The lines below are mostly a response to opinions expressed by a few close friends after many vigorous debates over the value that economists provide and the role that they offer in the current discussion about income inequality…
To my dear friend who contends that economists are no more reliable than weather forecasters and that the field of economics is less rigorous than the ‘hard’ sciences, I invite you to explore that claim beyond the shallow assumption upon which you make it. You may discover that while the field of economics does not enjoy the luxury of certainty that other sciences have, such as physics, it does not make its study any less intellectually rigorous or challenging.
Economics tries to do the impossible by providing models that describe how humans interact with each other, and while logic and math are indispensable towards that pursuit, neither will ever offer certainty to what decisions you and I will make. That is the crux of what economics tries to do – model human interactions on both a personal and aggregate level. So in addition to using math and logic, economists must also be historians, philosophers, game theorists, statisticians and social scientists. When Einstein and Newton developed their ideas, did they have to worry about political events, interest rates, competition, resource management and history? Lucky them!
Economics is the intersection of philosophy, math, history, psychology, the study of markets and so much more. It offers arguably the most comprehensive and holistic view on society and its mechanisms for interaction than any other existing framework.
To my other dear friend that disagrees with my belief that Bernie Sanders offers the most reasonable solutions to today’s problems, despite what talking heads will call him, I invite you to consider the following:
The Economic Policy Institute, a nonpartisan research organization, has published its findings on wage stagnation that illustrate the situation we have today:
These graphs paint a very clear picture. They unmask the ugly reality that most Americans already know. The reality they face every day and are becoming increasingly unhappy about. I include these graphs because I think they offer insight into why Sanders is experiencing so much enthusiasm, even as most continue to discount his viability. They are ignoring what is more important – the message he is sending that is resonating with so many.
Of course Bernie Sanders is offering solutions to other problems that include immigration, campaign finance, student loans, infrastructure, worker protections, and climate change; and I think we both agree on these issues. You and I seem to get hung up on his tax policies – which, I admit, need to be fleshed out. But lets separate the issue from the solution for a moment and reflect on each.
No one on the Republican side is talking about the issue of income inequality – at least not seriously and with conviction. How can any solution be discussed if the problem is not addressed? Middle class America cares about this. This is not about Right vs Left. This is about the average American genuinely concerned about having enough for retirement, being able to raise a family, affording higher education, being protected from workplace abuses like wage theft and misclassification, and many other issues that transcend party affiliation.
So back to the solution. Your argument and question is “how does Sanders intend to pay for his ideas?” That is a good question, but one I do not have an answer to. I will try to contact his folks and see if they can provide more detail. I would love to see him work with the Cato Institute and Heritage Foundation to come up with ideas that address the problem. Because the problem exists and a bipartisan solution is what we need.
I want to combine these two responses and comment on a larger point that I alluded to in my title – economists, for the most part, are forward thinkers and you should pay attention to what they say. While most folks are looking at the effects of something today, many economists are busy pondering the effects tomorrow, and that is where sometimes the disconnect between our matching opinions occur. This means that economists are either not doing a good enough job of articulating their point or policy makers are not listening.
This New York Times article does a great job of demonstrating the true value of economics and the power it has on the REAL world… not the world people want to see, but the world we actually live in. The article discusses the problem of the euro that has yet to be addressed – that monetary union cannot be successful without fiscal union.
For example, the article mentions,
“Mr. Friedman concluded that the adoption of the euro “would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues.””
Well, that is playing out now. He was right.
This part is particularly illuminating (emphasis mine):
“Now flash back even further, to 1919. World War I is over, and the great British economist John Maynard Keynes publishes “The Economic Consequences of the Peace,” an extended critique of the Treaty of Versailles. His main concern is that the treaty left Germany saddled with too much debt… Supporters of the treaty, including President Woodrow Wilson, are adamant that Germany pay sizable reparations for its previous misbehavior. Mr. Keynes, however, is looking forward rather than backward, and he is more concerned about ensuring prosperity for all European nations. While Wilson seeks contrition, Keynes seeks mercy.”
Again, the economist was right… we know what happened next.
This article ends with yet another valuable bit worth chewing on:
“it is worth bearing in mind the lessons from Mr. Keynes. A nation can withstand only so much economic pain before the political fallout becomes ugly”
I find this last part relevant and timely. Study the graphs above again and decide for yourself. At what point will Americans say “enough”? Every society has its threshold, a point at which a sentiment transforms into a movement that drives change. Economists can usually be at the forefront of discussing these issues and offering their analysis.
Quoting Keynes again,
“The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”