Collective Conscious

Jeff Sachs (via) wants gov­ern­ments to make some­thing out of noth­ing. While I firmly believe that they can, I don’t think that they can do it in the way he wants them to. He’s simul­ta­ne­ously call­ing for deep struc­tural bud­get cuts and seri­ous struc­tural bud­get increases; what it really seems like he wants is a dra­matic rethink­ing of the way gov­ern­ment operates.

This would be nice, but it’s sim­ply not a prac­ti­cal approach: it’s a high-​​minded rant in the vein of Tom Fried­man rather than a seri­ous eco­nomic pol­icy rec­om­men­da­tion. If we could by magic restruc­ture whole economies, we would! But we can’t: we face seri­ous polit­i­cal con­straints along­side the eco­nomic ones. This is a too-​​often over­looked area of real eco­nom­ics, and in fact is the rea­son why the dis­ci­pline was at first known as ‘polit­i­cal econ­omy’ — the prac­tice of mak­ing rec­om­men­da­tions to politi­cians. The­o­ret­i­cal eco­nom­ics only evolved later out of that prac­ti­cal occupation.

So when Sachs argues, for exam­ple, that “the pub­lic should learn that there is lit­tle that eco­nomic pol­icy can do in the short term,” he’s being rather fan­ci­ful. It’s a very seri­ous polit­i­cal con­straint that pub­lic knowl­edge is often divorced from eco­nomic real­i­ties, and that poli­cies have to be shaped to man­age pub­lic opin­ion rather than the other way around. Oth­er­wise you wind up with dis­mal fail­ures like Carter’s infa­mous ‘Malaise Speech.’ Instead you have to aggres­sively shape what peo­ple know, spend­ing valu­able polit­i­cal cap­i­tal every step of the way to get your mes­sage out.

The corol­lary to this flaw is his other one, that tax struc­tures should be reformed to col­lect more from the rich, rather than let gov­ern­ments “[fawn] over those who pay their cam­paign bills in return for low tax­a­tion.” The expec­ta­tion that entrenched inter­ests will be pushed aside so eas­ily is a gross mis­cal­cu­la­tion of polit­i­cal real­ity, even if it would be good pol­icy (which it would). Instead, a use­ful rec­om­men­da­tion is a change by which this can be accom­plished with­out a dra­matic change in pol­icy. For exam­ple, chang­ing the rules regard­ing tax deduc­tions so that they don’t become more valu­able the wealth­ier you are would be one cru­cial mar­ginal step toward chang­ing the expec­ta­tions and real­i­ties of the tax code.

Push­ing toward a dras­tic reshap­ing of pol­icy in the long term requires a giant pub­lic push to reshape the image of gov­ern­ment in the eyes of the pub­lic. This is the only way to secure those mar­ginal votes that pro­vide for bud­get cuts in over­grown areas like defense and real­lo­cate them to cru­cial pub­lic invest­ments that really will boost pro­duc­tiv­ity and out­put over that long term.

But to quote Keynes’ likely reply to Sachs: “in the long run we are all dead. Econ­o­mists set them­selves too easy, too use­less a task if in tem­pes­tu­ous sea­sons they can only tell us that when the storm is past the ocean is flat again.” We can, and should, inter­vene in the short run. Unem­ploy­ment is presently stag­ger­ing and unusu­ally per­sis­tent, and that is real human suf­fer­ing that a well-​​targeted change can and should remedy.

(Photo: The­Cre­ativePenn)