Posted on 04/09/2024 2:09:39 PM PDT by Eleutheria5
Angus Deaton is doing some rethinking.
Specifically, the 78-year-old Nobel Memorial Prize-winning economist is re-examining his views on major topics like unions, immigration, and global trade.
It's a big statement from someone who's spent over 50 years studying inequality, welfare, poverty, and "deaths of despair," and it comes as he sees economics in disarray. His most recent book, "Economics in America: An Immigrant Economist Explores the Land of Inequality," came out in 2023 — it catalogs, among other topics, the role of economists in the US and tackles some of the problems he's identified.
When I asked Deaton what prompted his rethinking, which he detailed in a recent article for the International Monetary Fund, he said there wasn't just one moment that led to his evolving views — it's been a process, and one that he's not alone in. He thinks there's a broader reevaluation going on.
.....
(Excerpt) Read more at businessinsider.com ...
Give back your Nobel Prize and all the money, cretin.
Pretty sure he was wrong on the lump of labour fallacy and women in the workforce not depressing wages but I could be confusing economists.
Find the short rope.
[All told, while Deaton’s shifting views might reflect the disconnect Americans have been feeling over the past few years between rosy economic numbers and their well-being, there is a bright spot: He thinks what the Biden administration’s been up to is pretty good, even as “a lot of economists are up in arms and saying, this is a disaster.”]
Interesting stuff. Good post.
He’s incurably stupid. No wonder he got the Nobel Prize.
Harry Truman: What the world needs is a good one-armed economist.
No more “on the one hand, but then on the other hand....”
Thomas Sowell for Fed Chairman.
Duh.
I'm old enough to remember when labor's share of national income peaked in the late 60s. This was a much better country for working people to live in then. I helped my father with his taxes. With no college degree, adjusted for inflation, he was pulling in between $100-$150K per year depending on overtime.
Forced deindustrialization through eco-kook policies, mass immigration, financialization of the economy, and "free trade" have pushed Americans' incomes into the toilet.
And with those changes it also looks like Americans are on the brink of losing democratic control of the government.
With the end of the Cold War we thought we finally made the world safe for democracy. But it looks more like we made it safe for oligarchy.
https://www.imf.org/en/Publications/fandd/issues/2024/03/Symposium-Rethinking-Economics-Angus-Deaton
Questioning one’s views as circumstances evolve can be a good thing
Economics has achieved much; there are large bodies of often nonobvious theoretical understandings and of careful and sometimes compelling empirical evidence. The profession knows and understands many things. Yet today we are in some disarray. We did not collectively predict the financial crisis and, worse still, we may have contributed to it through an overenthusiastic belief in the efficacy of markets, especially financial markets whose structure and implications we understood less well than we thought. Recent macroeconomic events, admittedly unusual, have seen quarrelling experts whose main point of agreement is the incorrectness of others. Economics Nobel Prize winners have been known to denounce each other’s work at the ceremonies in Stockholm, much to the consternation of those laureates in the sciences who believe that prizes are given for getting things right.
Like many others, I have recently found myself changing my mind, a discomfiting process for someone who has been a practicing economist for more than half a century. I will come to some of the substantive topics, but I start with some general failings. I do not include the corruption allegations that have become common in some debates. Even so, economists, who have prospered mightily over the past half century, might fairly be accused of having a vested interest in capitalism as it currently operates. I should also say that I am writing about a (perhaps nebulous) mainstream, and that there are many nonmainstream economists.
Power: Our emphasis on the virtues of free, competitive markets and exogenous technical change can distract us from the importance of power in setting prices and wages, in choosing the direction of technical change, and in influencing politics to change the rules of the game. Without an analysis of power, it is hard to understand inequality or much else in modern capitalism.
Philosophy and ethics: In contrast to economists from Adam Smith and Karl Marx through John Maynard Keynes, Friedrich Hayek, and even Milton Friedman, we have largely stopped thinking about ethics and about what constitutes human well-being. We are technocrats who focus on efficiency. We get little training about the ends of economics, on the meaning of well-being—welfare economics has long since vanished from the curriculum—or on what philosophers say about equality. When pressed, we usually fall back on an income-based utilitarianism. We often equate well-being with money or consumption, missing much of what matters to people. In current economic thinking, individuals matter much more than relationships between people in families or in communities.
Efficiency is important, but we valorize it over other ends. Many subscribe to Lionel Robbins’ definition of economics as the allocation of scarce resources among competing ends or to the stronger version that says that economists should focus on efficiency and leave equity to others, to politicians or administrators. But the others regularly fail to materialize, so that when efficiency comes with upward redistribution—frequently though not inevitably—our recommendations become little more than a license for plunder. Keynes wrote that the problem of economics is to reconcile economic efficiency, social justice, and individual liberty. We are good at the first, and the libertarian streak in economics constantly pushes the last, but social justice can be an afterthought. After economists on the left bought into the Chicago School’s deference to markets—“we are all Friedmanites now”—social justice became subservient to markets, and a concern with distribution was overruled by attention to the average, often nonsensically described as the “national interest.”
