–Open The Twentieth Century Fund’s 1945 publication, Financing American Prosperity: A Symposium of Economists and turn to the summary recommendations culled from its contributors. There you find: “Create budget surplus for debt repayment,” “Create budget surplus to reduce inflation,” “Avoid [public works] projects that compete with private investment,” “Raise interest rates when inflation threatens,” “Avoid wage increases beyond increases in productivity,” “Eliminate restrictive trade practices,” and such.
These are the same ones our economic elites and school economists have been talking about for ever since, and doubtless they will continue to do so in the decades ahead. Though, the most blisteringly obvious fact is that WE ARE NOT LIVING IN THE 1940s. We are, to put it mildly, in a different mess today.
–The earlier economic advice remains salient not because of a timeless inerrancy of economic theory, but only to the extent that the really-existing systemwide patterns we recognize today and the really-existing contingency scenarios we face now render the notion of “economic practices” intelligible to us in real time.
What, you don’t think the practices of economics has changed? Why then, by way of example, has economics altered so much since the advent of large datasets? Long gone are days when we felt comfortable with discussions that start, “Elementary economics demonstrates that. . .”
–Why does this matter? Consider a recent Wall Street Journal summary:
A record $9.7 trillion in bonds and other debt has been issued this year by companies and governments looking to weather the economic pain of the pandemic. That borrowing spree has put total global debt on pace to hit $277 trillion, or 365% of the world’s gross domestic product, by the end of 2020.see https://www.wsj.com/articles/the-world-is-bingeing-on-debtand-smashing-records-11606732203t
May I ask, how are such sums like the “debt” we use to talk about and understand, even well after the 1940s?
–Let’s stay with the terminology a bit longer. If economics is about satisfaction, then the fact that people are basically satisfied in terms of happiness after reaching a certain level of income means that economics doesn’t apply in this way to those with the higher incomes. The extent to which they remain unsatisfied irrespective of income has more to do with psychology and political science, not economics (assuming we have to resort to disciplines in order to explain what is going on).
It seems to me almost anything but pure economics can explain these times when, e.g., saving Europe is reduced to saving the euro; when what were once broad economic stabilization policies are now this or that financial stabilization mechanism; when it makes perfect sense to use credit default swaps to determine entire countries are riskier than some corporations; and when economists defend “competitiveness” as cost-slashing, whatever timeless economic theory said about labor productivity setting wage rates.