JONATHAN CHAIT AUGUST 19, 2011
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I have a bit of a weakness for insulting people's intelligence. I recognize this and try to restrain myself. When I read Stephen Moore's op-ed in the Wall Street Journal today, I thought that I would give restraint a try. There's simply no way to honestly analyze this piece without commenting on the author's intelligence. I suppose, to be charitable, I should refine that to mean Moore's analytic intelligence; there are many kinds of intelligence, and perhaps Moore is gifted with great social intelligence, or artistic intelligence. And yet the relevant point is that Moore is the lead economic editorial writer for the country's leading economic newspaper and yet he lacks even a rudimentary understanding of economics.
What makes this point especially hard to resist is that Moore's lack of understanding of rudimentary economics is the subject of his op-ed. Here is his thesis:
Christina Romer, the University of California at Berkeley economics professor and President Obama's first chief economist, once relayed the old joke that "there are two kinds of students: those who hate economics and those who really hate economics." She doesn't believe that, but it's true. I'm surprised how many students tell me economics is their least favorite subject. Why? Because too often economic theories defy common sense. Alas, the policies of this administration haven't boosted the profession's reputation.
Moore believes the entire economics field is composed of idiots who fail to grasp obvious realities. Their theories defy "common sense," which is to say Moore doesn't understand them, which is to say they must all be wrong. For instance:
Mr. Carney explained that unemployment insurance "is one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren't earning a paycheck are going to spend the money that they get . . . and that creates growth and income for businesses that then lead them to making decisions about jobs—more hiring."
That's a perfect Keynesian answer, and also perfectly nonsensical. What the White House is telling us is that the more unemployed people we can pay for not working, the more people will work. Only someone with a Ph.D. in economics from an elite university would believe this.
Right. The theory holds that a lack of demand is creating a high level of unemployment. Unemployed people have a high marginal propensity to consume -- which is to say, they're generally desperate to pay the bills. If you let them keep drawing uninsurance claims, they will spend that money on things like repairing their car and buying clothes, creating more employment in the fields of auto repair and clothing retailers. Moore seems to think either that unemployment benefits can only have the effect of discouraging people from working -- that apparently, our economy suffers from a surplus of jobs that have gone unfilled because applicants would prefer to stay on unemployment. I suppose you could argue that this is the case, and that this effect overwhelms the demand-side boost from maintaining consumption for the unemployed who would not otherwise be obtaining work.
But Moore doesn't make that case. He just thinks it's obviously dumb to think that unemployment benefits could have an effect other than to discourage work. I have not omitted from his op-ed any portion where he makes this case.
Moore continues:
A few months ago Mr. Obama blamed high unemployment on businesses becoming "more efficient with a lot fewer workers," and he mentioned ATMs and airport kiosks. The Luddites are back raging against the machine. If Mr. Obama really wants to get to full employment, why not ban farm equipment?
But Obama is not proposing to ban farm equipment, or ATMs, or airport kiosks. So, hey, maybe there is more to the argument! Indeed, there is an entire economic debate about the degree to which technological trends have impacted employment. Over the last three economic expansions, unemployment has taken much longer to come down than in previous cycles. Economists believe that technological changes have a great deal to do with this. That is the debate Obama was referencing. Moore, again, appears totally unaware of it.
More Moore:
Or consider the biggest whopper: Mr. Obama's thoroughly discredited $830 billion stimulus bill. We were promised $1.50 or even up to $3 of economic benefit—the mythical "multiplier"—from every dollar the government spent. There was never any acknowledgment that for the government to spend a dollar, it has to take it from the private economy that is then supposed to create jobs. The multiplier theory only works if you believe there's a fairy passing out free dollars.
Moore is at least referencing an economic theory here, albeit an extremely old one believed by very few economists any more. The theory holds that borrowing money in the short term must always lead to an immediate reduction in short-term spending. Economists have answers to this objection that do not rely on fairies. Moore genuinely seems to think that the entire field is filled with idiots unfamiliar with his "common sense" objection.
