An alternative to popular faith
I probably shouldn’t generalize, but what’s the deal with professional economists? Why are so many blind to the obvious? Economics is a difficult, complex field, requiring substantial brain power to understand even the basics. There are no unintelligent professional economists. They are exposed to consumption theory, capital theory, the theory of economic growth, and the analysis of labor markets. Yet, many don’t understand the simple truths that all money is debt, and a growing economy requires a growing supply of debt.
They are taught such esoteric lessons as producer theory, consumer theory, choice under uncertainty, welfare analysis and mechanism design. Yet, many believe an expanded health care system is unaffordable for the government.
Professional economists learn general equilibrium analysis, social choice and welfare economics, cooperative, noncooperative game theory and repeated games and economics of information. Yet, many believe federal borrowing reduces the availability of lending funds.
They immerse themselves in time series analysis, ARMA models, VARs, and detrending, dynamic stochastic general equilibrium models of business cycles, and New Keynesian theories. Yet, many say a balanced federal budget is more prudent than a federal deficit.
They author and publish papers on linear/non-linear regression theory on estimation, consistency, asymptotic properties and hypothesis testing. Yet, many believe federal taxes pay for federal spending, our children and grandchildren will pay for federal deficits, and the US will have difficulty finding lenders.
They critique writings on panel data regression, maximum likelihood estimation for tobit, logit and probit estimations, generalized method of moment estimation, least absolute deviation estimation, quantile regression method, nonstationary time series, cointegration, UAR and Kalman filtering for the time-varying parameter estimation. Yet, many neither recognize that debt/GDP is a useless, highly misleading, apples/oranges ratio, nor that low interest rates do not stimulate the economy.
They speak on neoclassical growth model, endogenous growth theory, models of product variety, and Schumpeterian models. Yet, many do not understand the crucial differences between a monetarily sovereign government vs. Greece or Illinois.
Why do so many smart people closely examine minutia, while ignoring abundant, overwhelming and widely available evidence? In effect, professional economists seem to spend lifetimes examining and expounding on one dot in a pointillist work, while ignoring the Sunday Afternoon on the Island of la Grande Jatte?
What’s the deal with professional economists? Why are so many blind to the obvious?
Rodger Malcolm Mitchell
No nation can tax itself into prosperity