When I Heard the Learned Economist…

When I read pieces by eminent conservative economists like the Hoover Institute’s Robert J. Barro’s Keynesian Economics vs. Regular Economics, I get the sick feeling in my stomach that the rift between left and right is becoming less and less bridgeable by day. It becomes clearer and clearer to me that, while the left may be going through a prolonged crisis of self-confidence, the right is becoming more deeply mired in an ideological morass and their project is to drag the rest of us down into it whether or not we want to go.

It’s true, this state of affairs is not all the fault of the right wing. We’re here because the center (including the center left) elite in government and media have bent over backwards to be fair to extremists on the right even while spending energy to keep the ideas of those deemed “too far left” out of the discussion. Apropos of this, a few months ago, I was told by participants in a forum at Think Progress that Milton Friedman‘s philosophy was moral and in the mainstream of modern liberal thought (not neoliberal, but liberal, mind you) while Naomi Klein–whose Shock Doctrine is, I think, a brilliant (albeit depressing) work showing the ruinous effects of Friedmanism on democracies and societies everywhere it’s been allowed to roam free–was a “self-promoting Canadian ditz.” Some of these characters may have been trolls, but if so, Think Progress has been giving more than a few trolls “top commenter” status.

In any case, I think any economist should be careful about what extent ideology plays in their thinking about economics. How much of what they present as “is” is actually derived from their belief of what “ought” to be? Do they hold the economic theories they hold because they’re seen to work or because they want to believe they would work? Interestingly, talk to most right wing Americans about this question and they will insist that their ideology is driven by the way economics actually works. So, of course, despite all evidence to the contrary, they’ll argue that supply-side economics worked in the 1980s and will work now. They’ll argue, despite all evidence, that tax cuts grow jobs and eliminate deficits.

Barro provides a good example of what looks to me like “ought”-driven right-wing economic thinking masquerading as serious, rigorous, scientific economics. The ridiculous title of his piece gives away his whole game.

Just a small example of how ideology distorts an economist’s work: Barro says:

Keynesian economics—the go-to theory for those who like government at the controls of the economy—is in the forefront of the ongoing debate on fiscal-stimulus packages. For example, in true Keynesian spirit, Agriculture Secretary Tom Vilsack said recently that food stamps were an “economic stimulus” and that “every dollar of benefits generates $1.84 in the economy in terms of economic activity.” Many observers may see how this idea—that one can magically get back more than one puts in—conflicts with what I will call “regular economics.” What few know is that there is no meaningful theoretical or empirical support for the Keynesian position.

The overall prediction from regular economics is that an expansion of transfers, such as food stamps, decreases employment and, hence, gross domestic product (GDP). In regular economics, the central ideas involve incentives as the drivers of economic activity. Additional transfers to people with earnings below designated levels motivate less work effort by reducing the reward from working.

Does Barro have a point that food stamps dampen incentives to look for work? Perhaps. There is probably evidence to support his claim. But does Barro seriously believe that if food stamps were contracted right now, the job market would suddenly get hot again? Does he honestly believe demand for jobs in itself creates jobs?

The problem with Barro’s take, it seems to me (and please correct me if I’m wrong), is that food stamps don’t expand because Keynesians, just for the hell of it, want to use government to stimulate the economy regardless of what state it’s already in. Food stamps don’t expand unless there is demand for them, as there is in this jobless recovery, when people who would ordinarily be spending cash on food are hampered from doing so by being unemployed. Without food stamps and other “transfers” to take the place of dollars that the unemployed or indigent would spend if they were employed or earning enough not to qualify for the transfers, there would be less of anything, including dollars, in the market to stimulate such economic activities as selling food, producing food, and food sellers’ buying food to sell. This is true no matter how you feel about the morality of doling out food stamps: when they’re in circulation in the market, they stimulate the economy. The market doesn’t care that they’re food stamps or that they come from the government. The market only cares if they’re treated as legal tender.

This may not seem like “regular” economics to the learned professor, but it seems like basic economics to me. And common sense.

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2 thoughts on “When I Heard the Learned Economist…

  1. It strikes me that the comments you quoted were written as if they were matter of fact. It is really irking me when people state whatever their ideological leaning is without even a wink that they are not even trying to prove it. Not only are their ideas potentially dragging down the economy, but merely the fact that they can state anything and few people will challenge their logic is a major problem.

    Aside from that, when these “economists” say transfer programs are inefficient and even hurt the poor they are meant to benefit, what is their alternative? Do they really think that cutting off the only lifeline of the unemployed will make them run out and find work? If that’s so simple why does famine exist anywhere? Do they really pay no notice to the calamitous consequences if they happen to be wrong?

    They want to play ideological games with other people’s lives.

    • It made me ill to see the number of times that piece was tweeted without comment. It’s already become a “classic” among the groupthinkers on the right, something they’ll cite over and over to “prove” Keynesianism is not “real economics.”

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