![]() These assumptions aren’t even well hidden in models but baked directly into the math. It’s a good thing Eisenhower took office before the neoliberal style of thinking came to dominate Washington, or instead of interstate highways we’d still have dirt roads. Taking this assumption to its logical extreme, there’s almost nothing government should ever invest in. Always.Įssentially, models assume that every increase in public investment is canceled out by the combination of lower returns and reduction in private investment. They say that government spending even comes with a penalty: It automatically causes businesses to spend less, leading to lower overall investment. They assume that any government spending will have less of a return than whatever private businesses spend their money on. What happens to the economy if the federal government spends $1 billion? The normal person would say that it depends what they spend it on, and how the policy is designed. Models assume that public investments will “crowd out” private investment, and are by definition less productive than private investments. Here are six of the assumptions built into most economic models that are among the most pernicious: 1. The problem is that few people take the time to explain what these faulty assumptions are, why they all promote the worldview of the rich and powerful, and why they shouldn’t be treated as science but as a trickle-down fantasyland. Models serve less as scientific analysis and more as incantations from the cult of neoliberalism, and if politicians and journalists continue to accept them with the same naïve credulity that they always have, they will hamper the astounding middle-out economic progress that the Biden administration has made toward rebuilding a more equitable, prosperous economy for all. Models serve less as scientific analysis and more as incantations from the cult of neoliberalism. ![]() The headlines derived from these models consistently reflect this bias: “ Raising Minimum Wage to $15 Would Cost 1.4 Million Jobs, CBO Says,” or “ Biden Corporate Tax Hike Could Shrink Economy, Slash U.S. They are wrong in a way that massively benefits the rich, and massively disadvantages everyone and everything else. The deeper problem is that these models are all wrong in the very same way, and in the same direction. If the assumptions are wrong, the models will be wrong too.Īnd these models are deeply and consistently wrong.īut “wrong” doesn’t capture the true problem. More disturbingly, the assumptions baked into these models completely define what the models predict. Rather, the point is to create useful abstractions to provide decision-makers with a sense of the budgetary and economic impacts of a given policy proposal. What few understand is that these economic models do not, and never can, fully reflect the extraordinary complexity of human markets. These existing models exert such great force on the political debate in large part because their predictions are treated by politicians and reporters as neutral, technocratic reality-simple economic facts, produced by experts, that reflect our best understanding of economic cause and effect. One of the trickle-down economists’ main persuasive tools is the economic model, used to predict and assess the outcome of economic policies and other major economic developments. The people who benefit from trickle-down policy the most have deployed economists to work their magic to tell this story, and explain why there is no alternative to its scientific certitude. But most citizens’ experience of economics comes from hearing a story-a narrative that rationalizes who gets what and why. Many academic economists do important work trying to understand and improve the world. No politician would outright say that rich people should get richer, while everyone else struggles to make a decent life.īut this message has been hidden under the confusing, technical-sounding, and often impenetrable language of economics. No politician would outright say they want to shrink the middle class, make it harder to get by, or reward hard work less. You would think that trying to sell such a disastrous outcome for the broad mass of citizens would be incredibly unpopular. And equally, that investing in you, raising your wages, forgiving your debt, or helping your family would be bad-for you! This is the trickle-down way of thinking about economic cause and effect, and there can be no doubt that it has substantially contributed to the greatest upward transfer of wealth in the history of the world. Subscribe here.Īmericans have been hammered for decades with an economic message that amounts to this: When wealthy people like me gain even more wealth through tax cuts, deregulation, and policies that keep wages low, that leads to economic growth and benefits for everyone else in the economy. ![]() This article appears in the April 2023 issue of The American Prospect magazine. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |