Economists vs. Non-economists
The Impersonal Perspective
some progressives don’t think economists should be regarded as experts on economic policy. They believe that popular conventional wisdom should take precedence when it conflicts with the opinion of academic economists.
I am afraid that there is a similar attitude among Trumpists, NatCons, and the like. On the right as well as on the left, non-economists are dangerously wrong in their thinking.
The line between economist and non-economist has nothing to do with possession of a Ph.D. People who have taken many economics courses but forgotten the key ideas are no better than non-economists. On the other hand, someone who absorbs the most important ideas from a freshman economics course can be an economic expert.
Probably the most essential idea is that the economy is impersonal. Economic outcomes are determined by general forces, like supply and demand, as opposed to the intentions—good or bad—of individuals.
Inflation does not rise because of a surge in greed. And it does not fall because greed recedes.
The grocery store owner does not control the price of eggs. That price is determined by supply and demand.
Why do jobs shift across countries?
Corporate executives do not “move jobs overseas.” Economic activity shifts between domestic and foreign production because of complex, impersonal forces, one of which is capital movements.
Suppose that the savings rate in China is much higher than that in the United States. In that case, China will accumulate dollar assets. This will raise the value of the dollar, making American goods expensive in China and Chinese goods cheap in America. This will shift manufacturing jobs away from China and toward the United States away from the U.S. and toward China. It does not matter what any individual executive does—the change in the trade balance has to take place, given the differences in saving behavior.
If you can appreciate the impersonal forces that affect international trade, you are an economic expert. Otherwise, if you fall back on “American executives who send jobs overseas,” then you are a dangerous demagogue. This is true even if—especially if—you are lauded in the press as a thought leader with new ideas.
A very large component of America’s saving weakness is the deficit spending of our Federal government. We pay for some of our Federal spending by sending securities overseas. The foreign buyers of those securities raise the value of the dollar, increasing our trade deficit. The next time you hear a Congressman blaming individuals for sending jobs overseas, tell that Congressman to look in the mirror.
Someone with a decent understanding of basic economics will emphasize the impersonal forces that drive economic outcomes. Politicians and pundits who instead put the blame on evil individuals are spouting non-economics.
substacks referenced above:
@
> This will raise the value of the dollar, making American goods expensive in China and Chinese goods cheap in America. This will shift manufacturing jobs away from China and toward the United States.
... away from the United States and toward China, rather, no?
But you can run an explicit policy to repress wages and force savings as China has done for decades. This is a deliberate policy implemented by CCP officials. You can also choose to accept the subsequent inflows of capital that keep the dollar strong and Yuan artificially weak without responding. This is also a policy choice made by US politicians, officials, and supported by Wall Street. It is far more personal than I think you admit.