Economists unimpressed by Kerry plans

[trragan]

since no other pedant appears to have pointed it out there is no Nobel Prize for economics - probably would have been to close to mathematics for his taste.

Keith is correct technically the Nobel prize is the not a Nobel. Alfred Nobel did not originally endow a prize for economics. The prize is offically called, "The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel," and was set up to be administered by the Nobel committee with the endowment set up by the Bank of Sweden, not the Nobel committee. This technicallity is not known by many at all, and because of that is simply called by almost all the Nobel Prize for Economics.

On a side note, Alfred Nobel famously hated mathematicians. Apparently, Nobel lost his girlfriend to a mathematician, and until his death hated their guts.

[jeff]

Hmmm, maybe if he hadn't lost his girlfriend he wouldn't have gone off and invented those explosives...

[Inquartata]

One sample is self-selected. The other isn't. So if you mean that the sample of 56 is the "pretty clear" one to use, then I'd say you're right.

Tomas

As I said, there are problems with both. IMO those with the random one are much larger than those with the other in this case.

[Inquartata]

The first document I couldn't read ( damned white lettering on black background! ) so I must leave that issue in abeyance. Apart from the names of the signatories, which, if the document affirms what the title purports, would indeed constitute much better refutation. At least, if the category is Nobel laureates: 10 opposed to 6.


The second is readable, but again, not all of the signatories are economists. Professors of Management? Business Administration? Business Ethics? Organizational Behavior and Human Resources? Marketing? In fact, in all that list I count only three or four identified as economists....

[QUOTE=Allez]

So that's more nobel laureates going against Bush with real data than nobel laureates going against Kerry with no data and a blind faith in clever, yet unrealistic models.

Eh? What "data"? All I see is a "statement", not unlike the one signed by the group I posted...

I note, too, your explicit assumption that those with whom you agree are using solid, irrefutable "fact", of course, while those with whom you disagree must only be using "unrealistic models"...

[Inquartata]

"American Nobel Prize laureate for Economics George A. Akerlof lashed out at the government of US President George W. Bush, calling it the "worst ever" in American history" (well, that he certainly doesn't mince his words). He says why - the article is short and and an interesting read.

I am more than willing to pay attention to his analysis of economic matters; his pronouncements on "foreign, social and environmental policy" are of no more import than anyone else's. He is not an expert on these, and this makes consulting him on them an argumentum ad verecundiam.

Even his statements on economics are more in the line of political economy---remarks about normative matters such as income distribution and the like coupled with value judgements on them. Naughty economist!

[Allez]

The second is readable, but again, not all of the signatories are economists. Professors of Management? Business Administration? Business Ethics? Organizational Behavior and Human Resources? Marketing? In fact, in all that list I count only three or four identified as economists....

The most salient fact there is that they are all professors. Plenty of the names you submitted had no affiliation with any school (I cannot verify whether or not they even have PhDs, since your link doesn't seem to be working). As far as your disrespect towards profs of Business, I can say from personal experience that this is unfounded. While an MBA might be meaningless (a joke amongst economists), profs in Business departments often have PhDs in Econ. Also, plenty of undergraduate courses in Economics have been taught by Business professors. While none of my graduate courses have been taught by a Business prof, I'm sure there are some somewhere.

Eh? What "data"? All I see is a "statement", not unlike the one signed by the group I posted...

The "statement" that you could read was the result of economists looking at the data derived from a full 4 years under Bush. Why don't you take the 2 minutes and actually read it? It doesn't take an economist to see that all mid to low income families are being fleeced by the Bush administration. Now, if your household is making more than 200k, then I understand your concerns about Kerry. But if you're not making that much, then either you have non-economic issues with Kerry or you're fooling yourself. Do you still have questions? Look at this biased website: http://www.thetruthaboutgeorge.com/economy/

Now, if you really gave all of that a fair shot, you might justify your faith in Bush with something like, "Well, how much control over the economy does Bush really have?" Well, this might be a good question if the Congress was Democrat. But because it is Republican and because of 9/11, Bush has been able to create the largest budget deficit in history. Do you really think that this isn't a problem? If you don't, then either you don't plan on having children or you really really hate their guts.

I note, too, your explicit assumption that those with whom you agree are using solid, irrefutable "fact", of course, while those with whom you disagree must only be using "unrealistic models"...

Hmm, I don't really seem to be communicating very well. Of course, I didn't really expect to with a couple sentences. I suppose that this is better than you intentionally taking my words out of context, though. I was simply taking a shot at the Chicago School of economics that has tended to lead all serious right-wing economic thought in the country. Now we can have debates on abortion, homosexual marriage, the Bible, or other fun stuff, but when it comes to Economics, you'll never be able to convince me that the Chicago School is right most of the time. Now I completely agree that a lot of those guys are extremely clever individuals. But when I read some of their papers, they seem to be so infatuated with their cleverness that they forget about being realistic.

