The full ignorance of the economics profession was on full display this past weekend at the meetings of the American Economic Association in Philadelphia. According to the Wall Street Journal account, economists are so baffled about what is happening, or not happening, in the American economy that they gravitated to discussing the work of Alvin Hansen, an economist who has been dead for nearly 40 years. That means he died before the full impact of the semiconductor became known or the Internet was born or biotechnology and genomics took off.
The reason the economists were pondering Hansen was that he argued in 1938, in the middle of the Great Depression, that the United States was facing “secular stagnation” driven by slowing population growth and insufficient technological powerhouse. HE TURNED OUT TO BE WRONG, but the economists still wanted to talk about him. Even someone as august as Larry Summers seems intrigued by Hansen’s work.
That’s pretty absurd. But what is most shocking is that economists cannot articulate what we should be doing to revitalize the U.S. economy. They give speeches and write papers and some of them get Nobel Prizes, given by other economists sitting in Oslo. But all they can talk about is how much government spending is appropriate and what the Federal Reserve should do with interest rates and quantitative easing. They completely disagree with each other, which means they do not really represent a science with hard facts. And they can’t understand that the American economy was imbalanced during the funny money era and now that the hot money has gone away, we face a deep structural challenge to ease our dependence on consumer spending and rev up the productive and innovative capacities of our economy. As I have written in The Next American Economy, that means coming to grips with how we commercialize technologies, how we create smart energy grids, how we promote exports, how we attract investment from American companies that have gone offshore as well as non-American multinationals, and how do we educate our workforce to achieve all this.
Instead the economists sit around talking about dead guys who were wrong then and are still wrong. Someone please explain this to me.
