What Economists Could Learn from George Costanza

My essay in today's New York Times...

I know, I know, I said Understanding America was going on holiday hiatus. But it’s Monday morning and I have an essay in today’s New York Times that I thought you’d all enjoy. It’s got everything: sad-sack George Costanza, hitman Anton Chigurh, physicist Max Planck, prominent economists making odd claims… so I’m sending it along with some excerpts. Read the whole thing.

What Economists Could Learn From George Costanza

“It has sometimes been remarked that asking five economists a question will generate 10 different answers,” Larry Summers, then the secretary of the Treasury, observed at a hearing of the House Ways and Means Committee nearly 25 years ago. On the issue the committee was discussing that day, however, “there has been only one answer.” He was speaking of “welcoming China into the global economic system,” which economists guaranteed would bring better jobs and greater prosperity to Americans.

It didn’t work out as promised. Rather than improve the fortunes of American workers, globalization has encouraged companies to shift their production to countries where governments hand out favors and workers come cheap. U.S. industrial output has, at best, remained flat since the mid-2000s and manufacturing workers in that sector have been getting less productive for more than a decade.

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Which is why it’s remarkable to see economists invoking the same faulty assumptions and models that got us into this mess, in order to make the case against Donald Trump’s proposed tariffs. … It all makes me think of a situation that George Costanza, the “Seinfeld” sad sack, found himself in one episode. “It became very clear to me, sitting out there today, that every decision I’ve ever made, in my entire life, has been wrong,” he tells Jerry. “Every instinct I have, in every aspect of life, be it something to wear, something to eat, it’s all been wrong.”

“If every instinct you have is wrong,” Jerry reasons, “then the opposite would have to be right.” So George decides to change course. Instead of his usual tuna on toast, he orders chicken salad on rye and immediately lands a date as a result. Interviewing with the New York Yankees, instead of praising George Steinbrenner’s management he launches into a critique, and gets his dream job.

It would be wonderful to see economists willing to try a new course when the one they’ve pursued has failed so spectacularly for so long. Instead, they are doubling down on their mistakes.

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Some free traders have tried reframing their case in terms of individual freedom. Thus, “real globalization” is not “container ships, wonky terms like trade deficit, or dry governmental agreements,” it is “billions of humans freely cooperating for mutual gain,” according to a new project from the libertarian Cato Institute. Similarly, the University of Michigan professor Betsey Stevenson, formerly a member of President Barack Obama’s Council of Economic Advisers, tried to reassure MSNBC viewers in November that “it’s not countries that trade, it’s people that trade.” adding: “I get a great new beverage refrigerator from China and they maybe get some economic services from me, or some insight into economics. That’s trading.”

It would be surprising if many of the Uyghurs performing forced labor in the supply chains of China’s refrigerator exporters are doing so in return for economic advice from Ms. Stevenson.

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Few things are harder to change than the minds of experts who have staked their reputations on a particular theory. Even in the most objective fields, the physicist Max Planck observed, “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it.” Fortunately, a democracy does not have to wait so long.

Continue reading at The New York Times →

- Oren