Here’s a letter to the Washington Post:
Dana Milbank praises Barack Obama’s outgoing economic advisor Austan Goolsbee for allegedly rejecting “hifalutin theory” in favor of “cold, hard facts” (“With Goolsbee’s departure, Obama losing a voice of reason,” June 12). While rightly lamenting the administration’s loss of Mr. Goolsbee’s reasonable voice, Mr. Milbank wrongly supposes that economic policy can be guided exclusively by “cold, hard facts” unprocessed by some theory about what data mean and how they relate to each other.
There are good theories and there are bad theories, but there are no ‘no-theories.’ Evidence for this fact (!) is given by Mr. Milbank himself when he writes that “Goolsbee endorsed many of the extreme measures Obama took two years ago, because the private sector was in free-fall and massive government spending was the only option.”
Correct or not, the belief that “government spending was the only option” to keep the economy from imploding is itself a theory. No data independent of some economic theory scream with crystalline clarity that increased government spending must substitute for collapsing private spending. That Mr. Milbank believes that increased government spending “was the only option” means only that Mr. Milbank accepts Keynesian theory so unthinkingly that he mistakes it for a cold, hard fact, and thus causes him to be unaware of other theories that counsel very different responses from government.
Donald J. Boudreaux