It’s interesting to read the comments for Wall Street Journal economics articles these days. The loathing that WSJ readers feel for economists is almost palpable.
The WSJ also has always had a somewhat conflicted relationship with economists. Economics encompasses a wide range of business topics as a matter of course. Economists often study businesses and markets and macroeconomies, and businesses often benefit from what economists tell them.
And yet economics is not, contrary to popular belief, the study of business, or money, or stock markets. It’s a social science – a study of human behavior. And its conclusions and recommendations do not always favor 100 percent free-market, laissez faire, pro-business policies.
Over the past decades, in fact, the conclusions and recommendations of economics have increasing found that the real world isn’t the simple, black-and-white place that we once believed.
Humans aren’t as rational as we used to assume, markets aren’t as competitive, and free market outcomes not as optimal. In more and more situations, economists are finding that it is possible for the right kind of government involvement in markets to improve outcomes.
Government involvement always has a cost, of course. Any government interference causes overhead and inefficiency and almost always has unintended consequences. Governments thus shouldn’t get involved unless there’s a really good reason to believe that the benefits of government will outweigh the costs.
That said, economic research is finding more and more situations in which there is reason to believe that government can improve things.
Business people tend to believe that any government involvement in an economy is bad for everyone, with the exception of specific measures that directly benefit their businesses or themselves. That’s understandable. Economists assume – rightly – that most people will act in their own self-interest most of the time. But that doesn’t mean they’re right.
But I suppose it’s understandable that many business people feel betrayed by the increasingly-progressive bent of economics science. After all, when mainstream economists proposed using fiscal stimulus to combat the Great Recession in 2008, there was no widespread outcry against it. The main question was “How much is enough?” Ben Bernanke, the chairman of the Federal Reserve is a progressive experimenter, pushing for innovative ways of stimulating the economy through monetary policy. In short, mainstream economists are looking increasingly progressive. It’s no wonder many business people are angry at economists. They’re no longer the pliable allies that they once were.
So I guess I shouldn’t be surprised at the scathing, critical comments of Wall Street Journal readers. Change is hard for all of us.
But as your economist, I advise you to stimulate heavily.