Monday, October 31, 2016

Why Is Macro So Hard? Activity Enslavement

Charles Coonradt:

In the absence of clearly defined goals, we are forced to concentrate on activity and ultimately become enslaved by it.

I don’t have a source for this. I got the quote from my colleague Greg Powell, who used it in a brown bag about motivating student engagement through questions.†


But I like the quote because it applies to another problem we have in understanding macroeconomics. Bryan Caplan dubbed this the “activist’s fallacy”:

Something must be done; this is something; therefore, this must be done.

I have lost the cite, but Lynne Kiesling paraphrased it as:

Don’t mistake activity for accomplishment.

When we think about macroeconomics — and certainly politicians talk an awful lot about it — what are their goals? No recessions on their watch? Low unemployment rate (how low)? Low inflation rate? Increased spending? Higher real GDP growth rate?

Consider the stimulus package of 2009. It was chock full of activity. But what was the goal? If it was stimulating the economy … it doesn’t seem like it did much (although I’m aware that we don’t have a control for this experiment).

† Coonradt, Charles A. with Lee Nelson. The Game of Work, Shadow Mountain, 1991, p. 10.

Thursday, October 13, 2016


Adam Davidson skewers Navarro, the author of Trump’s economic plan:

The first hint of how Navarro’s ideas might play out in a Trump Administration came in the most comprehensive economic document so far released by the campaign. Navarro, along with the Trump supporter and private-equity investor Wilbur Ross, wrote “Scoring the Trump Economic Plan: Trade, Regulatory, & Energy Policy Impacts.” …

The document … presents no concrete prescription to correct the trade imbalance it abhors. One key sentence: “Trump proposes eliminating America’s $500 billion trade deficit through a combination of increased exports and reduced imports.” This is a tautology, equivalent to saying one plans to weigh less in the future through a combination of losing weight and not gaining weight. [emphasis added]

That’s not a plan. That’s a wish.

Via Greg Mankiw.