I read a lot of articles written by economists. I know.
Boring, right? But fun for geeks
like me. Lately, I have come to a
conclusion about their writings. For the
most part, they don’t write about economics.
They write about their political views.
Many who have done break-through work have become
celebrities of a sort, at least among the business press. Robert Shiller predicted the dot.com bust
while most were smoking cigars and drinking Champaign. He also won the Nobel Prize for Economics in2013. He recently wrote about FDR’s
coining of the phrase “The only thing we have to fear is fear itself”. He would have us believe that the main reason
that consumers and businesses are not spending enough to boost economic growth
is fear manifesting itself as “performance anxiety”. His follow up point is
that such anxiety becomes a self-fulfilling prophecy.
Fair enough.
He extends this metaphor to our government’s failure to
invest in infrastructure at a time when interest rates are at historic
lows. Is that the result of fear? I
think not. It’s the result of political
dysfunction.
Shiller’s political views are not as much in evidence as some
of his colleagues. Fellow Nobel winner Joseph Stiglitz is a former chair of the President’s Council of Economic
Advisors. In a 27-page whitepaper, he
lays out his prescriptions for reforming the tax code.
There is little doubt that the “hollowing out” of the middle
class, as he puts it, affects the performance of the economy. However, he connects this factor to the presumption
that “one of the reasons that our economy is not performing is the high level
of inequality”. The middle class has
suffered as a result of other macroeconomic factors, globalization and
technology for example. Inequality
didn’t cause those things.
Stiglitz goes on to propose more complexity for our already
onerous tax code. He proposes higher tax
rates on the rich “who save a large fraction of their income” having an effect
on aggregate demand. He fails to mention
that, in economic terms, savings equal investment and investment creates
jobs.
Stiglitz also decries the schemes that corporations use to
legally avoid taxation and lobby for preferential treatment in the tax
code. I quite agree with him on that
point. However, his prescription is to
raise the corporate tax rate without regard to the impact on investment
capital. The high marginal tax rates we
endured in the 1950’s had a terrible long-term effect on capital
investment. We paid the price in the 60’s
and 70’s when we couldn’t compete with German and Japanese manufacturers and
their newer plants and equipment.
Robert Reich, another liberal economist, does a great job of
presenting his views in short YouTube videos.
Generally, he supports the perspective of Democrats in Washington even
when he contradicts himself. Recently he
argued in favor of the President’s proposal on corporate taxes despite having suggested
doing away with them in his 2009 book, Supercapitalism: the Transformation ofBusiness, Democracy and Everyday Life.
Then, he argued that eliminating the corporate income tax
would make corporate profits subject to a progressive personal tax and create
greater equality for middle class investors.
It’s a sound argument.
Everyone has a bias. However,
learned economists who become thought leaders have an obligation to raise the
level of political dialog above the petty, partisan politics we endure
daily. Presenting your political opinion
as though it is derived from analysis is simply punditry. Do we really need more punditry?
WHO WILL LEAD?