[Inquartata]

The most salient fact there is that they are all professors.

ER, you might want to try rereading the title of the thread...

Plenty of the names you submitted had no affiliation with any school

Relevance?

(I cannot verify whether or not they even have PhDs, since your link doesn't seem to be working).

Still working for me, but if you Google "368 economists" you should get a lengthy list of sites either reproducing or linking to the letter.

As far as your disrespect towards profs of Business, I can say from personal experience that this is unfounded.

I have no idea what set you off on this tangent. The argument is about economists and their assessments. Not professors, not business professors---economists. Professors of management or accounting or marketing are fine in their own fields, but as economists they mostly aren't. If one is looking for expertise in chemistry proper, one does not consult a biologist, even if the latter has had some schooling in chemistry; one consults a chemist. And if one needs an economic opinion I do not think that a teacher of business ethics is the person to seek out: one wants an actual economist.

profs in Business departments often have PhDs in Econ.

Then perhaps it would behoove them to list same as a credential when rendering opinions about economics? Just a thought. I see none on that list. The one I provided, however, explicitly identifies its members as economists proper, not just professionals associated with the business world in general.

Also, plenty of undergraduate courses in Economics have been taught by Business professors.

I can't think of a single one of mine that was. Professors or associate professors of economics, every one. At which schools does this go on? ( And do they also have law courses taught by journalists? )

The "statement" that you could read was the result of economists looking at the data derived from a full 4 years under Bush.

Which was cited where, again? Tough to refute a statement that vague....

Why don't you take the 2 minutes and actually read it? It doesn't take an economist to see that all mid to low income families are being fleeced by the Bush administration.

No, just a partisan looking through the proper normative filters.

if you're not making that much, then either you have non-economic issues with Kerry or you're fooling yourself

Fallacy of bifurcation---and you have zero idea what my critical process is like. My "issues" ARE economic, just like those of the ECONOMISTS named in the letter I posted. I guess they're also "fooling themselves", according to you? And what makes your assessment more worthy of consideration than theirs?

Do you still have questions? Look at this biased website: http://www.thetruthaboutgeorge.com/economy/

Now why would I want to do that?

There's an axiom: Whenever someone prefaces a statement with a phrase like "In all honesty" or "To tell the truth", they are usually getting ready to lie to you...

"Well, how much control over the economy does Bush really have?"

That's another of my problems with the way people look at political economy generally. Presidents and their minions have been assiduously promoting the view that they control economic outcomes at least since Kennedy, and the great mass of the electorate seems to have bought it. Which does not of course make it any less false. Modern economies are stupefying in their size and complexity, and the degree of control exercised by government is relatively small and weak. Can government interventions have effects? Certainly, but as often as not it's the wrong effect or the right one at the wrong time, with the law of unitended consequences in full force---and even then the effects are seldom great. But people by and large prefer to believe that some all-powerful agency is in complete command of things, rather than confront the reality of chance, uncertainty and half-seen, half-understood forces moving inscrutably beneath the surface of the economy. It's more comforting to think that everything is in hand ( so long as one's own Party is at the helm ). And who better to look to in that regard than the man at the top? But the Fed has more "control" than the rest of the government combined, much less the President alone, simply because it can act promptly and without months of negotiation. And even the Fed cannot "fine tune" the economy. How then shall the President, acting on imperfect and retroactive data, facing the difficulties of policy creation and the process of getting it through Congress unaltered or diluted, and the slow process of getting it implemented by the bureaucracy, really going to manipulate the private sector with any degree of reliability?

Well, this might be a good question if the Congress was Democrat. But because it is Republican and because of 9/11, Bush has been able to create the largest budget deficit in history.

Yes. Because clearly Congressmen have no agendas of their own. They are puppets of the President, because they are of the same Party. Lockstep cooperation is the order of the day. That's why Congress approves all of the policies for which Bush asks....

Come on, man, this is naive thinking! Legislators each face unique individual, constituential and cooperational imperatives. They represent districts which are not all served equally by federal policies. There are winners and losers from any potential initiative, and the losers don't just throw up their hands and yield because they share a Party affiliation---even when they're Republicans. They try to get their own pet bills passed by trading votes on the pet bills of others. They form blocs and factions and caucuses based on personality and shared interests, or shared animosities, but these never comprise the entirety of a Party, and as often as not they compete rather than conspire. They have each their own ideas and beliefs and motives, and they are not all identical to those of the President. They have to answer to a different segment of the populace for their tenures, and they are like all human beings self-interested. Congress is not a the rubber stamp you seem to think it is. It wasn't for Johnson, and it's not for Bush. Especially not with the narrow majority in the Senate.

