Notes From Babel

Governing beyond the speed of public opinion

with 2 comments

I find this argument offensive:

Politicians don’t understand that the voters don’t care about the deficit because the voters themselves don’t understand that they don’t care about the deficit. . . .

But they don’t. Public understanding of fiscal policy is hazy, inaccurate, and dominated by fallacious analogies between a national government and a household. What’s more, voters believe that deficits are primarily driven by wasteful government spending. So when a recession strikes the deficit spikes, and people complain. The smart thing for a politician to do under the circumstances is ignore the voters, do what you can to fix the economy, and recognize that in the end the economy drives public opinion.

Is there any wonder why voters don’t understand macroeconomic policy?  Left-leaning macroeconomists have, for the better part of century, sought to render this topic inscrutable and beyond the American public’s understanding.  They have done this precisely for the purpose of de-politicizing some of the most important political questions, making politicians unaccountable for running up massive deficits, and generating greater need for ever greater taxes.  And all this has resulted in a massive shift of political power to Congress.  (According to Wikipedia, “[e]very US state other than Vermont has some form of balanced budget amendment; thus, this macroeconomic mojo is less effective at the state level.)

This is a phenomenon I noted in my review of Bruce Bartlett’s The New American Economy: The Failure of Reaganomics and a New Way Forward.   Bartlett notes that Keynes had enormous confidence in his ability to manipulate public opinion, and that this was a driving motivation of his work.  As a result, Keynes was not concerned with consistency in his approach to economics:  if the approach he advocated to meet one political challenge was inapposite to another, he showed little reluctance in making the necessary adjustments without regard to consistency among the approaches.  As Bartlett puts it:

Through the years, many economists have puzzled over the contradictions in Keynes’s work. But there is one thing that ties it all together: his intense desire to influence public policy. As Keynes biographer Robert Skidelsky put it, “He invented theory to justify what he wanted to do.” If one goes through the 30 volumes of his collected works, the vast bulk of the material is not technical economics, but articles for newspapers and popular magazines, as well as memoranda and policy papers for government officials. “He was an opportunist who reacted to events immediately and directly, and his reaction was to produce an answer, to write a memorandum, and to publish at once, economist Elizabeth Johnson explains.

Bartlett goes on:

It is clear that Keynes would often put forward proposals because he thought they would be helpful at a particular moment in time, knowing full well that it would be highly undesirable for them to be maintained for the long term. . . .

Thus, for Yglesias to suggest that voters “are not that savvy about New Keynesian macroeconomic models” strikes me as disingenuous:  The Keynesian model was never meant for consumption by voters.  It was meant to confuse and disorient them so political leaders could govern without having to make their macroeconomic policies economically defensible.


Written by Tim Kowal

March 13, 2011 at 7:09 pm

2 Responses

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  1. And of course, the biggest abuse of said New Keynesian models was the Bush “deficits don’t matter” Administration. We’re only seeing a continuation of 10 years of bad policy

    Aaron W

    March 13, 2011 at 7:25 pm

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