One more piece of Moore's argument:
Keynesians believe that the economic problem is abundance: too much production and goods on the shelf and too few consumers. Consumers lined up for blocks to buy things in empty stores in communist Russia, but that never sparked production. In macroeconomics today, there is a fatal disregard for the heroes of the economy: the entrepreneur, the risk-taker, the one who innovates and creates the things we want to buy. "All economic problems are about removing impediments to supply, not demand," Arthur Laffer reminds us.
Let's take the last part first. He cites supply-side guru Art Laffer, who claims that all economic problems are supply-side problems. Moore is not just saying that marginal tax rates matter. He is ascribing them total importance, reducing all economics to the supply-side. No real economist believes this. Moore is epitomizing the pure crankery of supply-side economics, the belief that it has discovered simple truths that have elided the entire profession.
In the first part of the paragraph, he assumes that Keynesian economics is simply the mirror image of his own belief system. He thinks that government discouragement of wealth is the only possible economic problem. Therefore, Keynesians must believe that a failure of demand is the only possible economic problem. But look, he says -- there were shortages under communism! He has refuted Keynesian economics! That Keynesians do not believe that a failure of demand is the only possible economic problem genuinely does not occur to him.
I have been following Moore for years, and I have met him -- yes, it was awkward -- and I can assure you that this is not just some oddball rhetorical game he's playing. He genuinely has no idea what he's talking about. And I'm sorry to be mean to what seems to be a fairly nice guy, but it does matter that there are completely ignorant people wielding great influence over the policy debate.
18 comments
This article was like watching a master chef deftly cut up a whole chicken into serving pieces.
- zardoz67
August 19, 2011 at 3:52pm
Someday things will be much better. And in that blessed someday, when we look back on our darkest hours, when the tide of idiocracy appeared inexorable and it seemed all of society - politically, economically, socially - was coming unraveled, it will be remembered that Jon Chait was better than Xanax.
- Tristan
August 19, 2011 at 3:55pm
My fave quoted bit was "Only someone with a Ph.D. in economics from an elite university would believe this." I found Moore's use of the word "elite" to be genuinely touching. Wikepedia claim's Moore's formal educated peaked with an M.A. in economics from George Mason University. My impression was that George Mason was a perfectly acceptable institution, but perhaps its graduates suffer from what Oprah would call "self-esteem issues." How very sad.
- mtinora@me.com
August 19, 2011 at 4:23pm
Are you possibly making a mistake by believing that Mr. Moore really believes what he writes?
- chmcdonald
August 19, 2011 at 4:26pm
My former spouse has a degree in economics from Converse College. She knows absolutely nothing about economics. Nothing. I didn't know her in her college days, so I often asked whether she meant home economics. Nope, economics. She freely admits she doesn't know anything about economics, or why she majored in economics, or what she got out of her efforts. I'd guess that this poor fellow Moore got his degree from Converse College, but it's an all-girls school. Moore is a guy, right?
- rayward
August 19, 2011 at 4:58pm
I don't know about the state where Moore lives, but mine and the one next to it require recipients of unemployment insurance to keep applying for jobs in order to keep their benefits.
- frippo
August 19, 2011 at 5:29pm
Yeah, being hated by a large number of people is a great predictor of being rotten, whether for a discipline or, say, for an ethnic group. If I could count how often I heard: I hate math...
- harasan
August 19, 2011 at 5:41pm
To characterize Keynesianism as the view "that the more unemployed people we can pay for not working, the more people will work" is to say, in effect, that you don't really believe that unemployment exists, except insofar as the government creates it by subsidizing it. If you believe there are people who are willing to work but unable to, through no fault of their own, then it's instantly both obvious and commonsensical why they need money, why they're likely to spend it and why, therefore, gettting money to them will help re-grow business. Not to see this, therefore, is to imagine a world in which jobs always exist for all takers. Presumably, then, Moore can't explain why there was unemployment during the Great Depression, before there was unemployment insurance. Who was paying people not to work back then? I guess all those hobos must have had trust funds.
