Should Economists Be Blindly Followed?
Economics and government policies are often intertwined, both working in tandem to sustain one another. When the economy of a state is healthy, the government looks to preserve it and if it slides too far the other way, politicians rush for solutions. In the US, the federal government primarily uses the Federal Reserve Bank, tariffs, and taxes as a means to control the economy. However, since the 1960s, economists have held a larger role in shaping domestic and foreign policy.
In recent decades, US policies have skewed toward markets. Trade is king, consumerism is god, and the government should not interfere. To that end, lobbyists have pushed for minimal regulation and sought new avenues to generate business. Although it worked—the US GDP has soared upward since 1972—average wages have remained flat.
Economists were right in their philosophies to boost economic growth, but the American worker has not enjoyed the benefits. At times, however, they have been dead wrong. Leading up to the 2008 recession, respected figures such as Alan Greenspan, former chairman of the Federal Reserve, preached there was no cause for concern. The result was a series of the largest government bailouts in US history and an economic collapse that rippled through several industries.
But their economic models were supposedly correct. Issuing more subprime mortgages would keep the GDP trending upward. Blindsided by the need for enhancing corporate profits, economists have increasingly advocated for reckless policies without factoring in long-term consequences. Their mathematical projections and spreadsheets cannot possibly be wrong. Two plus two always equals four.
In Binyamin Appelbaum’s book, The Economists’ Hour, he noted how the decades from 1969 to 2008 were a heyday for the field of study. At the height of the Cold War, the US government pushed to outpace Russia in areas of science and technology, both of which spurred economic growth. And it worked, vindicating economists.
“For [Appelbaum], this was a time when the policies that economists almost universally endorsed—tax breaks, austerity, deregulation, free trade, monetarism, floating exchange rates, reduced antitrust enforcement, low inflation, among others—were enacted,” wrote Robin Kaiser-Schatzlein for New Republic.
The rise of the cost-benefit analysis affected everything from consumer product recalls to Environmental Protection Agency regulations. Through a simple mathematical model, economists could even determine the cost of a human life.
“The United States experienced a revolution. No gun was fired. No lives were lost. Nobody marched. Most people didn’t notice. Nonetheless, it happened,” wrote Cass Sunstein, an economist in the administration of former President Barack Obama.
Up until the administration of President Donald Trump, economists have largely kept their sway. In a 1979 survey of economists, 98 percent opposed rent controls, 97 percent opposed tariffs, 95 percent favored floating exchange rates, and 90 percent opposed minimum wage laws, according to Appelbaum.
As a result, Washington largely avoided tariffs, kept a floating exchange rate, and efforts to raise the federal minimum wage have continued to fail. After all, the economists cannot possibly be wrong; their math is sound.
That is not to say they are entirely wrong, however. Trump’s trade wars have by and large only hurt Americans. By leveraging tariffs against China, Trump ignored virtually every economic model. As a result, billions were spent in a rush to stabilize American agriculture.
Still, Trump is no fool when it comes to the economy and continues to follow their sage advice when it suits his political goals. Take, for example, his policies toward the US energy industry. Trump removed restrictions allowing for a boom in fracking and offshore drilling. He struck out laws designed to protect the environment, allowing oil companies to pollute rivers once again. Why? Because the economy projections demand it.
The War in Iraq has widely-been criticised as a play for Middle Eastern oil and with a lack of evidence for weapons of mass destruction, it is a difficult argument to counter. Why else would the US continue to occupy Middle Eastern states? Economists understand the value of regional stability and its impact on the global oil markets. If Iran barricaded the Strait of Hormuz tomorrow, markets would nosedive.
The role of economists was called into question following the 2008 recession, but few lessons have been learned. Sure, the problems were patched, particularly in the mortgage industry, but economists can still be blindly followed off cliffs. Sometimes their models are sound, however, but the human element must be questioned as well. Will the American public benefit from increased weapons sales to Saudi Arabia or a trade deal with China, or just big business? Is it ethical for oil companies to operate without restriction if it translates to greater production at the expense of clean water?
Economists cannot account for these in their equations and therefore can be blind to the reciprocal effects of policies, both foreign and domestic.