Noah Smith — How normal people see macroeconomics

Most of the time, econ bloggers and columnists write as if we were speaking to an audience that has taken a few econ classes. But the more widely read our posts and columns become, the more our real audiences fail to fit this ideal. Most people who read us are smart and educated. But smart and educated non-economists ("normal people", if you will) see econ - and especially macro - in fundamentally different ways from economists.

I've been thinking about these differences for a while, and I've reached two major conclusions:

1. Normal people see macro as inherently political.

2. Normal people see macro as being mostly about redistribution rather than about efficiency....

The result is that public discussions of macro, on the blogs and elsewhere, usually break down into tribal camps, and thinkers are often seen more as tribal champions than as technocratic advisors or sources of intellectually interesting ideas. Many people see the "-isms" of macro - "New Keyneisanism", "New Classicalism", etc. - as political advocacy rather than as dispassionate scientific attempts to explain the world around us....

What do you think?

Noahpinion
How normal people see macroeconomics
Noah Smith

As a non-economist, what I see is economists advocating macro positions that advance their own political agenda. The fact is that macroeconomics is used to justify policy alternatives and economists of different political persuasions disagree and that disagreement is almost perfectly predictable based on past performance.

I am not alone in this and this is likely the major reason that non-economists see macro as essentially political.

Secondly, I have a terminal degree in philosophy, and a lot of what philosopher do is examine arguments and the context in which they are embedded. What a person accustomed to logical analysis looks to is assumptions, key terms, method, and conclusions. Based on this, it is immediately apparent that the conclusions of economists are based on the choice of assumptions, key terms, and method, which are chosen to justify the preferred conclusions.

It is also immediately obvious that the subject matter is so complex that no model can forecast the future with any degree of high probability, let alone virtual certainty. Yet, many economists offer their conclusions as if certainly true, deduced from highly complicated mathematical models that only experts can penetrate. This looks a lot like medieval scholastic debates over theology that were only conducted in Latin in order to exclude the common person. When they are caught out, like Rogoff and Reinhart, they come up with lame excuses that are easily fielded by opponents.

When many economists do address "normal people," it is often with what looks like a lot of hand waving, dismissing opponent's arguments as obtuse and not worth responding to. But this turns out to be based on their own assumptions, definitions, and methods, which are often the subject of attack. This is just circular reasoning or evasion. Typical is that the opponent lacks a model, which on inspection means that the opponent is using a different method and the opponent is attacking the apologist's method as inappropriate.

When virtually all the major conventional economists missed the global financial crisis and major institutions were assuring the public that everything was fine until the meltdown, then normal people, including the Queen of England, began asking how this could be. After all these were the experts advising "the masters of the universe." This was the high priesthood of the religion of progress based on efficiency.

The answer came back that the models are not constructed in a way that could foresee this. As result, a lot of people began getting interested in finding out how major macroeconomists could have been so wrong, especially when they were the people giving policy advise to political decision-makers.

Then, post-crisis, normal people saw the policy choices that were adopted leading to increasing inequality, saving large corporations from failure with enormous bailouts and extension of "forbearance," when normal people had been told that the basic rule of capitalism was risk and market accountability  They also saw that the privileged class was not being held to the same standard as normal people, so that the privileged class was doing exceptionally well through the crisis while normal people were bearing the brunt of it through liquidation, unemployment, and a decline in real wage.

Economists generally represent what they are doing as positive science and economics as non-normative and amoral. This is supposed to result in a value-free approach. But what became egregiously apparent to normal people was that economists did not consider power relationships, looked at rent-seeking as productive, and had no idea of the Ponzi finance that had progressed to the to the point of control fraud and criminogenic environments. In addition they did not consider social costs and externalities to be economic costs at all. In other words, they were either clueless, or else fronting for a privileged class bent on maximizing its own utility at the expense of other classes — you know, the normal people.

Apparently macroeconomists missed this?