Arnold Kling  

Campaign Season Economics

Exuberance... Tournament Ranking of Colleges...

My latest essay says that it's not pretty.

Democratic candidate Senator John Kerry managed to appeal to all four of the economically ignorant biases identified in Caplan's paper. You could say that Kerry hit the economic illiteracy quadrifecta! is not clear to me which candidate would end up executing better economic policies. It could very well be Kerry. Instead, my concern is with the economic rhetoric. Senator Kerry inundates us with pronouncements that are economically illiterate. And yet his supporters claim to be well-read, well-informed, and well-educated.

Also, this week's economic posts on Carnival of the Capitalists discuss a number of current economic issues.

Edward Lotterman writes,

Kerry is wrong on many different economic things, including trade, employment, Social Security and health care, among others. Bush is wrong on one enormous thing: tax cuts and their effects on budget deficits and the national debt...

In response to news about Social Security, Kerry recently thundered, "When I am president there will be no decrease in Social Security benefits and no increase in (Social Security) taxes." This stand is just another way of saying, "I am a coward who is going to push this issue forward into someone else's presidency, even if it means any eventual solution will be much more difficult." I know of few economists who could endorse Kerry's position...

On trade, a strong majority of economists would opt for Bush's espousal of trade liberalization over Kerry's implicit protectionism. Yet, many are skeptical of the president's true commitment to opening trade, given his quick resort to steel tariffs in his first term and their doubts about his willingness to confront domestic sectors such as cotton and sugar that will be hurt in any serious new trade agreements.

UPDATE: Richard Schmalensee, who is one of the professors who signed off on my dissertation, is voting for Kerry as the fiscal conservative in the race.

For Discussion. Today, the post-debate TV analysis is done by political spinners. If the analysis of economic issues were done by economists, would candidates be forced to upgrade their economic literacy?

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The author at Asymmetrical Information in a related article titled Watch what I say, not what I do . . . writes:
    Andrew Sullivan writes about John Kerry today: The major objection . . . is that Kerry simply cannot be trusted.... [Tracked on October 11, 2004 9:53 AM]
COMMENTS (11 to date)
Matt M. writes:

They would as long as the economists were good at pointing out their flaws in non-wonk terms like yourself and Bryan Caplan. In fact that's a very good idea that would go a long way in educating the public. But hey, why stop with economics? We could get foreign policy experts in there too.

BC writes:

I ran across this and found it interesting:

These 100 academics, it would seem, are economically literate, and they agree with Kerry. You're probably right in that they wouldn't agree with Kerry's economic rhetoric, though.

I agree with Matt M. I think most economists just end up confusing people with their blunt statements. They imply that protectionism is always bad, but people want jobs in their countries, and they want the money flowing around them. The economists don't explain their positions; perhaps the reasons are too complicated or abstract to explain. It may be better in the long-run to allow outsourcing to India, but what about the programmers losing their jobs right now?

napablogger writes:

This is a very good article, thank you. I think that your question assumes economists agree, and they don't. I guess it could revolve around the issues that they do agree on, basic issues. The public, including me, are massively confused about economic issues and I wish there were a way to more easily find basic economic literacy information. For example, one thing that economists seem to take for granted is that tax cuts boost the economy, but they never explain why, and to me it seems like a dollar spent is a dollar spent, no matter who spends it.

Anyway, maybe a better idea is what you are doing, sort of an economic truth squad to go over claims that are made. More specific explanation in simple terms would help, like why Bush's tax cuts do not affect the deficit they way he says they do, as Lotterman only mentions.

Maybe you or someone could do a basic economics FAQ on line, answering common questions like, why do tax cuts help the economy, and how do bond rates affect the economy, etc, etc.

David Thomson writes:

I don’t even for a minute believe that John Kerry is better than George W. Bush regarding economic matters. But the heck with this secondary debate. We must keep our priorities straight. The war on terror should be one’s first consideration. Which candidate will keep our families safe? In this regard, President Bush wins hands down. Senator Kerry has a long record of appeasing our nation’s enemies. This is all you need to know. Abstract economic debates can be held at a later date. Right now, we must focus on staying alive.

John Topoleski writes:

Bush might espouse free trade, but reavealed preference (his administrations actions) certainly indicate otherwise. I don't see how a Kerry administration would do worse.

Matt M. writes:

napa - A dollar spent is a dollar spent, but the question is one of who is better equipped to know where and how those dollars could most productively be spent: the government or the market?

John - If Bush were genuinely a protectionist, the steel tarriffs would not have been lifted. Being president sometimes entails making concessions to political pressure. I'm not saying it was right, but at least Bush is generally in favour of free trade. Kerry on the other hand has been demagoguing on issues like outsourcing from the beginning of his campaign, so I don't see how anyone could think for a second that he wouldn't do worse than Bush on that score.

John Top writes:

For me the Bush administration's failure on trade is more than steel tarriffs, although that is the most egregious example. It's also Canadian lumber, shrimp, catfish, farm subsidies, failure to bring any trade deals to the table despite party control of both the House and Senate and trade promotion authority, unwillingness to cut sugar quotas. That's all that comes to mind at the moment.

napablogger writes:

Matt, thanks, it comes down to productivity then, which is what I have deduced more or less. A dollar spent on something more productive creates greater wealth.

As far as economic issues not mattering so much compared to terror in this election, I agree. Kerry has spent his whole career as an anti-military, anti-defense spending politician, arguably the most biased that way in the Senate, so how in the world can we elect him President in the middle of a world war? I don't think so.

BC writes:

If our companies put foreigners on the payroll or purchase foreign goods, isn't that sending money out of our country and leaving our people unemployed?

Yeah, I know that it cuts cost for companies and makes them more productive. But if they're not employing US citizens with that money, then how does that help the people looking for work? I agree that it's more productive globally, but is it really more beneficial for our country?

Economists seem to take for granted that new jobs will always open up, but I don't think you can do always do that. If a programmer who spent 4 years getting his degree loses his job to a cheap Indian programmer, he doesn't have a lot of other skills to fall back on. He's likely just to become a blogger/bum.

jbo writes:

How do our current government policies on drugs fit into the free market system? Aren't our pharmaceutical markets artificial and non-competitive given the arbitrary 10-year patents given out and the heavy regulation on the part of FDA? Why do free market principles not apply to the drug industry?

Mark Horn writes:
Matt, thanks, it comes down to productivity then, which is what I have deduced more or less. A dollar spent on something more productive creates greater wealth.

I'm not an economist. I'm still in training. However, I don't think the engine is productivity. Productivity is the result. The engine is choice.

What makes economics and free market transactions work is that when you and I trade, we both benefit. We both prefer the thing we received from the transaction to the thing that we gave up. When the government taxes us, it's a one way transaction. The governement forces us to trade whether we like what we're getting or not.

When you and I trade we both have to agree to the trade. If you don't like what I've got or how I made it, we won't trade. A consequence of this is that if I want to trade with you, I have to produce. But when the trade is forced, the one doing the forcing doesn't have to actually produce anything. Not producing, but charging for it leads to poverty. The mechanism that makes it work is the freeness of the trade. If it's free, the end result is higher productivity. If it's forced, the end result is lower productivity.

This is why I think that economists prefer free trade to taxation. However, I don't think that economists are opposed to all taxation. For example, I've read where Arnold thinks we need to increase taxation (in the short term) to get ourselves out of the mess that is Social Security and Medicare. Ultimately, I think the goal would be to privatize those programs and do away with the taxes. Because we're not getting any richer funding these programs that don't produce.

But, of course, I'm only an economist in training. I hope that the real ones will correct any errors that I've made.

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