The Popularity of Compartmentalized Economics
August 11, 2012 Leave a comment
Well, now that Mitt Romney has chosen Paul Ryan to be the Vice Presidential nominee on his losing November ticket, it’s time for everyone to let loose with their lengthy analysis of this important choice. (Here’s mine: ‘Huh.’)
I’ll say for my money the most interesting early response was that of Matthew Yglesias:
…focusing attention on the big picture disagreement between Democrats and Republicans about long-term fiscal policy means we won’t be focusing attention on what ought to be the most pressing economic policy issue of our time—mass unemployment…
Expanded a little, he is (if I’m reading him correctly – I skimmed his post, mostly) fretting that Ryan being in the race means that we’ll all talk about X instead of Y, where
X = how much federal revenue to collect, and in particular, whether to (as (D)s want) attempt to crank up taxes so as to make tax revenue slightly less of a shortfall vs. the unrealistic spending promises and debt the federal government has racked up in its efforts to buy votes over the years, or (as some but perhaps not all or even most (R)s want) attempt to restrain those fantasy spending promises/plans in some way
Y = high unemployment.
Of course, to Slate’s business and economics correspondent Matthew Yglesias, X has nothing whatsoever to do with Y. No, a confiscatory government’s unrealistic fiscal promises and the ever-present ongoing threat of neverending spikes in taxation and/or moneyprinting do not dampen businesses’ ability or willingness to hire more people and/or outlook for their future profitability.
The one has nothing to do with the other; according to Matthew, we should try to address unemployment ‘instead of’ talking about whether our federal government is broke and will try/need to confiscate wealth or print money to make up for it, because neither affects the other. It’s another one of those separability theorems in economics that I just never learned, I guess. In his defense, I’m sure it does make economics easier to think about if you just imagine that any given aspect of the economy can be compartmentalized and firewalled off from any other, for the purposes of discussion and policy debate.