I’m increasingly convinced that any puppet-master, top-down solution to supporting the American Economy is inherently flawed as it relies on a view of economies as systematic – applying a scientific practitioner’s view to the process (the analog being Medicine and Surgeons). Just as our understanding of the complexities of the human body are slow in coming and constantly surprising practitioners – so too with economies. The important distinction is the contagion effect – a surgeon isn’t operating on all of us and the value of feedback loops that facilitate learning by practitioners in diminished by the long observation lag of policy effect in economics. Meaning that developing expertise on the part of our economic ‘surgeons’ is an extraordinarily costly and long process and vulnerable to debunking (often rightly) when unpopular as “snake-oil” or “witchcraft”
Current policy-makers are limited to blunt instruments (like a civil-war surgeons). Ex. Make money cheaper or more expensive, give Congress/States/Executive Depts. more latitude to spend, lower or raise the tax burden and costs to companies.
This problem is amplified by the diluted impact of these tools and their inconsistent application. Using Monetary Policy – Cheap money doesn’t flow everywhere across the economy – in the current form it flows through Wall Street where it gets stuck a lot of the time. And the often touted Wealth Effect as a means of lubricating the economy is bribery and unsustainable (the Economic Equivalent of a Defibrillator).
Fiscal Stimulus gets expressed through Congress and the Executive Branch – meaning it gets hugely politicized and is vulnerable both to being stolen (yes it is stolen) through lobbies and pet projects – all in the name of compromise that is nothing but political posturing grandstanding.
My thought is that we have clear evidence of two things. One that economies do not operate as rational systems as we currently understand them. And, two that a clear-eyed examination of our limited policy capabilities and limited understanding of the economic systems means that we are conducting very costly experiments in a lab without a hard consideration of the cost of those expirements. We don’t know what impact these policies will have, but we have consistently given the keys to overly confident puppet-masters who keep tinkering and assuring us that they’re going to get it right – that the economic cycle doesn’t need to happen and that we’re in for a smooth utopian ride, just trust them. All the while, the interventions continue to cloud our understanding of what is going on, and like the patient that is constantly being administered one drug after the next by physician unable to diagnosis the illness, we go from one unhealthy symptom to the next in a drug-induced haze.