Arnold Kling  

Who is Advising these Guys?

Two Critiques of Macroeconomet... Block, Hazlitt, DeLong, Me, an...

Ed Glaeser does not like the Republican mortgage plan any more than I do. I am not sure that plan is still alive. It may have been superceded by another ill-conceived idea, a tax break for home buyers. See Tyler Cowen.

Meanwhile, President Obama comes across as rather confused. He cannot tell the difference between policies to fight a recession and policies to produce long-term structural change (or, at a more cynical level, programs to reward Democratic Party constituencies and push favored Democratic Party causes). He seems to be with Nancy Pelosi, not with Alice Rivlin.

I'll admit that the economics profession is in turmoil these days. But watching both parties, I am reminded again of Herbert Stein's observation that noneconomists, including politicians who make economic policy, know even less about the economy than economists do.

COMMENTS (8 to date)
robert ortega writes:

I think the government is not going in the right direction because have the diagnosis wrong.
Lic. Aldo Abram thinks United State has used Argentine economic recipes that lead them to this crisis. Do you think that US will pay the same price Argentina did?

You can read the full article in
Aldo Abram has predicted the crisis since 2004 when he published an article about it in one of the main economic newspaper in Argentina - Ambito Financiero. You can read the chronicle since them in Spanish or searching in

Maniel writes:

The key to protecting the economy is to provide tranquilizers to politicians. The seeds of the recovery are already evident: lower costs at many businesses, through layoffs (the less desirable approach) and furloughs or salary reductions (the more desirable approach); increased savings; foreclosures which get "homeowners" (a relative term) out from unmanageable debt-service payments; lower home prices; and lower rates of debt acquisition. If the government would just let it happen, rather than crushing taxpayers and businesses with new debt, we'd be fine.

Scott B. writes:

Politicians use a form of economics called "make the general public happy-nomics" --- the general public doesn't understand a lot of the theory behind macroeconomic policies that would actually help recover our economy... they look to the Government and go "We need help NOW, we don't want to wait..." "You need to help us NOW! Yeah, we did a lot of risky things, so, give us money" and since the Government cares about their approval rating, they do things to make people think they are helping the economy.

Their "economic advisers" are probably being muted by "political advisers"

Gary Rogers writes:

"noneconomists, including politicians who make economic policy, know even less about the economy than economists do."

If you only knew how much that scares me! As much as I like the good ideas I see at GMU, I think the economic profession as a whole is extremely impractical. And, I agree that politicians are worse yet they are entrusted with a budget of over $3 trillion per year. At the very least economists should be able to agree on the basics of good economic sense and be able to do an economic audit on our economy in general and on bills like the pork bill that is up for a vote right now. If we at least had a listing of the items in the bill and the economic assumptions on which they are included, it would be a help.

Greg Ransom writes:

Actually, Arnold, there are a lot of us who know better than the economists how bad their economics really is -- and many lay folks who've read Hayek and Mises have a better understanding of how the economy works than the "professional" economists bewitched by their pseudo-scientific math models.

It takes a professional economists to really believe some _really_ stupid and false things about the economy -- the history of economic thought is littered with idiocies only believed by economists, e.g. the socialism of Abba Lerner, the 1960s Keynesian belief in micro-mananging the trade cycle, etc. -- and _many_ non-economists new more than enough to know that the economists were scientifically mistaken about the economy.

I.e. the economists knew less than the non-economists.

It's happened time and again in economics.

The economist need to be _extremely_ humble. And I'd say that Herb Stein is one of those economists, an economist who held many scientifically false beliefs (although he was better than many of his even more scientifically challenged peers.)

No, economists often, even routinely, know less about economics than intelligent and well read non-economists.

Arnold wrote:

"I am reminded again of Herbert Stein's observation that noneconomists, including politicians who make economic policy, know even less about the economy than economists do."

Randy writes:


"The key to protecting the economy is to provide tranquilizers to politicians."

That is a great idea! Or maybe some medical marijuana. I've been catching some CSPAN lately, and maybe its all just acting, but they do seem panicky. Then again, many of them have probably lost millions personally, and control over hundreds of billions that they are used to having in their line of work. I guess I'd be panicky too if I were in their shoes.

Greg Ransom writes:

Barro on what most economists know about fiscal policy and the wisdom on a "stimulus::

"Most economists haven't really been thinking about this issue, they haven't really focused on it. It's not their specialty. Most economists today, they haven't really been thinking about this kind of multiplier issue. Which goes back to that first question you asked about how come now we're so worried about this. I don't think most economists are focused on this, or that they're familiar with the empirical evidence. I don't think they've really worked on the theory. So I don't know, maybe they have some opinion that they got from graduate school or something.

I think my sense is that the sentiment has been moving against this kind of approach both within the economics profession and more broadly. I think the initial view was that "yeah, this is a terrible situation" -- which I agree with -- "and we've got to do something about this, and maybe this will work." I think there was support in that sense."

Jacob Oost writes:

I only started studying econ relatively recently, and now that I'm paying more attention to political economy, and what academic and government economists propose as policy, I'm shocked at the enormous divide between what economists say in textbooks (what they know to be good economics) and what they say op-eds or as advisors or whatever.

I'm also surprised that the insights of Hayek and public choice theory are not more widely considered in these debates and discussions they have. Learning economics, they seemed central to understanding how the economy works and the proper role for the government. Now I see these insights thrown to the wind by people who (on paper) know better.

I'm shocked by the phoniness. It just shows that science may be fact-based and empirical but unfortunately science is carried out by fallible humans.

Comments for this entry have been closed
Return to top