Economics is an agenda-setting system. Here’s a working example – Noah Smith engaging Robert Gordon (who is in his turn drinking from the poisoned well of Tyler Cowan). Gordon’s big idea is that y’know how things aren’t so great? Well, they’re always going to be awful, so there’s nothing can be done about it! And therefore, we don’t need to discuss any action and shut up.
He argues this for the following reasons. One, he thinks technological progress is slowing down. Two, he thinks the US labour force won’t grow as fast as it did. Three, educational attainment has “plateaued”, based on the OECD PISA comparison. Four, high income inequality means structurally weak demand from the “consumer” (aka labour) sector. Five, globalisation. Six, the environment. Seven, “debt” of whatever sort.
Well, the first of these is an arguable proposition. Personally, I can think of plenty of people who are convinced that technical progress is accelerating, others who think it is slowing down, and still others who think (like David Harvey) that it is illusory or even undesirable. I would argue that both the declinist and Kurzweil-ist views are wrong for the same reason: they are both exercises in cherry-picking the data. Singularitarians love computing and sometimes genetics, because both fields give you an instant optimism hit. Declinists prefer to pick problems that remain unsolved and projects that failed, because that’s what their prior assumptions are set to. Both views are dependent on prior value judgments.
But I have a more subtle and useful critique. Economists tend to think technology is exogenous. Historians of technology couldn’t disagree more. In their view, technical progress happens through learning-by-doing. This has an important corollary – you learn nothing by being unemployed except that it sucks, and a set of survival strategies that aren’t much use except in the context of being on the dole. Technology is, in part, endogenous, and therefore it is influenced by macroeconomic policy.
Surely demographics is an independent, structural force? The answer to this is “bullshit”. There is a reason why the European countries with welfare states that are more generous to parents in particular (like the UK, Sweden, and France) have much higher TFRs than the Mediterranean ones that are getting told that they aren’t having enough kids and also that they need to slash their welfare provision. Further, people who are thinking of starting a family need to know that they are likely to have a job.
And the US is a country, despite everything, where people queue up to get in. Therefore, there is an even more direct way in which its population is a political choice. They can issue more green cards.
As for education, Gordon argues that the US is doing badly, and that it is doing badly compared to its competitors. The competitors, presumably, did something different. Perhaps they didn’t spend so much time teaching the controversy? It is a political choice.
It seems to me hardly worth saying that inequality is an expression of political power, but perhaps it should be banged home. The US could become more equal by changing the tax code, hiking the top rates and putting the money into the earned-income tax credit. If income inequality is the problem, the answer is surely to do something about it.
Globalisation, well, I thought it was meant to be good for growth? Snark aside, if the US wants to deglobalise, it can increase its tariffs, subsidise exports, and devalue the dollar. It is a political choice.
As for the debt, surely nothing is more subject to politics than the size of the government budget deficit, and the incidence of taxation? Further, if it’s the fact that consumers want to save/reduce their debts that’s the problem, the government ought to be running a deficit, because how else can the private sector save on aggregate?
As for the environment, well, where the fuck have you been all these years, smartarse?
But the interesting point here is how a succession of political choices, which were all originally sold as being economic requirements, are now recycled as being structural economic forces in themselves. As such, it turns out, they explain the problems of the day entirely, and get rid of the need for further political choices. A structural force is very often nothing else than an unrespectable political choice.
This is the spirit of what I call Sad Donkey economics, although sadly my prediction hasn’t yet delivered. Now, Chris Dillow argues in Gordon’s favour that equities are pricing-in low growth. But then, why would they do anything else if the politicians have chosen it?