Macro is hard because of the Overton Window.
This is the set of policy option that politicians feel will not hurt them politically.
If you think there’s not much difference between parties on some issues, it’s because the window is smaller on some issues than others.
This raises 3 sorts of problems for macroeconomics:
- What if the Overton window on an issue is narrow?
- What if the commonly accepted economics answer lies outside the window?
- Dumb economic ideas are inside the window.
Here’s a couple of issues where the window is narrow:
- Favoring a small tax increase over a small spending cut when the amounts are not large.
- Favoring one size fits all regulations because they are “fair”.
How about situations where the economics advice is outside the window?
- Ricardian equivalence: maybe the size of the national debt doesn’t matter much?
- Price flexibility after disasters.
And the big-mac-daddy of potential policy blunders that the Overton window has somehow moved over is:
- The “green new deal” and its confusion of costs with benefits.
What is a simple economist supposed to do when the right answer isn’t even on the table?
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