Why Is Macro So Hard? Another "Economist" Who Isn't an Economist At All

This one is pretty hard to believe.

But there it was in the Wall Street Journal: "The Economist Whose Contrarian Streak Has Gotten Attention in Biden and Trump Camps".

Pettis isn’t a trained economist. He describes himself as “a finance guy,” ...

Now, my own biases may be creeping in here, but I think a lot of the fascination of the press with Wall Street types borders on parasitic (or worse, but this is a family blog). 

Anyway, it's a fact. So as an economics student, please put on your tinfoil hat when anyone ... I repeat ANYONE ... starts implying that people involved in buying and selling assets have special insight to macroeconomics.

A career on Wall Street ... worked in the bond divisions of investment banks Bear Stearns and First Boston. 

And for 20+ years he's been an finance professor at a very good university in China. Without actually having a degree in finance (he has an MBA with a focus in finance, and a Masters of International Affairs).† His Wikipedia page notes that he was a bond trader ... so basically ... he started in sales.

Oh ... and a punk rock music producer and night club owner in China.

Who sings this guys praises? Well, the article quotes Robert Lighthizer, Trump's first term trade representative. Again ... the problem is ... Lighthizer is an attorney, not an economist (seemingly not even a undergraduate major). And Oren Cass (another non-economist who plays one on TV) whom I trashed in the immediately preceding post. Go figure. Oh, and Katherine Tai, Biden's current trade representative, who happens to be an attorney (and definitely has zero economics training as an undergraduate or graduate student).

Who  doesn't? Well they quote Maurice Obstfeld, who's a likely winner of a Nobel Prize in the next 10 years or so for his work in trade.

“The world is really complicated. For Michael Pettis, the world is really simple,” said Maury Obstfeld ...

Maury? Can't say I've heard that before.

***

For the umpteenth time in my career ... there is nothing wrong with having opinions about macroeconomics ... and no requirement that one have any background in economics ... but the analogy here is that we keep getting told to pay attention to what the assistant basketball coach has to say about modern dance.

Macro is hard. And macroeconomists are wrong about it all the time. But articles like this don't even note that we probably a bit of an edge on this topic.

FWIW: the article is written by 2 Wall Street Journal reporters, and at least one of them did major in economics as an undergraduate.

† Do note that this sort of background would not qualify Pettis to get a tenured or tenure-track job in a finance department in an AACSB accredited school, although his experience and two books would probably be enough to keep him as qualified lecturer once he had his foot in the door.

What Populists Don't Know, But Economists Do

I am writing this a few weeks before the 2024 election. Both Presidential campaigns have taken populist stances that display a lot of ignorance about how macroeconomies work. Good luck with that.

For his part, Trump is doubling down on the tariffs he deployed while President, and proposing new tariffs that are more comprehensive, and often bigger.

The article entitled "What populists don't understand about tariffs (but economists do)" goes over some of the magical thinking underlying support for these plans.

Most of this piece is a response to a piece by Oren Cass in The Atlantic, who pushes the net benefits of the proposed tariffs. Cass has been involved in conservative political policy circles for the last 15 years. And, as noted in my post about Harris' economic team ... he's another person that presents themselves as a macroeconomics expert ... without having much economics background. Cass was a political economy major (whatever that non-standard degree entails) at Williams College (a small, northeastern, liberal arts school). Then he went to Harvard Law School. He also worked for Bain; so he's smart and ambitious, but again business consulting is not macroeconomics. He also worked for Romney's campaigns, and for conservative think tanks.

The authors hit Cass' position early and hard:

... An assessment of tariffs as a policy tool must answer three questions:

• How costly are tariffs?
• Would they deliver the desired benefits?
• Would other policy tools be more effective than tariffs?

Our brief answers are:

• Very.
• Negligibly or no.
• Yes.

If Trump wins the election, you should definitely read the whole thing. 

If Harris wins and proposes tariff policies (because it's not like her campaign has not already copycatted Trump campaign proposals), you should definitely read the whole thing.