Did economists not see inflation coming? Or, if inflation was not a surprise, why did economists not raise the alarm about the policies that led to it?
The answer to these questions is disheartening. Many in the economics profession did see that government policies of the last couple of years would result in high inflation. But most who saw it coming chose not to inform the public or raise the alarm until it was too late.
Jason Furman, former Chairman of President Obama’s council of economic advisors and current Harvard professor, commented recently that most academic economists have been ‘skeptical (mostly silently)’ of the stimulus packages. The high inflation we see today is partly the price of the economics profession’s self-censorship.
The economics profession’s determined silence on inflation is on display in regular surveys of top U.S. economists conducted by the Initiative on Global Markets of the University of Chicago School of Business. The initiative and surveys aim to help policymakers make informed decisions on ongoing policy debates.
None of the 35 surveys from January 2020 to May 2021 included questions about the potential inflationary impacts of covid restrictions and relief packages. Neither did the respondents bring up this concern in their free-form answers to the many survey questions about covid policy during this time.
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However, economists’ application of the precautionary principle was tragically one-sided. Economic analysts assumed the worst about the virus and the best about the effectiveness of lockdowns and other restrictions in limiting disease spread. A consistent application of the precautionary principle would also have assumed the worst about the collateral harms of covid restrictions.
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The idea that people would have voluntarily locked anyway is spurious and ignores the grave distributional impacts of lockdowns. A lockdown imposes the same restrictions on everyone, whether or not they can bear the harm. Nevertheless, many economists favoured imposing formal lockdowns and shelter-in-place orders rather than offering public health advice.
Epidemiologists knew the staggeringly steep age gradient in the mortality risk from infection with covid from the pandemic’s start. This meant that vulnerable older people were wise to take precautionary measures. These formal orders meant that those for whom covid posed much less risk but who suffered great harm from lockdowns—such as children, teens, the poor, and the working class—could not avoid the worst of lockdown harms.
Economists justified lockdowns by the idea that people were appropriately panicked. However, a substantial part of the fear of covid was irrational, which led many people to overreact to covid. Surveys show that people vastly overestimated the mortality and hospitalization risks of covid and vastly underestimated the degree to which risks rise with age.
For example, one survey indicated that for under 40-year olds the average perceived mortality rate from a covid infection is up to one thousand times higher than the approximate actual mortality rate (10% versus 0.01%). Though the first surveys on excess fear of covid were published in April 2020, media outlets such as the New York Times waited until March 2021 before discussing excess covid fear, reflecting a widespread unwillingness to accept these facts.
Public fear of covid thus did not correspond to the objective facts of the disease. This undermines economists’ argument that people stayed home voluntarily as a rational response to the spread of covid in the Spring of 2020.
The economics profession has yet to explore what role lockdowns played in fomenting the excess fear of covid. Faced with a lack of public information about the risks posed by covid, people sought to infer the risks partly from observed policies—lockdowns were one such policy.
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The lockdowns of Spring 2020 were likely responsible for much more of the economic decline than the consensus among economists still admits. Though economists’ reasoning justifying the covid consensus was flawed from the start, the profession has been unwilling to examine the implications of the excess fear of covid and the decision to stoke fear in the public.
Ultimately, whether economists can gain back the public’s trust depends on their honesty in admitting the profession’s failure. The profession needs reform so that dissent from orthodoxy is encouraged and self-censorship seen as a failure to live up to economists’ basic professional obligations.
And here’s George Leef on Bhattacharya and Packalen.
Paul Offit writing in the Wall Street Journal:
The Centers for Disease Control and Prevention recommends that everyone over 12 receive a “bivalent” Covid-19 vaccine as a booster dose. But only a select group are likely to benefit, and the evidence to date doesn’t support the view that a bivalent vaccine containing omicron or its subvariants is better than the monovalent vaccine. The CDC risks eroding the public’s trust by overselling the new shot.
Good news on the covid-hysteria front from the Netherlands.
This Cafe Hayek “Quotation of the Day” from Thomas Sowell and posted ten years ago yesterday contains a lesson that proponents of industrial policy would be wise to learn. (I thank A. McKenzie for reminding me of this long-ago QoD.)
The green movement’s rush to transform the energy economy while ignoring the laws of nature and economics calls to mind China’s ruinous Great Leap Forward.
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Like Mao, today’s advocates for the green-energy revolution have become impatient with the slow progress made by renewable energy. Fossil fuels and nuclear power provide 80% of the energy the world needs. Despite years of subsidies, renewable energy is still unstable and unreliable, since the sun doesn’t shine at night and the wind doesn’t blow all the time. Almost all renewable-energy power plants require either nuclear or fossil fuels as backups.
Rather than gradually phasing out fossil fuels while investing in renewable energy research and development, Western green-energy revolutionaries have launched their own version of the Great Leap Forward in Europe and the U.S. Today’s greens operate in a democratic system unlike Mao, but they have resorted to government coercion to replace fossil fuels (and nuclear power) with renewables on an aggressive deadline. The European Union is set to cut greenhouse-gas emissions by at least 55% by 2030, and the Biden administration promises to “achieve a 50-52 percent reduction from 2005 levels in economy-wide net greenhouse gas pollution in 2030.”
One of the essential lessons from China’s Great Leap Forward is that catastrophic failures inevitably follow from politicians’ insistence on ignoring reason, logic, truth and economics. Europe’s current energy crisis, California’s continuing power outages and Sri Lanka’s food shortages are all warning signs. The Green Leap Forward has set humanity on a fast track to another man-made catastrophe.
And so to neoliberal, the stablemate of trickle-down economics, if for no other reason than that, like its stablemate, it cannot be defined in any serious way. Again, it is used by parts of the Left to describe anything it disagrees with. This philosophy holds that neoliberalism was championed by Margaret Thatcher and then by all her successors, including the Labour governments of 1997 to 2010. And so we are left with a definition of neoliberalism as a policy that avoids nationalisation and big tax rises.
There are so many progressives like him straining to be transgressive, and so few standards remaining to transgress.
