Friday, February 17, 2012

Framing the Economics Discussion

Shorthand can have a powerful influence because it affects the way people frame discussions.

I think it would elevate the economic policy discussion tremendously to change the shorthand version from: "Hayek thought markets coordinated dispersed information and brought prosperity, and he also was skeptical of government intervention, and in the 1930s he argude with Keynes, who advocated government intervention" to:

"Hayek thought markets coordinated dispersed information and brought prosperity, and he also was skeptical of government intervention. Keynes agreed strongly with Hayek on the importance of markets, and was also worried about poor governance, but he helped us understand important things that a government can do during recessions."

It's not hard to promote one shorthand over the other, but the difference is huge. If you choose one version over the other, you really ought to think about why. I think the second bit of shorthand accomplishes a few important things:

1. First, it helps combat anti-market bias among an often economically illiterate public by making crystal clear that all sides of the debate among economists agree about the value of markets.

2. It focuses on the real disagreement: the question of whether there are smart things government can do or not.

3. It moves away from the place where there isn't disagreement: the question of whether the market or the government is better at allocating resources and coordinating human wants.

Plus it's simply better history.

And the point is, you can still write make whatever point you want to make - side with Hayek over Keynes, etc. - if you use this sort of shorthand for the debate. There's no good reason to make people think that Keynesianism is underconsumptionism. There's no good reason to make people think that Keynesianism is a blank check for government. There's no good reason to make people think that Keynesianism is a challenge to the market. It's very easy not to say these things. There's no cost to not saying these things. Indeed, what you're doing when you say these sorts of things is skewing the debate.

Ditto for the people with a proclivity to say Hayek doesn't care about poor people.

This is what I do a lot on this blog - correct the framing of the discussion of Keynesian economics. I have other things I write about too, but that sort of monitoring of the way Keynes and Keynesianism are talked about is part of it (in fact, most bloggers seem to have some discourse or other that they take it upon themselves to monitor and police... it's a very common blogging style). The little things can do a lot for the debate. I'd much rather we argue over stabilization policy than over some kind of false government vs. markets dichotomy where Keynesians always get stuck on the side defending government.

2 comments:

  1. Not to frame Keynes as a radical socialist, but what do you think about his quotes that talk about "socializing investment" and driving the MEC down to zero? Keynes thought of a secular unemployment, and did not just think government was a tool that would only be used in the short run during recessions. That seems to be more of a New Keynesian/Neoclassical idea.

    Keynes did see the value of markets, but he thought that there were grave, grave defects in them. The animal spirits and extreme uncertainty that caused business pessimism and made investment highly volatile. Not to mention secondary problems of the fetish for money, which can lead to a high interest rate and unemployment.

    "2. It focuses on the real disagreement: the question of whether there are smart things government can do or not.

    3. It moves away from the place where there isn't disagreement: the question of whether the market or the government is better at allocating resources and coordinating human wants."

    This kinda leaves you open to the attack that if the market is better at allocating resources and satisfying wants, then what can the government do in the marketplace?

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  2. If you get stuck as a Keynesian defending government, attack them for being intellectually inconsistent. I guarantee most Hayek fans and libertarians are not anarchists.

    "So you don't believe the government should help stabilize investment markets, but it's okay to set up monopolies on things like defense and judicial services? What a hypocrite!"

    Attack them for being "pro government" in a different fashion. It's not important if you agree with them on it.

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