Do you really think that this isn't a problem? If you don't, then either you don't plan on having children or you really really hate their guts.

Another fallacy of bifurcation. Tsk. Somehow I suspect that there are more than the two uncomplimentary alternatives you forward in order to advance whichever facet of your argument is at hand at the moment...

For the record, no, I don't think that deficits moderate on a historical and international basis are particularly worrisome. None of the supposedly dire effects of a national debt predicted by the critics have as yet been observed in the real world; yet the hand-wringing continues. Why?

when it comes to Economics, you'll never be able to convince me that the Chicago School is right most of the time.

Who is, especially in a "soft" science like economics? ( Though your last phrase there seems indicative of a certain degree of presumptive close-mindedness. "Never"? In spite of any evidence that might emerge? You are really that wedded to out of hand rejection? )

they seem to be so infatuated with their cleverness that they forget about being realistic.

"Realistic", of course, being defined as what you believe to be true?

Look, academics are all to some extent insulated from the practical world. And theory seldom matches exactly with practice. But I don't see how that translates into thinkers with whom you disagree obviously being disingenuous merely in the name of displaying their own wit...or for that matter of being wrong.

[Tomas N]

That's another of my problems with the way people look at political economy generally. Presidents and their minions have been assiduously promoting the view that they control economic outcomes at least since Kennedy, and the great mass of the electorate seems to have bought it.

For the record, no, I don't think that deficits moderate on a historical and international basis are particularly worrisome. None of the supposedly dire effects of a national debt predicted by the critics have as yet been observed in the real world; yet the hand-wringing continues. Why?

Wow Inq, it's been said before, but you write prodiguously (and well).

I agree that the Prez isn't all powerful. But decisions he makes and agendas he sets do affect the economy. Bush pushed through the tax cuts. The war in Iraq is Bush's war. Add them together and we get big deficits. Are there zero costs to the deficits? Perhaps. (I'm of the "there's no such thing as a free lunch" ilk.) But making all the tax cuts permanent, reforming social security and our national health system, and continuing to fight our Orwellian war on terror all cost $. I'm curious how it'll get paid for, if not for even larger deficits. Much of our debt is being bought by foreign governments right now (as opposed to foreign individuals, who have largely dropped out of that market), mostly to support their currencies. (China wants to keep exporting goods to the U.S. so they keep the dollar inflated.) If/When those governments also decide they can't afford to buy more U.S. debt, I'm not sure what will happen. But it'll certainly shake things up.

Presidents have been campaigning on economic policy forever. Most people forget that one of the most divisive political issues in the postbellum U.S. was whether to resume a bimetallic (gold and silver) standard or stay on the gold standard. We can go all the way back to Jefferson (don't know about Washington to be honest) to get nuanced economic arguments.

As for the hand-wringing, I guess it happens because debt induced crises have happened elsewhere in the world plenty (the phrase "third-world debt crisis" rolls off the tongue quite easily) and in the U.S. also. When states overinvested in the railroads in the 1850s, several went bankrupt. Now there's a big difference between a state and the federal government, but it happened and should be somewhere in the mix of our thinking.

Now for the 368 thing. I got the petition. Didn't sign it. There are some awfully impressive names on that list, but there are thousands of economists in the U.S. (I can't find the AEA membership numbers, sorry) and only 368 signed? My question would be, why didn't Kerry (or someone else) get a similar letter against Bush? We have the Nobel laureates letter against Bush, but not a more general one. I would suspect (but have no way of proving) that the numbers would be far larger.

Not everyone on the 368 has a PhD in economics ... although having a PhD in economics is neither a necessary nor a sufficient condition for clear economic thinking.

Tomas

[Inquartata]

I Bush pushed through the tax cuts. The war in Iraq is Bush's war. Add them together and we get big deficits.

One small problem with this widely-held belief: the tax cuts were enacted in 2001, and the 9-11 attacks also occurred in 2001. But the "surplus" fell by more than half between 2000 and 2001, ie before either of those events...

Outlays grew far more than receipts fell in that period, as a result of the sort of domestic big-spending initiatives for which I myself fault Bush: No Child Left Behind, election reform, etc.

