Korten, Herman Daly, plus late mentor-to-all Hyman Minsky, just to name a few — proposes some specific economic changes for the future. These ideas and proposals are all worthy of consideration. The problem is this: in today’s political and cultural climate I fail to see a path for enacting any of the proposals.
    It all seems bleak, but I cannot sit still and wring my hands in silence. I must do something, however small.

    I live in Oregon, a state that has given community land use planning the force of strong law. The spirit of this law is that, every generation or so, a city or county must decide, with full citizen participation, what it wants to be for a next couple of decades. State law presents the opportunity to fashion a practical consensus of each community’s future. This happened across the state once, 40 years ago. Generally, it has not happened since. We must do this at the local level, and I am proposing such a conversation on national economics as well.
    We need to decide who we want to be, not passive conformists to the President-select and the worst of Wall Street. Main Street may have moved to the suburbs, but it is not dead.

    And I think we must confront capitalism, at least the predatory financial corporate rule we are experiencing. I have no use for dualities or for ideologies, so I don’t think we should fear the reactionary red-baiting that already is poisoning us. But capitalism is the elephant in the room.

    And, as we do so well in this blog, we must continually confront the cover for capitalism, the Neoclassical economics ideology, show it for the naked emperor it is.

  4. January 17, 2017 at 4:54 am

    First, Trump is a classic sociopath. Giving him access to almost unlimited resources and power is really dumb. For two reasons. He’ll destroy the resources (i.e., the federal government). He’ll start a fight with someone who isn’t bullied by sociopaths (China) or is a sociopath also (Putin) and get a really big war started. That the man we elected.

    Second, on the positive side perhaps Trump’s neglect of economists and the economic chaos his actions are likely to cause will be the final denouement for the comfortable economics most economists like to practice. Economists and policy makers that listen to them may finally be forced to face their demons. To face the absurdity of continual economic growth, perfection, optimal, certainty, and economic decision making via markets. Then perhaps we’ll have a chance to build a functional economy in the US, and perhaps the world.

    • Edward K Ross
      January 17, 2017 at 10:08 pm

      i am only an ordinary older New Zealander citzen resident in Australia my response to your blog is yes you make some interesting comments. However it appears you want to eliminate capitalism in my humble opinion the problem is not capitalism but the way those with capital control political economic policy and even the education system to facilitate their rush for wealth and power. However if I read you correctly I certainly agree with you that neoclassical neoliberal economic rationalism is a tool of the riling elite who like mad dogs need to be muzzeled

      • January 18, 2017 at 5:54 am

        Edward, capitalism is just a name for a set of assumptions and assertions. It is the assumptions and assertions I object to and wish to destroy. If that’s possible while still keeping some form of capitalism in place, I’m all ears to hear any such proposals. In other words I don’t think capitalism is possible without capitalists seeking to control the political and policing processes. Capitalists don’t seek competition or markets. They use them to gain wealth and power. Capitalists’ only focus is winning.

  5. January 17, 2017 at 8:19 am

    I think its possible wall street and small business have equal understanding of the economy—some. In my area there are now alot of new small businesses catering to educated millenials , serve healthy food, expensive beer, or fix up slum houses to sell them after they evict the poor people who lived in them. Others businesses are for the uneducated and poor and sell lotto tickets, cheap alcohol, junk food. Both sets know their market snd economy, and both want to survive and even grow—open another liquor store, etc. Wall street sometimmes knows how to make money investing, and also which law firms to hire if that doesnt work so they can tax breaks and bailouts. Alot of mainstream economists know about market inefficiencies, trends in ineqyuality and environment,, but dont emphasize these or dismiss them as natural processes. They know the economics of academia.

  6. January 17, 2017 at 2:04 pm

    Austerity policy is the emotion-charged variant of location-policy. Adjustment and conformity are stylized as survival-necessities. Inequality hurts – and plutocracy hollows out democracy. According to Oxfam on Monday January 16, the eight richest persons including Bill Gates and Michael Bloomberg own more than 99% of American wealth.

    The market and competition are the highest values in neoliberalism. The unemployed and the poor are blamed for their plight and market failure and systerm failure are made taboo. Speculation and productive investment are confused. To neoliberalism, sharing and the social state are called tribalism. These insights come from critical psychology and Thomas Gerlach,

  7. robert locke
    January 17, 2017 at 2:23 pm

    “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”

    What we have insisted on in this blog is that economics is of little use in promoting an understanding the real world. Maybe Trump in this respect is being rational to establish contacts with both Wall Street and small business owners. They have some kind of handle on the real world that economists do not..

    • January 18, 2017 at 4:06 am

      Question is, what kind of understanding of the “real” world do Wall Streeters and small business owners have? Liberalism began in Europe as a means to put business owners and persons of commerce into a position of control. Most business persons and Wall Streeters still look at the need to manage the risks they face in terms of regulation and democracy. They want control. In that effort they view professional economists as distractions, at best, confused dilettantes at worst. they tend to rely on their own industry organizations and lobbyists. If this is the “real” world you’re expecting, then yes they have definite contact with it.

      • robert locke
        January 18, 2017 at 12:05 pm

        Your analysis is correct. “What do we do?” said the American, “How sad,” said the Englishman.

      • January 18, 2017 at 4:01 pm

        “You can always count on Americans to do the right thing – after they’ve tried everything else.” Winston Churchill
        “8 billionaires “as rich as the world’s poorest half.” Maybe, perhaps “Even if he (TRUMP) destroys the federal government…” as it governs now, “And he’s good at the job.);
        YES, We Will Reverse “… an economic recovery program that has privileged the recovery of financial markets and corporate profits has fueled the increase in wealth inequality, in the United States and across the world.”… “”This is not merely an economic problem; it undermines democracy… A banking system supported by the people must serve all the people—not merely a subset.”(Mehrsa Baradaran ( How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy.)
        Reverse that program, make it fund “…a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…”

      • January 19, 2017 at 5:17 am

        Justaluckyfool, agree with all your comments. But how to accomplish these things? Many US leftists complained about Obama’s decisions. What they don’t understand is he is fighting a holding action. He is trying to slow the take over of the nation, the end of democracy, and the creation of a functional plutocracy. He did well. Trump has no such interest in slowing, let alone stopping this shift. The only real question of significance remaining – will the new plutocracy be fascist or not?

  8. January 17, 2017 at 10:45 pm

    Trump is a financial predator who now has possession of HUD as his personal real estate development bank.

    Trump has nothing to do with economics as per the quaint isolation of academic economics which cannot even understand that less than ten people own half of all wealth on Earth and are not a sufficiently large sample for probability theory even if it actually worked as described.

    • January 18, 2017 at 4:29 am

      Of course Donald Trump is a predator. And he’s good at the job. Even if he destroys the federal government, which seems likely to me, he’ll come out richer than when he went in. Garrett, I understand you’re upset about eight billionaires being “as rich as the world’s poorest half” (BBC). But the question is can this be changed, should it be changed, and how?

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