Saturday, March 24, 2012

Economist's View

Following the advice of Paul Krugman, I have started to frequent an economics blog run by University of Oregon economics professor Mark Thoma, economistsview by name.  Many links are given to current research papers (surprisingly accessible as often as not), as well as to fairly high level discussions of policy and philosophy by respected economists in academia, government, and industry.  Typically these posts lie to the political right of Mr. Thoma's apparent sympathies, but they are highly informative concerning the mindset of academically trained economists, which, in my reading, is in many instances rather divorced from the messy realities of business and politics in which it might should be embedded.

The discussion seems to involve a smallish group of dedicated readers who post regularly, and are not shy about their views, which are often (though not always) left-progressive, but also reflective of training in economics.  As a recent example, a policy paper was linked from the Federal Reserve  Bank of Atlanta, on the question of the health of today's labor market in America, and whether recovery from the 2007 recession had produced (or not) appropriate levels of employment.   From which I select the following quote:
In these charts lies the crux of some very basic disagreements about the appropriate course of policy. The last three graphs draw a clear picture of labor markets that are underperforming by historical standards—a position that I take to be the conventional wisdom. An argument against following that conventional wisdom centers on the question of whether historical standards represent the appropriate yardstick today. In other words, is the correct reference point the level of employment or the pace of improvement in the labor market from a permanently lower level? For the proponents of the latter view, the bubble chart might very well look like a return to normal, despite the fact that employment has not returned to prerecession levels.
To me, this illustrates a sort of passivity in the face of the facts, which I find inexplicable.  I append my response, which the interested reader can look up under Mr. Thoma's original post.

The sense I get from this post is that, according to economic wisdom, we might be adjusting to a new equilibrium, which includes a shrunken labor market; and since that's what's been determined by the immutable laws of economics, we should all just face the unpleasant facts, and live with them, and stop boo-hooing.
To me, this is akin to saying, that if an individual becomes ill, it reflects the workings of the inviolable laws of biology, and we should let nature take its course without complaint.
Then my response is: Gott in Himmel! what ever happened to the practice of Medicine? To the idea that poor conditions of human existence might be ameliorated? That the human and social factors influencing the health of an individual, or an economy, are not eternally fixed, and have arguably deteriorated in measureable ways over the last thirty years? That maybe it's time for activist policy aimed at making things better?!
Part of my argument for changing conditions is that forty years ago, the Republican party under Richard Nixon was populated by crooks but not by utter dolts; but we have now entered the era of dolts ascendant. The plain fact now is that we have a major party that has cut loose its moorings to reality. Sure, lot's of other things have changed, but I offer that as a simple example.

No comments:

Post a Comment