Why are our economists so surprised by the poor performance

[Veggie Meathead]

of our economy? The tax cuts implemented by the Bush Administration
disproportionately favored the rich over the middle and lower income people;this stripped away the purchasing power of those people whose
needs generally power our economy.At the same time,the extra money that the rich were favored with went for investment in countries like India and China, chasing the higher returns possible in these countries over our own.

If these facts are apparent to a yokel like me, why is it so unfathomable for the mavens of economic theory? Or has Economics become so corrupted by Republican thought processes that the lives of ordinary people are not included in their calculations?

[NewJeffCT]

1. I think most legitimate economists are horrified by Bush's policies

Liberal ones, as well as legitimate small-gov't conservative types.

However, they don't get much air time and/or media play.

[stickdog]

3. Exactly. Our new corporate media rules requires that 85% of information

comes from Busholini approved sources. (It's only 66% for "liberal" bastions like NPR.)

[ProfessorGAC]

2. All Of Us Aren't

I would say that at least 30% of economists and analysts predicted low growth and minimal job creation.

Really, probably over 50% of folks in this field now believe supply-side to be theoretically discredited. If one deducts the increase in spending (all borrowed money, btw), one will find that the real GDP is shrinking and the nominal GDP is rising by a rate that is slower than the rate of population increase.

Really, the problem is not so much that economists have had Republican thought infiltrated. There has been a very high concentration of liberterian thought in economics for a hundred years. So, the belief in minimal gov't, small tax base, etc. is consistent with those Hazletian and Hayekian theories.

The bigger problem is that a few schools have begun to dominate the scene out of which economists are trained. There becomes a dogma for that school and contrary thinking is not encouraged. It's not forbidden, but certainly going to Chicago and then doing a dissertation on the failings of the Bloom theories is not going to be the first recommendation you'll hear.

Add to that the fact that within gov't those positions are not tenurable (for the most part) so analysts have to come up with conclusions their politically appointed bosses want to hear. So, they've come up with all kinds of rationalizations for ignoring significant data, adjusting values, and ignoring any really causative influeneces. Sort of keep your head down philosophy. This results in too many of them being bought and paid for, whether overtly or covertly.

There are folks who are supportive of these fiscal policies, but they really believe in "starving the beast". They don't care as much about the GDP growth as deconstructing the New Deal. (Think Grover Norquist) And they want US to get over it!
The Professor

[Veggie Meathead]

4. In an odd way, what I hear from you,Professor, is that Economists

are also whores like our journalists saying what the guy who doles out the money wants to hear.It seemed to me that in our recent past
( during the Clinton years) we seemed to get opinions from economists that seemed to have some credibility even though, I suspect, that those economists too were beholden to their paymasters.This is why I said that Economics might be infected by Republican Gestapo tactics.

[ProfessorGAC]

6. Yes, There's Some of That

Look, the big banks hire MS and PhD economists and pay them REALLY well. Some of the work they do ends up being that which will allow the banks to manage their portfolios to minimize risk and exposure given market and monetary changes. (For instance, a large change in the overnight rate puts at risk a repricing on a whole lot of deposit money, but won't allow much change in the outstanding loan rates. So, models are built to allow a repricing schedule that still maximizes profit while minimizing repricing risk.)

So, they get their money. But, all these things require causative models to understand those thing extrinsic to the lending industry. These models show reduced profit because they require a lowering the risk when the economy is shaky. So, optimistic economic models are usually use because they allow more risk to be assumed and higher returns. That optimistic assumption is wrong, but catastrophic losses to the bank are only about a 20% probability. So, these guys are basically gambling they're right and will keep their jobs.

There is some whoring, especially at Labor and Commerce, but in private industry, there're also elements of aggressiveness and optimism that clouds the picture. Then the optimistic assumptions are never refuted, even by the private industry guys get slightly burned, because by then those projections are old news.
The Professor

[EST]

5. In other words...

HUA disease?

[ProfessorGAC]

8. I Guess In Some Cases, Yes

Look, i know some guys with credentials equal to mine that i'm not sure can balance a checkbook. But, their thesis was written regarding the application of pre-existing theory of economics. IOW, they found a set of anecdotes and circumstances that support a theory someone else thought of. They get their advanced degrees like that.

The analytical faction of economists and analysts develop causative understanding of certain economic conditions by doing heavy data crunching, and then develop hypotheses and theories based upon those findings. It's the inverse of the other approach. I know which way i respect more, but folks end up with the credentials, just the same.

Now, if schools are cranking out folks of the former approach on a 3 to 1 basis v. the latter, you are going to populate the field with two dimensional thinkers who really haven't developed a deep and original understanding of macroeconomics. So, it's not a matter of HUA, as much as brain-on-hold.
The Professor

[nyhuskyfan]

7. Isn't it true...

That the U.S. ranks something like 29th in the list of the top 30 industrialized nations in terms of tax burden? Almost every other country forces its citizens to pay more taxes than we do, and those other countries aren't trying to dominate the world militarily.

Those who wish to starve the beast by gutting tax revenue are ignoring the fact that we don't have much of a beast.

[ProfessorGAC]

9. You're Right

I don't know if we're 29th or not. I'd have to look that up, but i know we're nowhere near the top.

Also, interestingly, is that defense is nearly 20% of the total budget. So, the beast's greatest appetites fall in that arena, and those "starve the beast" idiots (think Norquist again, because he fits the description and he is as dumb as a fencpost) would never deign to lower that spending.

People like that just hate other people. Social programs send money toward other people. They hate that. Defense spending puts us in a position to kill people. They like that.
The Professor