Empirical methods: The credibility revolution in econometrics was an understandable reaction to the identification of causal mechanisms by assertion, often controversial and sometimes incredible. But the currently approved methods, randomized controlled trials, differences in differences, or regression discontinuity designs, have the effect of focusing attention on local effects, and away from potentially important but slow-acting mechanisms that operate with long and variable lags. Historians, who understand about contingency and about multiple and multidirectional causality, often do a better job than economists of identifying important mechanisms that are plausible, interesting, and worth thinking about, even if they do not meet the inferential standards of contemporary applied economics.
Humility: We are often too sure that we are right. Economics has powerful tools that can provide clear-cut answers, but that require assumptions that are not valid under all circumstances. It would be good to recognize that there are almost always competing accounts and learn how to choose between them.
Second thoughts
Like most of my age cohort, I long regarded unions as a nuisance that interfered with economic (and often personal) efficiency and welcomed their slow demise. But today large corporations have too much power over working conditions, wages, and decisions in Washington, where unions currently have little say compared with corporate lobbyists. Unions once raised wages for members and nonmembers, they were an important part of social capital in many places, and they brought political power to working people in the workplace and in local, state, and federal governments. Their decline is contributing to the falling wage share, to the widening gap between executives and workers, to community destruction, and to rising populism. Daron Acemoglu and Simon Johnson have recently argued that the direction of technical change has always depended on who has the power to decide; unions need to be at the table for decisions about artificial intelligence. Economists’ enthusiasm for technical change as the instrument of universal enrichment is no longer tenable (if it ever was).
When efficiency comes with upward wealth redistribution, our recommendations frequently become little more than a license for plunder.
I am much more skeptical of the benefits of free trade to American workers and am even skeptical of the claim, which I and others have made in the past, that globalization was responsible for the vast reduction in global poverty over the past 30 years. I also no longer defend the idea that the harm done to working Americans by globalization was a reasonable price to pay for global poverty reduction because workers in America are so much better off than the global poor. I believe that the reduction in poverty in India had little to do with world trade. And poverty reduction in China could have happened with less damage to workers in rich countries if Chinese policies caused it to save less of its national income, allowing more of its manufacturing growth to be absorbed at home. I had also seriously underthought my ethical judgments about trade-offs between domestic and foreign workers. We certainly have a duty to aid those in distress, but we have additional obligations to our fellow citizens that we do not have to others.
I used to subscribe to the near consensus among economists that immigration to the US was a good thing, with great benefits to the migrants and little or no cost to domestic low-skilled workers. I no longer think so. Economists’ beliefs are not unanimous on this but are shaped by econometric designs that may be credible but often rest on short-term outcomes. Longer-term analysis over the past century and a half tells a different story. Inequality was high when America was open, was much lower when the borders were closed, and rose again post Hart-Celler (the Immigration and Nationality Act of 1965) as the fraction of foreign-born people rose back to its levels in the Gilded Age. It has also been plausibly argued that the Great Migration of millions of African Americans from the rural South to the factories in the North would not have happened if factory owners had been able to hire the European migrants they preferred.
Economists could benefit by greater engagement with the ideas of philosophers, historians, and sociologists, just as Adam Smith once did. The philosophers, historians, and sociologists would likely benefit too.
Post of the day, perhaps the year.
You get it.
So many people on this site don’t have a clue.
If someone is making $10/hr they they that is $5 too many.
If he thinks that labor unions help a country, then he is an ABJECT NUTCASE.
Skilled labor should be paid for their skills. Unskilled labor needs to be paid for their skills as well. Burger flippers don’t deserve $20 an hour.
I recommend unskilled labor learn skills.
It is reported that between China joining the World Trade Organization in around 2001, and the late 2010's over 50,000 US factories were moved to China. Think Mitt Romney and Bain Capital. The effects on American workers and families can be easily contemplated. This might even interfere with the ability of the USA to project power like in supplying Ukraine, but the ruination of America's middle and working classes is more important than anything else.
As they say, if you laid all the world’s economists in a long line, head to toe, they’d never reach a conclusion.
There was never an ounce of nationalism and populism in their veins. All the cared about was send jobs to China and Mexico, never about the culture and nature of America. There never comprehended the social dynaimics of mass migration, global wage arbritage and the social disease associated with self worth involving losing your culture and area.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.