- Jeff_Smith
August 19, 2011 at 5:58pm
I add this. Unemployment insurance helps to stop the spread of unemployment. If a factory goes under and creates unemployment, as any factory town knows, that lack of consumption spreads to create more unemployment. Is it in the interest of people of Pennsylvania to agree to finance the unemployed in California, if California agrees to do the same in return? I think so. Is it in the interest of the wealthy in the country to watch unemployment spreading? Not in the long term.
- Nusholtz
August 19, 2011 at 6:27pm
If Chait wrote a bunch of nonsense on this blog day after day, at some point I would forget about Chait start questioning the intelligence of the owners of TNR. Moore's writings will keep being published in WSJ as long as WSJ keeps paying him to write. Maybe Chait should discuss the soft bigotry of low expectations for WSJ op-ed writers.
- aboufade
August 19, 2011 at 6:39pm
Deadweight Chait, 1. Not sure Moore even remebers you (likely forgot meeting you given your insignificance) . He reaches 3 M subscribers and business leaders worldwide vs the 30 or so moonbats that read TNR (and me). 2. He was merely making fun of Obama and his failed Keynesian policies. Maybe gloating a bit. And to parse gloating is useless. But a use of your time no doubt 3. And while moonbats will never abandon Keynes, Americans are: "another set of Gallup results Thursday showed only 26 percent of Americans approve of how Obama is handling the economy."
- mr_rationale
August 19, 2011 at 6:59pm
This is not nasty in the least JC, it's a public service.
- WandreyCer
August 19, 2011 at 7:09pm
But the fact remains, rat, that neither you nor Moore understands the first little thing about economics.
- roidubouloi
August 19, 2011 at 11:14pm
I don't know, Moore may be right. Think about all those awesome raises and bonuses you get while on unemployment. That means dream homes and dreamier vacations. Yep, that keeps me out of the employment market.
- jet
August 20, 2011 at 11:54am
I read Moore's editorial. It reminds me of something a crank commenter at RealClearPolictics might have written. This guy is on the editorial board of the country's most influential business newspaper? His opinion's are simply ignorant; they don't even defend BUSINESS interests.
- stevedwight
August 20, 2011 at 11:09pm
Roid, You are a failed lawyer, got laid off after the LBO bubble bust, and tried trading un-successfully. As a last resort you are turning to academia/Gov -- the employer of last resort for folks who create no economic value. Pathetic parasite. Did you always want to be a parasite growing up?
- mr_rationale
August 21, 2011 at 4:38pm
Chait: "I have been following Moore for years..." I haven't been following Moore for years, but I still find it amazing that he can't argue his way out of a paper bag and still gets all this media space. He just puts up straw men and misleading data (which perhaps he really believes) to push his obsessive call for lower taxes. Of course, he's in a lot of company in that respect these days.
- dsimon
August 22, 2011 at 9:08am
"As a last resort you are turning to academia/Gov -- the employer of last resort for folks who create no economic value." I guess this applies to all of those GOP candidates that make up a disproportionate part of the rentier class (cough, cough)...I mean "job creators." that continue to suck off the teat of American tax-payers and/or pretending to be Academia nuts. Newt Gingrich - former government parasite and long-time academia parasite. Michelle 'moonbat' Bachmann - on-going government parasite and rentier who gets tax-payor funds for her "farm" and "re-education camps for gays." Rick Perry - state government parasite for the last 15 years and now seeks federal level of parasitism. Parasitic rentier of the first order with his crony-capitalism (err...tax incentive grants) for friends. Mitt Romney - former "jobless creator", former government parasite, and now seeks the ultimate parasite position of POTUS. Ron Paul - libertarian extraodinaire who has been a government parasite since the 70s and pretends to be an academic with books titles like "The Case for Gold", "The Revolution: A Manifesto".
- singlspeed
August 22, 2011 at 5:02pm