Whle it is true that 9-11 recovery costs, homeland defense costs, the WOT, Iraq and the tax cuts have exacerbated the deficit, as have continued spending initiatives like Medicare "reform", the process was already well begun before any of those events, due primarily IMO to the downturn in the business cycle. ( Recessions lower tax receipts and increase spending via the so-called "automatic stabilizers" such as UIC, welfare and other outlay programs which "bleed" more freely when people are thrown out of work, businesses go under, consumers cut back spending, and so forth. )

But making all the tax cuts permanent,

OK, but I'm curious: why do you feel that the government is more deserving of and can better use the monies you and I earn than we can? This I think is at the root of the tax cuts, because I do not believe Bush intended or now intends them as neo-Keynesian fiscal policy measures: I think he sees them as philosophical desiderata, embodying the idea that people should be able to keep more of what they earn and government less. ( Alas, I don't think he's come to grips with what this means for government spending, which latter he's shown no such philosophical bent for reducing. )

reforming social security and our national health system

Do you not think these need reforming?

and continuing to fight our Orwellian war on terror all cost $.

Have you maybe some suggestions for how we could guarantee our safety from terrorist attacks on the cheap?

I'm curious how it'll get paid for, if not for even larger deficits.

A good question, and one that has faced every Administration. The short answer is economic prosperity and growth, which increases tax revenues and reduces the need for spending. Unfortunately, prosperity and growth are not things which can be predicted or counted upon---they have to be taken as the vagaries of the business cycle deliver them, as they did during the 1990s. And when they are not to be found, we muddle through as best we can, as by borrowing ( or preferably reducing spending, but that's not in the cards when politicians are in charge ).

Much of our debt is being bought by foreign governments right now (as opposed to foreign individuals, who have largely dropped out of that market), mostly to support their currencies.

Yes. Why is this especially problematic?

If/When those governments also decide they can't afford to buy more U.S. debt, I'm not sure what will happen.

Interest rates will have to be raised until they or others are once more willing to do so. This will certainly cause economic ripples, but we've survived periods of rising interest rates before. These too tend to run in concrt with the overall swings of the business cycle.

Now for the 368 thing. I got the petition. Didn't sign it. There are some awfully impressive names on that list, but there are thousands of economists in the U.S. (I can't find the AEA membership numbers, sorry) and only 368 signed?

By the same token, the poll Jeff posted---the one taken by The Economist---only had a 56% response. In both cases we are unaware of WHY given persons declined to answer the requests. Because they disagreed? Because they procrastinated? Because they had more important things to do? Because they wanted to remain, or at least appear, apolitical? Because their secretaries lost or discarded them? Probably a combination of all of the above, but without a breakdown we can say nothing about consensus opinion. The 368 on the one hand, the 56 on the other, were I suspect simply more motivated to reply to the question than the others.

In any event, the same might be said of countervailing statements, such as this one by the EPI:

http://www.epinet.org/stmt/2003/statement_signed.pdf

21,000-odd members of the AEA, and less than 2% of them will sign it? Does this mean that the other 98% have no opinion either way, or that the above reasons for their absence are more likely the cause?



Why did you decline to sign the letter, BTW?

My question would be, why didn't Kerry (or someone else) get a similar letter against Bush? We have the Nobel laureates letter against Bush, but not a more general one.

Actually, they did and we do---it's the one I posted above, from the Economics Policy Institute. It was also signed by many more than the Nobel laureates...and would have made a much better counterargument to my posted statement than the others thus far produced. ( I did not care to do my opponent's arguing for them, however! )

I would suspect (but have no way of proving) that the numbers would be far larger.

By about 4, to be exact.

Not everyone on the 368 has a PhD in economics ... although having a PhD in economics is neither a necessary nor a sufficient condition for clear economic thinking.

Tomas

To be sure!

[Tomas N]

Small government, individual choice, etc. etc. etc. All for it. I'm usually the one giving those lectures! Reform needed? Yup. Defense of homeland needed? Yup.

So there's this part:

Interest rates will have to be raised until they or others are once more willing to do so. This will certainly cause economic ripples, but we've survived periods of rising interest rates before. These too tend to run in concrt with the overall swings of the business cycle.

Sure, interest rates rise. What else? Dollar deflates. So higher interest rates and a deflated currency...good or bad for the economy taken together? Does it cause a recession? Lower economic growth? Trade deficit drops probably. But does that cause recession elsewhere? Effect on U.S. economy? Effect on government stability elsewhere? I'm hoping it's as easy as "interest rates go up," money keeps piling in, end of story, but bubbles can burst more spectacularly than that.

I'm not a big fan of the idea of a "business cycle." Economy goes up, economy goes down, but it's not cyclical as in "regular" or "exogenous." We do things, most of which we probably have no idea about, that create the incentives that make people take certain actions that affect the economy. So I'm not a Calvinist when it comes to the business cycle.

