In today’s edition of the Washington Post, Amity Shlaes — author of, most recently, The Forgotten Man — distinguishes "Campaign Econ" from "Real Econ." It’s an important distinction to understand, for "Campaign Econ" (the "economics" typically babbled by politicians) is to real economics as astrology is to astronomy.
Here’s a choice selection from Amity’s op-ed:
Campaign Econ has costs. The first is that talk of a downturn — or
"mental recession," as Gramm put — can itself generate a downturn.
Keynesian economists say this is so because consumer spending slows
when people are afraid. But there’s also a non-Keynesian dynamic.
Grumbling leads to costly government rescues that scare markets and
slow growth.
Podcast RSS Feed
Full EconTalk Text
{ 2 comments }
If one defines "campaign Econ" as negative propaganda (or whining), then it is obviously costly because it displaces opportunities to educate people about the truth. But competition in the marketplace of ideas (e.g., campaigning) has both benefits and, of course just like all activites, costs. The benefits are more widespread now than ever because of blog sites like this one where the ideas are debated in a forum that accessible worldwide. This speeds the process by which ideas evolve into better ones and constrains the power of purely political propaganda to persuade.
Good for Phil Gramm. Obama has pinned his hopes for victory on the economy being a disaster and Iraq being a holocaust. Ironically, the only way Obama can lose this one is to overplay his hand, and I wouldn't be surprised if he did. Things aren't ideal, but they really aren't so bad either.
All my neighbors who bought a better 50" flat screen this year than the 46" one I bought last year for twice the price know that there are ups and downs with "the economy". So do the people who waited hours in line yesterday to get an extra G in their iPhones. It's choppy. But it doesn't meet the textbook definition of recession.