There is a sense these days, whether in politics or academia, that
people should shape their own realities and each result is as valid or
real as any other. Your truth. My truth. Speaking as a
fill-in-the-blank, my view is this and you can tell my theory by the way
I just phrased that: identity is truth and there is no other. Let’s all
just make things up, dream our dreams and then impose them by force of
intimidation or of law.
If nothing else, let’s fight.
Which is precisely why economics is so lovely by comparison. Yes,
economists disagree on things. But for the most part, economic science
strives to understand universal forces at work, things that unite us and
the human experience through time and space regardless of our wishes
and dreams. More importantly, regardless of what economists themselves
think, economics is an amazing and welcome constraint on flights of
intellectual and political fancy.
Last week, for example, Elizabeth Warren’s campaign for the
presidency hit a brick wall. That wall was economics. For months, she
had faced the demand that she explain how she will pay for her
multitudinous promises of hundreds of billions of dollars for
everything, because it seemed implausible that a little tax on
billionaires could possibly cover the costs. Finally, she coughed up a
white paper that explored the revenue side.
Whoops. The numbers didn’t add up. She faced excoriating criticism
from people on all sides who said she was essentially engaged in
fantasy, and a dangerous one that would lead to a vast pillaging of the
middle class. Even that would not be enough. It turns out that it’s not
causing reality to change to shout slogans about all the glorious
bounties of plenty that would be bestowed upon everyone if only she were
Steven Rattner, who worked for Obama’s Treasury department, notes that Warren’s health care plans propose an
armada of changes (that) would be highly disruptive (for example, to the 156 million Americans who have private health insurance) and expensive (at least $23 trillion over the next decade). To her credit, she proposes to pay for all that spending — but with a mountain of new taxes that would increase federal revenues by more than 50 percent. Talk about expansionary government.
Donald Trump has faced a similar situation over the last 18 months. Somehow he got it in his head sometime in the 1980s that outsourcing production to foreign countries always operates as a cost to the domestic economy. The more dependent Americans are on production outside our borders, he somehow came to believe, the less robust is the domestic economic environment. Assuming the presidency was his time to test the theory. He of all people is reluctant to admit error but even he can’t avoid the reality that American manufacturing has suffered more since his protectionist push began. Markets and business investment have weakened, and the costs of his grand experiment have fallen hard on Americans themselves.
Max Gulker quotes the Wall Street Journal:
The strong evidence is that trade policy is the main growth culprit. U.S. manufacturing has slumped, which is related to slowing exports. Slower growth in China from the trade war has reduced the exports of U.S. farm, industrial and construction equipment. The third-quarter decline in spending for information processing equipment, much of which is exported, was the largest in seven years.
Will either of these two ideological fanatics face the truth that
economics is teaching them? It’s hard to say because ideological nuts
are hard to crack, especially when their careers depend on keeping them
intact. Still, the rest of us can watch and learn and easily observe
that their plans are not consistent with any existing reality. They are
untenable. Economics is the oracle of truth that exposes political
duplicity, intellectual irresponsibility, and fiscal recklessness.
These are beautiful moments when economic reality intervenes and
calls out political lies. Economics does this often in the world of
politics, exposing dreams and elaborate promises of free things for
everyone as nothing but an illusion from Schlaraffenland.
But it’s not only in politics. Economics is a force for keeping
things real in all aspects of life. The metaphor of a brick wall is a
good one. Economic forces were not erected by any state or powerful
interest or even a social-media influencer; economics is baked into the
structure of reality itself, a glorious reality check not that different
Economics is a ubiquitous and conspicuous set of limits that cause
everyone to buck up, cease our simpleton solipsism, face what’s true,
become disciplined, get adaptable outside our embedded identity, live
within our means, adopt solid values, and lead a good life.
Every one of us at some point has met this reality in our lives.
Growing up in a household, we are presented with a world of abundance.
Free things come to us in loving homes. We are fed, housed, educated,
and kept healthy at the expense of others. This is the only economic
reality we know, all the way through our late teen years. You can call
it a form of socialism but it’s more accurate to say that we are
experiencing affordable benevolence from our caretakers. We just aren’t
that aware of it yet.
At some point reality hits. We leave college and get out there and
get a job. We find ourselves shocked at how hard it is to earn a buck
and how much harder it is to live within our financial means. We realize
that if we want nice things tomorrow, we have to forego consumption
today. This path works forward through time: the more long term we think
and plan, the more security and prosperity we can enjoy.
The other path is to pretend that protesting, screaming something,
and inventing far-flung ideologies to justify one’s immaturity will
cause reality to bend to our wishes. It’s perhaps understandable in a
7-year old. It’s despicable when this attitude persists into adulthood
and takes over politics and academia.
We should celebrate anything that checks this mode of thinking. People denounce economics for being impersonal. In fact, economics is eventually very personal. It bows to no one, no matter how powerful and persuasive. It demands that we shape up, grow up, get real, and face the facts of life. That is precisely why politics and academia today try so hard to ignore it.
THIS ARTICLE ORIGINALLY PUBLISHED HERE.