Why not sign the letter when I agree with large chunks of it? Well, because we've had 4 years of Bush giving tax breaks to buddies and certain lobbies, starting wars with folks who don't have weapons, and pushing tax cuts for the very rich. My great hope for Bush in the second term that he proposes a Steve Forbes type flat tax. Flat tax of 17% on earnings over $36K. Get rid of every other loophole. Think it'll happen?

Tomas

[jBirch]

Awesome discussion guys.

Two questions, then I'll go back to keeping my mouth shut for a bit.

1) What effect does the President have on the psychology of the citizenry and how does that effect economics? It would seem to me that the Prez is like the CEO of a corporation in that they embody the marketing image of the company and it's products. How much of the economic cycles are perception oriented and not fact oriented? With Bush in power, are the citizenry of other nations (and other nations themselves) more likely to purchase US products or otherwise? Are top-notch immigrants likely to enter the US and thereby improve innovation or likely to go elsewhere? What image does the US portray on an economic front?

2) What is the goal of taxation? What government programs are useful and what are not? Why have a government at all?

[Tomas N]

Jbirch,

I'll let the articulate Inquartata answer all the big questions. Either I a) can't because I don't know, or b) can't because it would only really work over drinks.

Are top-notch immigrants likely to enter the US and thereby improve innovation or likely to go elsewhere? What image does the US portray on an economic front?

Well, given the post-9/11 restrictions in place, it's become harder to hire foreign workers. I'd be curious as to what the overall trend has been. In higher education, applications from foreign students has dropped quite a bit. That will hurt us in the long run, both in terms of research at universities and (to a lesser degree) high-skilled workers.

Since Sept. 11, foreign students applying for visas have faced stringent review at American embassies. But science and technical students must also now be cleared by the Federal Bureau of Investigation and the Central Intelligence Agency. Educators have been warning that the process keeps thousands of students away, and officials in the Bush administration are trying to fine-tune it, said Vic Johnson, a spokesman for the Association of International Educators.

http://www.nytimes.com/2004/11/10/ed...tml?oref=login
http://www.cnn.com/2004/EDUCATION/11...eut/index.html

My guess is that there indeed needs to be some more fine tuning.

Tomas

[Inquartata]

I'm not a big fan of the idea of a "business cycle." Economy goes up, economy goes down, but it's not cyclical as in "regular" or "exogenous."

Yes, that's the sense in which I meant the phrase as well: oscillating, but not necessarily with a predictable or closely repetitive pattern.

We do things, most of which we probably have no idea about, that create the incentives that make people take certain actions that affect the economy. So I'm not a Calvinist when it comes to the business cycle.

Oooh, careful, JBirch may take exception to any slight directed toward his avatar!

Why not sign the letter when I agree with large chunks of it? Well, because we've had 4 years of Bush giving tax breaks to buddies and certain lobbies, starting wars with folks who don't have weapons, and pushing tax cuts for the very rich.

So it was a reluctance to support Bush, rather than dissent from the economic position of the letter designed to provide him said support? Demurral on political grounds rather than economic?

My great hope for Bush in the second term that he proposes a Steve Forbes type flat tax. Flat tax of 17% on earnings over $36K. Get rid of every other loophole. Think it'll happen?

Tomas

Doubtful, especially so with regard to those exact terms.

Anyway, would you be so cruel as to throw thousands of IRS employees and tax accountants out of work? I'm sure that Senator Kerry would be SO disappointed to hear that, what with the abysmal unemployment picture and all.

[Allez]

I have no idea what set you off on this tangent. The argument is about economists and their assessments. Not professors, not business professors---economists. Professors of management or accounting or marketing are fine in their own fields, but as economists they mostly aren't. If one is looking for expertise in chemistry proper, one does not consult a biologist, even if the latter has had some schooling in chemistry; one consults a chemist. And if one needs an economic opinion I do not think that a teacher of business ethics is the person to seek out: one wants an actual economist.

I'm not sure who this theoretical "one" is, but it surely isn't me. I would sooner read a economic paper by an Econ PhD from Princeton who happens to be teaching in the Columbia Business Department than a self-designated "economist" working in the private sector. And that's the point that I was stressing.

