Economic Solutions For Little People
One theme that has cautiously been appearing in front of me as I read about the solutions to the Great Recession from more conservative, Hayek-Friedman inspired economists is the lack of fine detail on their vision for American society. Perhaps it’s asking to much for an economist or two to elaborate on what they believe society should look like from an economic standpoint but if economists are going to convince the body politic that these more conservative ideas are superior to the tried and mostly unsuccessful fiscally-oriented economic tools to minimize impacts of busts and booms, they’re going to have to start selling not to economists but to the people. I fear that there may be many good ideas, and perhaps even complete solutions, in these more conservative economic policies however the economists who propose these ideas fail in the way evolutionary scholars fail: they explain their theories but don’t speak to the people about what those theories mean for every day life.
The fiscal solutions that many leftists purport are necessary to combat economic busts such as the one we saw in recent years sound reasonable to the public because there is a picture that has been painted for them in vivid color. That picture consists of money being borrowed (often believed to be by foreign governments) and given to either the people directly or to corporations, industries or states to stimulate their pocketbook and, as a result, their spending. It makes sense to the public because it’s easy to envision. They believe it would work because they’re hopeful that the money will somehow make their life easier through job creation and lower prices, etc. This hope is misplaced most of the time, however, and of the times fiscal policy could work, they’re mismanaged or run aground by outside forces. Take, for example, the stimulus plan put forth and executed in 2009 by the Democrats and the Obama administration. Plenty of money was given to the states however the states largely spent no more than they normally would have any fiscal year despite that new money because they decided to cut spending—a decision made in light of lower tax receipts due to the economic downturn. That stimulus money, as a result, was very ineffective to produce a net result and instead simply mitigated a worse situation.
I have a lot of faith in people like Paul Krugman and Scott Sumner and their ability to argue their different economic philosophies to each other and those with degrees in economics but one thing Krugman does better than other economists (although he has a leg up on the competition since fiscal policy is, as noted above, largely already painted in plain view) is bring the solutions back to the public and how the majority of the public will be affected.
Take Scott Sumner’s open letter to Paul Krugman for example. Great sounding solutions there, Mr. Sumner! How does any of that translate to me, the unemployed guy with no prospect of getting a job, grateful for the big, chunky tax return, and not a inkling of idea why, other than to better manage the money of wealthy people and as a result manage the economy and recovery better, it’d be better for me? People fear that these solutions will serve the wealthy and those who manage the bigger economic picture and leave the lowly lows like myself to fend for themselves. Managing the bust and recession in a better manner, and thus recovery, is a great thing to do but in order for a salesman to properly pitch his set of knives, he has to demonstrate how well they cut through the bone. The fancy handle may look fancy and might make a kitchen look good but for the commoner, personal function and affect are more important. A recovered economy is not recovered until it reaches (trickles down?) to the plebs; until then, the public’s anxiety will reign.
The thing is, though, that doesn’t seem to be of much concern to such economists except for the bottom line, or so it seems. I’m sure Mr. Sumner is a great guy but he fails to speak to people like me. It’s not his job, of course, since he’s an economist and not a salesman but that’s the problem. Sumner may have more clout with economists while Krugman has clout with economists and the people reading his blog or New York Times editorials. It’s the difference between writing a white paper and writing for a black and grey paper. The selling point isn’t so much at the economist level or even at the politician level: politicians listen to the mood of the people in fear of getting voted out. If these conservative sales pitches can be written for the center and center-left, it will get sold.
These economic solutions are tied to a much larger view of how society and the economy should run. Take, for example, Rep. Paul Ryan (R-WI)’s, advocated here by Niklas Blanchard. Much, if not most, of Ryan’s plan is not just radical but outright frightening. Elimination of Medicare and turning it to a completely private insurance system with a weak voucher system in place (corporate welfare in the guise of a tax subsidy, just like in the Democratic Party plan) even though people distrust private insurance companies? Privatize social security and put the trust back into the same people who played with trillions of dollars as if it were Monopoly money? The public just shit itself, right on Ryan’s plan.
Basically, the question put forth is what does this overall economic outlook look like? The people need to see a picture of the top-down approach this new world will look like—something as detailed as the Sistine Chapel. Don’t just give the image of God and Adam, the bigger picture of the economist view; flesh the rest out and mention the angels (middle men), cherubs (the people), prophets (politicians) and sneak in a few demons (caveats) here and there. In essence: tell the whole story, all at once, of what society should look like.
The sales pitch needs to paint a pretty picture, though. Until then, it’s not going to fundamentally convince the public of anything. If, in a different world, we gave Scott Sumner and Niklas Blanchard authority over everything to craft their perfect world, what would it look to the majority of people—in their perspective? We might infer, from their more popular non-fiction, what the world would look like for investment bankers, corporations, and businessmen, but how can their economic vision be translated to the common factory worker, nurse or the parent with two kids who would have been on Welfare if it existed? In the fiscal policy world painted for the many, it’s visible how the majority of people will be mainly employees of the few and have some kind of opportunity to start a business on their own. Money trickles down, inefficiently. How does money policy trickle down, though? The vision of the federal government handing cash down is easy to imagine; Federal Reserve monetary policy, on the other hand, is a black smudge in that picture.