Now don’t get me wrong, I am against almost everything that Trump plans to do. I am socially liberal, his tax policies (and the sharp cuts and spending that will need to be implemented) will redistribute away from the poor, his tariffs programs will hurt the vast majority of Americans and undermine the rate of reduction in absolute poverty in other low income nations, and his lack of trust in the Federal Reserve is likely to erode independent monetary policy. Furthermore, his divisive rhetoric and willingness to create “other” groups to blame failures on point to a dark undercurrent within the US and within his administration.
But none of these things suggest:
Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.
So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened.
When these things don’t happen, it will further undermine the credibility of economists – and implicitly tell Trump supporters and opponents that ALL the costs economists had said would occur from his election do not exist!
I am especially disappointed with Krugman given that he stood against this type of argument by panic for Brexit. And he himself was disappointed with all the economists warning of recession as:
And I worry that what we’re seeing is a case of motivated reasoning, which could end up damaging economists’ credibility.
There are real winners and losers from Brexit. There are real winners and losers from the policies President Trump will put in place. And a credible set of Economists would inform the public of those without recourse to panic – without a determination to panic the public into doing what the economist themselves believes is morally right.
However, for a long time economists HAVE mixed their relatively objective discipline with their own normative values, and have used the authority they had to try to push the public towards what they have believed is right. In a classic case of “boy who cry’s wolf” economists – along with other experts – have undermined their own credibility with the public.
And what has filled the void? “Common sense” and “folk economics” – concepts that do not require facts and figures, but instead offer clear narratives that help people understand the world around them quickly. A loss of credibility by experts (both self-inflicted and due to changing communication technology), a failure for policy makers to remember that “compensating losers” is really part of any potential pareto improvement from global trade, and a willingness to confuse opinion for fact when convenient by ALL sides is what is driving political change.
The people voting for change are not stupid, their willingness to follow folk economics concepts that are false is not idiotic. In truth our inability to persuade the public to believe our research on some of the basic trade-offs that exist in society is our own fault – due to an increasing desire for economists to act as advocate as well as adviser. Instead of focusing on how to communicate our research more clearly to the public, our discipline has increasingly been associated with telling people they should eat less sugar, pay taxes on their fuel, and surrender a variety of their choices to government because it is in their interest – how exactly do we expect people to react when we just tell them “we know better”?
Where, as an economist, I may find many of these policy arguments persuasive, if the public doesn’t we really need to think about why – instead I often hear the argument of stupidity. As long as we rely on that argument to protect our fragile egos, we aren’t serving anyone as economists.