I can't think of a single one of mine that was. Professors or associate professors of economics, every one. At which schools does this go on? ( And do they also have law courses taught by journalists? )

Hmm...how about every top 10 Econ program in the US? No, maybe not each and every semester, but it happens often enough. Research profs have far better things to do than teach basic undergrad courses and these courses are often given to outside profs. And since Business departments have courses in Micro and Game Theory, they often have Econ PhDs. Econ profs have joint appointments in other schools: Business, Poly Sci, Mathematics. Look at some fields in economics: Law & Economics, Political Economy, Psychology & Economics, etc. It's a very interdisciplinary field. Economic modeling and econometrics has infiltrated many of the other social sciences, but a lot of outside thought has been incorporated into economics as well. Your whole view of Economics as an isolated field with arcane practices that only the initiated can engage in is false. That said, I don't disagree with:

Not everyone on the 368 has a PhD in economics ... although having a PhD in economics is neither a necessary nor a sufficient condition for clear economic thinking.

I suppose it's my academic bias that predisposes me to weight sources based on school and degree. That said, I still see no better way to judge the validity of hundreds of names as we have been presented with.

Which was cited where, again? Tough to refute a statement that vague...

Uh, the date on the letter was 2004. That means the letter was talking about changes in economic indicators from the start to the end of Bush's first term. Your letter was theorizing on the effects of a Kerry term that never happened. Refute? Is that all we can do, debate? Personally, I haven't got much of a rise from that since high school. Wouldn't a mutually beneficial conversation be better? Ah, but I can dream...

How then shall the President, acting on imperfect and retroactive data, facing the difficulties of policy creation and the process of getting it through Congress unaltered or diluted, and the slow process of getting it implemented by the bureaucracy, really going to manipulate the private sector with any degree of reliability?

+

For the record, no, I don't think that deficits moderate on a historical and international basis are particularly worrisome. None of the supposedly dire effects of a national debt predicted by the critics have as yet been observed in the real world; yet the hand-wringing continues. Why?

When it comes to the national debt (the issue I was talking about...no, I don't believe the president has complete control of the economy), we're talking about the budget. And when a president pushes for tax cuts and raises spending (I take it this is common knowledge and not in need of links) when he's already facing a deficit, the national debt will increase. As far as this not being a problem? Well, assuming that you don't like economic disasters such as hyperinflation or defaulting on the debt, the huge payments on the national debt that WILL happen will force us to cut spending (unless you think that we could sustain a Ponzi game where we borrow and borrow ad infinitum) So Medicare, Social Security and other programs will be cut drastically in the future. For this not to happen, you would need sustained economic growth. How much? Consult the Growth Accounting literature. No, I don't remember the numbers, but when I saw them they scared me. Will sending a bunch of troops with overpriced food and equipment to Iraq help the American economy grow? Maybe, but I think I know a few darts that could figure out better ways to spend tax dollars.

[Inquartata]

1) What effect does the President have on the psychology of the citizenry and how does that effect economics?

I'm sure there is some effect, but I don't know how it could be measured or quantified. If I had to guess I'd estimate the effect to be quite small, particularly given the polarized nature of the electorate in recent years---for every citizen who might react positively, there's likely to be another who reacts negatively, simply on the basis of personal or political animosity. I mean, supportive Republicans might be inspired, but Democrats repulsed---and by the same statement or policy. Offsetting results...

Now, in private, as with executives of big corporations and small business and other lobbies I'm sure jawboning is more effective. But even then there is disagreement on how closely the views of opinion leaders correlate with those of the general public, so will it translate into widespread psychological effects? I don't know...but as a cynic I'm inclined to think---not so much.

How much of the economic cycles are perception oriented and not fact oriented?

Again, impossible to quantify, I suspect. Perceptions surely play a large role, but they in turn are shaped by reality even as they shape it in return...

With Bush in power, are the citizenry of other nations (and other nations themselves) more likely to purchase US products or otherwise?

I would expect a weak effect at best. I mean, look at our own experience. There has been a good deal of resentment toward, for example, France and Germany among conservatives over their hostility toward the Iraq venture. Yet how many of us would refuse to buy Allstar/Uhlmann or Cartel or Prieur equipment on that basis? Not I, certainly. Have sale of BMWs or Mercedes' fallen off? Doubtful. What does affect such decisions? Price. Quality ( or perceived quality ). Customer service. In short, economic factors; self-interest; utility. All of the things we'd expect, in other words, from economic theory, and the things on which successful businesses focus.

Are top-notch immigrants likely to enter the US and thereby improve innovation or likely to go elsewhere? What image does the US portray on an economic front?

These things too are cyclical. Setting aside such barriers to entry as we may haply erect, the net result is likely to depend on supply and demand in the various labor markets. We have certainly seen no decrease in the tide of immigration, legal and illegal, amongst those in the unskilled categories, despite adverse political opinion toward the US in Mexico and Latin America. Opportunity and reward trumps political resentment. I think it will amongst educated and skilled immigrants as well---so long as there ARE perceptible opportunities and rewards comparable with or superior to those to be found elsewhere...

