Congratulations to Paul Milgram and Robert Wilson for their recent award. Tyler Cowen noted that Milgram was a coauthor of this essay:
That’s an impressive group of economists. And here’s the abstract:
The ability of groups of people to make predictions is a potent research tool that should be freed of unnecessary government restrictions.
Unfortunately, it’s unlikely that this will happen, despite that powerhouse line-up of expert opinion. Nor is it likely that the government will remove rent controls, or allow the sale of kidneys, or legalize drugs, or eliminate tax loopholes, or impose a “Cadillac tax” on health insurance, or enact a carbon tax, or eliminate tariffs on imports, or open up the aviation market to foreign competition, or let car companies sell directly to customers, or eliminate most occupational licenses, or get rid of taxi medallions, or eliminate farm subsidies, or eliminate multifamily zoning restrictions in residential areas, or do hundreds of other things that economists recommend.
That’s not to say that governments always oppose the recommendations of economists. If they are already favorably inclined toward a policy, then they will listen to economists. But I shake my head whenever I read articles suggesting that the economic problems we face “show that orthodox economics is wrong”. When was orthodox economics ever tried?
READER COMMENTS
Michael Pettengill
Oct 13 2020 at 8:53pm
How about from 1935 to 1965-1975 when the consumer demand exploded driving businesses expanding by paying workers more who then consumed more.
This was the age of Keynes who made clearer ideas expressed by Adam Smith about the link between consumption and production, which was for Smith basically a worker, baker, butcher, candle stick maker. Industrial capitalism makes the link between consumer and worker harder to see, which Keynes explains.
Government creating monopoly on ideas that cost nothing to duplicate has hindered economic growth which is driven by consumer spending which is constrained by wage income. Cut the cost of labor, you cut the benefit of consumer spending: zero sum.
Scott Sumner
Oct 14 2020 at 12:51pm
You said:
“Government creating monopoly on ideas that cost nothing to duplicate has hindered economic growth”
There’s some truth to this claim. I don’t know exactly where to draw the line, but our intellectual property laws seem far too generous to holders of patents and copyrights.
robc
Oct 14 2020 at 2:44pm
Another answer: 1917 Russia.
Marxist economists seemed to be fairly orthodox at the time.
Mark Z
Oct 14 2020 at 4:19pm
“Cut the cost of labor, you cut the benefit of consumer spending: zero sum.”
If this were true, the modernization of agriculture would have made us all permanently poor. Cutting labor costs per unit of product tends to reduce average prices by more than average wages, which is why so much economic progress is owed to finding ways to reduce labor costs.
Michael Pettengill
Oct 15 2020 at 2:37pm
Farmers are much poorer, so poor, most have been “creatively destroyed”. I grew up mostly in Indiana among family farmers who formed sustainably. As part of civics, I was taught as much about crop rotation to improve the land as about Indiana government. Farmers could live off their land, feed them with crops they grew, and most had plenty of opportunity off the farm to earn added income so they were productive years round. That changed rapidly after Earl Butz set a new farm industrial policy in response to a “food shortage” circa 1970. The basic principle was a combination of mining and high volume manufacturing of raw ingredients to food factories. Farms no longer grew lots of crops for people to growing only raw materials shipped to freed lots or to chemical plants, ie soybeans, dent corn, etc. Gone was crop rotation. Gone were animals, critical to crop rotation.
Rural Indiana has been in decline for over half a century. That’s because real food production was substantially outsourced, a lot to other nations, with certain States best seen as other countries. Or maybe corporations. What is odd to me is the nation’s dairy corporation produces mostly “government” cheese as its high value product. A total lack of “innovation” which increases prices. Think of all the imported cheeses compared to the five types of government cheese product. Dairy needs government bailouts like Trump trying to force Canadians to eat inferior US cheese.
And how has cheap food promoted the general welfare? Has obesity returned to a sign of wealth and power without my noticing? The wealthy don’t want to eat the production of the triumph of highly productive US industrial farming. The low price means low benefit in terms of quality, taste, diversity.
Jon Murphy
Oct 14 2020 at 4:39pm
Except Keynes got the relationship backward. He saw Production as the end. For Smith, Consumption was the end.
Michael Pettengill
Oct 15 2020 at 2:58pm
Keynes saw work for wages as the end, because wages were the means to individual consumption. For Smith, individuals consumed by producing and trading with other individual producers. Keynes was dealing with the complexity of division of labor where no individual produced anything that could be consumed by individuals.
In particular, goods that are consumed fractionally be thousands or millions of users are well beyond individual consumption choices. As Keynes put it:
That is capital, like a foundry, iron or semiconductor. Or interstate or rail line. “Return” is the price paid by consumers for consuming production of the durable good.
Ivan Tcholakov
Oct 15 2020 at 4:57pm
1871 – 1914
Mark Brady
Oct 16 2020 at 10:58pm
Scott writes, “That’s not to say that governments always oppose the recommendations of economists. If they are already favorably inclined toward a policy, then they will listen to economists. But I shake my head whenever I read articles suggesting that the economic problems we face “show that orthodox economics is wrong”. When was orthodox economics ever tried?”
I suggest that this statement (and indeed the entire post) conflates economic analysis (positive statements, correct or incorrect) with value judgments (normative statements, right or wrong). Whenever economists recommend particular courses of action, their policy prescriptions embody not only their expertise as economists, but also their choice of values, and are tempered by their assessment of what is feasible (an empirical judgment that may also reflect normative preferences).
Jose Pablo
Oct 18 2020 at 11:24am
Which “orthodox economics” are you proposing to try? Krugman’s or Mankiw’s? Monetarism or new Keynesianism?
How many “orthodox economics” are actually out there?
There is a whole “menu” in front of politicians. No wonder they cherry pick their favorite dishes … served by Peter Navarro.
I will love to be in the position of cherry picking a gravitational theory that would allow me to fly.
Jose Pablo
Oct 18 2020 at 11:31am
… to fly at least for a couple of 4 years terms … and after that, we will see.
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