What is a recession? Who is to say? What is an economist, and who is to say? For many years after completing my graduate education, I called myself an economist with a certain pride — but these days not so much. I thought I was following in the footsteps of many great thinkers, starting with Adam Smith who fathered the field with his great book, “The Wealth of Nations” (1776), followed by people like David Ricardo, John Stuart Mill, Frederic Bastiat, Alfred Marshall, up to the modern era with Milton Friedman, F.A. Hayek and many others.
Rather than continuing to advance knowledge, many of the better-known economists seem to have forgotten the fundamentals, which is causing them to say idiotic or “woke” things and, worse yet, convince political airheads like President Biden to follow disastrous policies.
Fortunately, we are blessed with many funny, yet solid, thinkers outside the world of academic economics. One of those is Bill Frezza, an MIT-trained electrical engineer, successful venture capitalist and policy wonk. Back in 2012, he wrote a classic article for Forbes, asking: “Why do we allow economists to formulate economic policy?”
Why are economists “accorded such respect and influence given the fact that they claim knowledge over the unknowable, promote theories that are untestable, and make forecasts for which they are never held accountable? Isn’t that the definition of a witch doctor?” Fortunately, not all are “witch doctors.” The great F.A. Hayek warned us about the limits of knowledge, “the fatal conceit,” and our ability to forecast. Vernon Smith continues to bring real science to economics by creating testable experiments that can be duplicated.
Mr. Frezza goes on to say: “If engineers were held to the same standards, bridges would collapse as often as banks, planes would fall from the sky (if they ever got off the ground), etc.”
If a plan for a novel design for a new bridge is proposed, TV, radio and print reporters will ask the engineering firm how it works, yet rarely go to another engineer for a rebuttal. Economists are considered so unserious that the press will most often feel the need to get a contrary opinion to almost any policy recommendation from them. Economists have brought much of this on themselves, as Frezza notes, “like rival witch doctors… promoting diametrically opposed economic remedies, sometimes sharing Nobel Prizes in the same year for theories that directly contradict each other.”
The administration has just come up with a new massive spending bill that is supposed to reduce inflation, global warming and tax avoidance, among many other things. It also has huge tax increases in it. They are trying to sell this unholy glob under the false flag as an anti-inflation measure, when in fact it will most likely do just the opposite.
Some decades ago, while attending a meeting of the American Economics Society, I noticed that they had several sessions on Marxist economics, not to explain it as a discredited historical artifact, but as a serious alternative — which led me to conclude that the AEA program designers were not serious people. Can you imagine the American Geophysical Union having sessions for the “flat earthers”?
All presidents, and to a lesser extent members of Congress, have a difficult time trying to decide who knows what they are talking about and who is merely blowing smoke when it comes to the more detailed aspects of policy — economic, defense, foreign, environment, etc. Former President Ronald Reagan picked an outstanding economic policy team, in large part because he understood economics (his degree was in economics). The results showed in a record fall in inflation and record economic growth.
Some presidents pick good people and then discard their advice. Former President Richard Nixon initially had a good economic team, but he ignored his Treasury secretary, George Shultz, who told him not to impose wage and price controls (so Shultz did the honorable thing and resigned). Nixon bullied his Fed chair, Arthur Burns, into an unwise monetary expansion.
Former President George H.W. Bush ignored his Council of Economic Advisers chair, Michael Boskin, and other members of the administration like Jack Kemp, who warned him against the disastrous tax increase — thus losing an election he should have won.
Mr. Biden, day in and day out, shows he knows nothing about economics by making endless comments on the economy which are best described as untrue and downright “silly.” He probably has the weakest economic team ever assembled. They first claimed there would be no inflation, despite record increases in the money supply and government spending. Then they claimed the inflation would be “transitory,” without any evidence to back up the statement other than wishful thinking. They then claimed, up to the day before the negative GDP announcement, that the country was not and would not go into a recession.
In most professions, the incompetents are quickly weeded out — their planes don’t fly and their computers don’t work. In economics, incompetents with good PR skills can go on for years without ever being called to account. Unfortunately, we have also learned (all too late) that the government medical community also is loaded with con-people (e.g., Dr. Anthony Fauci and Dr. Deborah Birx).
It is obvious that Treasury Secretary Janet Yellen and the Biden senior economic team are not up to the job. Replacement is overdue.
• Richard W. Rahn is chairman of the Institute for Global Economic Growth and MCon LLC.
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