2) What is the goal of taxation?

Depends on who you ask. From a strictly economic perspective: to fund the provision of such services as only government can provide, ie public goods and the amelioration of externalities. Others might advocate that they be used to redistribute incomes and redress perceived inequities. You can probably guess upon which side I come down.

What government programs are useful and what are not?

Whew, a really complex question! Easier to talk about which ones are indispensable or obviously needed, rather than useful. In the latter case there's bound to be a quarrel over what "useful" means, and what degree of usefulness is sufficient to warrant supporting a program. There are for instance laws passed every session at the federal level which affect only a handful of individuals. These are certainly "useful" to those individuals, but to they merit the spending---the income taken from all workers and investors---lavished upon them? One would have to sift through them on a case-by-case basis to determine that....

Why have a government at all?

To deal with foreign powers; to provide for pubic goods such as defense and a predictable, reliable legal system; to mediate between the various states and factions within the nation; to palliate negative externalities. Beyond that one enters the realm of the normative...the society as a whole must decide what more it wishes to do as a polity, and what it wishes government to accomplish. ( Hopefully the society as a whole, that is, rather than a disproportionately influential segment of it. Which of course is always the reality. )

[trragan]

To deal with foreign powers; to provide for pubic goods such as defense and a predictable, reliable legal system; to mediate between the various states and factions within the nation; to palliate negative externalities. Beyond that one enters the realm of the normative...the society as a whole must decide what more it wishes to do as a polity, and what it wishes government to accomplish. ( Hopefully the society as a whole, that is, rather than a disproportionately influential segment of it. Which of course is always the reality. )

Inquartata, everything you said before, "beyond that one enters the realm of the normative" is normative in nature. Some economists, my self included do not see the need for the governement to as you put it "palliate negative externalities." As Im sure your'e well aware the classical dichotomy says that externalities are experienced due to "market failures," well IMHO there is not such thing as a market failure. "Failure" is not caused by the market rather by government intervention, which disallows the rationing of goods to where it otherwise would have been absent the said intervention.

By the way, most professors in business schools have Ph.D's in their respective area's in which they teach. Departments with all economists, obviously the economics department, and then finance departments, with some with Ph.D's in finance, which is scion of economics. After that economists are few and far between. Also, most economics departments are in liberal arts colleges of universities, not business schools. Whereas, Finance departments are usually in fact almost always in colleges of business. Believe me.

[Inquartata]

IMHO there is not such thing as a market failure. "Failure" is not caused by the market rather by government intervention, which disallows the rationing of goods to where it otherwise would have been absent the said intervention.

Indeed? Just a couple of points:

How do we deal with externalities, absent an arbitrator such as government? Yes, I know, ideally those suffering a cost from, say, a polluter might compensate the polluter not to pollute. This would result in organized extortion in short order, or I am no judge of human nature.

How do we solve the free-rider problem?

Is monopoly, with its lower production and higher price, not a failure of the market system---a failure to efficiently allocate a society's scarce resources?

most economics departments are in liberal arts colleges of universities, not business schools. Whereas, Finance departments are usually in fact almost always in colleges of business. Believe me.

Well I know it; it was my intention, originally, to major in finance through the business college. Then I found to my dismay that it'd require at least two years of what I considered a waste of my time in a "core" curriculum: management, marketing, accounting, etc. No thanks. So I switched to economics through the liberal arts college; an economics degree was offered through the business college as well, but again there was the stupid "core" with which to reckon. In the event I ended up with a course load about three times heavier in actual economics than would have been possible with the business equivalent. Which, since I came to enjoy economics, makes me glad that I chose as I did.

[Tomas N]

Is monopoly, with its lower production and higher price, not a failure of the market system---a failure to efficiently allocate a society's scarce resources?

What is modelled as the deadweight loss from monopoly really isn't. If transaction costs are zero, then there's no inefficiency from monopoly. Remember the difference between a single price monopolist and a price discriminating monopolist? Why don't all monopolists price discriminate? Because it costs too much to do so. So it's not inefficient for them to charge a single price and generate the so-called deadweight loss.

The entire transaction cost literature in economics is a thought-experiment in whether inefficiencies or externalities actually exist in the marketplace. The short answer, if you take it to its extreme logical conclusion, (and if you talk about assumptions carefully blah blah blah) is no.

