Tuesday, October 30, 2012

Dean Baker — Inequality: The silly tales economists like to tell

If economics was an honest profession, economists would focus their efforts on documenting the waste associated with protectionist barriers for professionals. They devoted endless research studies to estimating the cost to consumers of tariffs on products like shoes and tires. It speaks to the incredible corruption of the economics profession that there are not hundreds of studies showing the loss to consumers from the barriers to trade in physicians' services. If trade could bring down the wages of physicians in the United States just to European levels, it would save consumers close to $100 billion a year. 
But economists are not rewarded for studying the economy. That is why almost everyone in the profession missed the $8 trillion housing bubble, the collapse of which stands to cost the country more than $7 trillion in lost output according to the Congressional Budget Office (that comes to around $60,000 per household).
Few if any economists lost their 6-figure paychecks for this disastrous mistake. But most economists are not paid for knowing about the economy. They are paid for telling stories that justify giving more money to rich people. Hence we can look forward to many more people telling us that all the money going to the rich was just the natural workings of the economy. When it comes to all the government rules and regulations that shifted income upward, they just don't know what you're talking about.
Al Jazzera
Inequality: The silly tales economists like to tell
Dean Baker | Co-founder of the Centre for Economic and Policy Research


Dan Lynch said...

Agree with Dean.

"Free Trade" has meant laissez faire for manufacturing and protected trade for corporate patents and copyrights.

There have been winners and losers. Maybe lawyers enjoy the benefits of cheap manufactured goods from China, but that's little consolation to the unemployed/underemployed manufacturing worker whose job was shipped overseas.

Until such time as we have a post-Keynesian coup to ensure full employment, I remain skeptical of free trade.

Ralph Musgrave said...

Margaret Thatcher was keen on removing “protectionist barriers for professionals” and all other protectionist barriers.