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A Challenge for Oren Cass

Here’s a letter to Roll Call:


In Jim Saksa’s piece on Oren Cass and Matt Stoller the reader comes upon this line: “’I love economics,’ said Cass. ‘I think economists are very bad at economics’” (“From the left and the right, these two thinkers are upending Washington’s neoliberal consensus,” April 3). But the economics that lawyer Cass and political commentator Stoller criticize is largely a strawman; it isn’t the serious economics that’s most devastating to the case for industrial policy. That serious economics poses several questions that industrial-policy advocates must – but have yet to – answer substantively if they are to be taken seriously, including these two:

– Cass wants more high-paying manufacturing jobs. Is he aware that, because high worker pay results from high worker productivity – and high worker productivity chiefly from more capital per worker (roughly, mechanization) – that the means of raising worker productivity, and hence wages, reduces the number of manufacturing jobs? In other words, economics reveals that, absent a gargantuan increase in Americans’ demand for manufactured goods (which isn’t in the cards), there’s a tradeoff between the number of manufacturing jobs and the height of manufacturing wages. Government can increase the number of such jobs only if manufacturing wages are lowered, or government can raise manufacturing wages only by decreasing the number of such jobs. Economics reveals that, unless it engineers an enormous increase in the demand for manufacturing output, it can’t do both.

– Because the only way government can increase both the number of manufacturing jobs and manufacturing wages is to engineer a colossal increase in demand for manufacturing output, how does Cass know, if government were to do so, that what Americans would lose by the resulting necessary massive shrinkage of other industries (for example, health care, information technology, transportation) would be more than compensated for by the expansion of manufacturing? Economics reveals that if government arranges for the manufacturing sector to be larger than it would otherwise be the government necessarily also arranges for other sectors of the economy to be smaller than they would otherwise be. Given that industrial policy involves disregarding the detailed information conveyed by prices and other market signals, what alternative, credible source of equally detailed information does Cass have to assure him that the net result would be beneficial?

If Cass is correct that we economists are very bad at economics, then he’ll have no trouble identifying what must be the glaring flaws in the economic logic expressed above and exposing what is surely the silliness in the questions that this logic raises. I’m all ears for Cass’s demolition of the above arguments.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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