Tomas

[jBirch]

I'm sure there is some effect, but I don't know how it could be measured or quantified. If I had to guess I'd estimate the effect to be quite small, particularly given the polarized nature of the electorate in recent years---for every citizen who might react positively, there's likely to be another who reacts negatively, simply on the basis of personal or political animosity. I mean, supportive Republicans might be inspired, but Democrats repulsed---and by the same statement or policy. Offsetting results...

Now, in private, as with executives of big corporations and small business and other lobbies I'm sure jawboning is more effective. But even then there is disagreement on how closely the views of opinion leaders correlate with those of the general public, so will it translate into widespread psychological effects? I don't know...but as a cynic I'm inclined to think---not so much.

True, but is the magnitude of the reaction from the positive citizen equal to the magnitude of the reaction from the negative citizen? If not, then you need more of one to offset the other. Plus, generally, it takes more effort to get a citizen to come back then it does to cause them to leave in the first place. Does a disaffected citizen that leaves equal an ecstatic one that stays?

Again, impossible to quantify, I suspect. Perceptions surely play a large role, but they in turn are shaped by reality even as they shape it in return...

Maybe not totally quantify, but you could probably dump it into the old 1-4 buckets. Do perceptions heavily influence, somewhat influence, somewhat not influence, or have no/negligable influence on the marketspace? Given that, how do facts shape up? Are different parts of the business cycle more susceptible to one or the other? How rigourously are facts investigated? ARE facts discernable from perceptions? To tie that into the original line of thought, if perception has a significant impact on the economy then does the President wield disproportionate power over the economy by their ability to shape national perception? Ie// If there is rumour of a war, then aren't war related companies likely to be valued higher? Does this not lead to a shift in the dynamics of the marketspace for ill or good?

I would expect a weak effect at best. I mean, look at our own experience. There has been a good deal of resentment toward, for example, France and Germany among conservatives over their hostility toward the Iraq venture. Yet how many of us would refuse to buy Allstar/Uhlmann or Cartel or Prieur equipment on that basis? Not I, certainly. Have sale of BMWs or Mercedes' fallen off? Doubtful. What does affect such decisions? Price. Quality ( or perceived quality ). Customer service. In short, economic factors; self-interest; utility. All of the things we'd expect, in other words, from economic theory, and the things on which successful businesses focus.

No, but you're talking about goods where there really is no choice. There really is no domestic comparison to a BMW or a Mercedes (in as much as they are identified as Made in Germany goods). Given equal choice what is the impact on sales? What about sales of those goods that are heavily identified with American culture (Music, fashion, soda pop, food, etc...) Are nike, coke and mcdonalds doing as well in Germany/France as they were before? What about in the MidEast? What about elsewhere? I know that in Canada, the Made in the USA sticker is actually a barrier to sales, not a boon to it. Is there not a similar effect elsewhere?

These things too are cyclical. Setting aside such barriers to entry as we may haply erect, the net result is likely to depend on supply and demand in the various labor markets. We have certainly seen no decrease in the tide of immigration, legal and illegal, amongst those in the unskilled categories, despite adverse political opinion toward the US in Mexico and Latin America. Opportunity and reward trumps political resentment. I think it will amongst educated and skilled immigrants as well---so long as there ARE perceptible opportunities and rewards comparable with or superior to those to be found elsewhere...

The point is whether or not the culture and environment of the US today constitute a barrier to entry. Given equal mobility and opportunity, will those individual choose the US or others?

Depends on who you ask. From a strictly economic perspective: to fund the provision of such services as only government can provide, ie public goods and the amelioration of externalities. Others might advocate that they be used to redistribute incomes and redress perceived inequities. You can probably guess upon which side I come down.

Whew, a really complex question! Easier to talk about which ones are indispensable or obviously needed, rather than useful. In the latter case there's bound to be a quarrel over what "useful" means, and what degree of usefulness is sufficient to warrant supporting a program. There are for instance laws passed every session at the federal level which affect only a handful of individuals. These are certainly "useful" to those individuals, but to they merit the spending---the income taken from all workers and investors---lavished upon them? One would have to sift through them on a case-by-case basis to determine that....

To deal with foreign powers; to provide for pubic goods such as defense and a predictable, reliable legal system; to mediate between the various states and factions within the nation; to palliate negative externalities. Beyond that one enters the realm of the normative...the society as a whole must decide what more it wishes to do as a polity, and what it wishes government to accomplish. ( Hopefully the society as a whole, that is, rather than a disproportionately influential segment of it. Which of course is always the reality. )

To be honest, I'm not sure that government DOES anything but those two things: fund public goods and ameliorate externalities. What constitutes a public good seems to be in flux though. Philosophically though, is there any moral obligation on the part of the state to also improve the lot of its citizens?