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On The Chief Economic Adviser’s Real Job???

April 24th, 2012 · 6 Comments
Macroeconomics

Isn’t this Alan Krueger’s job? From Saturday Morning Breakfast Cereal:

I particularly like the part about embarrassing in front of staff economists, since I quite often amuse myself by picturing the looks on the economic advisers’ faces when they have to listen to a lot of the things that politicians say. I also don’t understand why the unemployment thing is so hard for people- in order to be unemployed, one has to be looking for a job. Otherwise, the unemployment rate would count people who didn’t want to work and politicians would decide that we have a national crisis of stay-at-home moms. (Granted, if you follow politics, you may have noticed that it pretty much seems like we do have that.) You see, when both the numerator and denominator of a fraction increase (as when the labor force gets bigger), the number can get bigg…oh, right, math, now I’m seeing the problem.

Anyway…technically speaking, the “Fix Our Economy Now” bill was passed in 1946 and it was the thing that created the Council of Economic Advisers in the first place. It’s called the Employment Act of 1946, and it pretty explicitly makes the ups and downs of the economy (i.e. business cycles) the government’s problem:

The act begins with a “Declaration of Policy” (section 2), affirming that it is “the continuing policy and responsibility of the Federal Government…to coordinate and utilize all its plans, functions, and resources for the purpose of creating and maintaining…conditions under which there will be afforded useful employment opportunities, including self-employment, for those able, willing, and seeking to work, and to promote maximum employment, production, and purchasing power.”

You can see more on the act here. I suppose this is at least better than the original Employment Act of 1945, which mandated that the federal government do everything in its power to achieve full employment, despite the fact that it’s unclear exactly what full employment is, whether the government has the power to achieve such a goal, and, even if so, whether the benefits of doing so outweigh the costs. Unfortunately, this bill’s close cousin, the Full Employment and Balanced Growth Act appeared in the 1970’s, and it explicitly mandates that the federal government take action towards to the goals of full employment, growth in production, price stability, and balance of trade and budget. I’m not sure why those who drafted the bill didn’t just add in “ponies for everyone” while they were at it, since they seem to be under the impression that the government has magical powers and doesn’t face tradeoffs. (For example, one way to theoretically get growth in production results in increased inflation, so satisfying some of the goals almost by definition entails not satisfying others.)

It’s things like these that almost make me feel sorry for politicians (as opposed to just sympathizing with the economists hired by the politicians). Almost. 🙂

Tags: Macroeconomics

6 responses so far ↓

  • 1 Bob // Apr 24, 2012 at 9:47 pm

    “I quite often amuse myself by picturing the looks on the economic advisers’ faces when they have to listen to a lot of the things that politicians say.”

    Not to defend politicians, but don’t their stupid utterings really reflect economists’ difficulty in making themselves coherent and the economics profession’s inability to say anything consensual, cogent, and relevant to policy makers?

  • 2 econgirl // Apr 25, 2012 at 4:14 pm

    Absolutely not. I’ve heard the same economic advisers field questions in a non-political context on the same issues that their politicians get asked about, and the reasonableness of the resulting answers is like night and day from what the politicians explain to the public. For example, it’s not like Romney’s adviser can’t give a thoughtful answer to the question “Is Obama doing a good job with the economy?” (I’ve heard it), but you’re never going to hear anything close to that answer from Romney himself. I have no reason to believe it’s any different on the other side.

  • 3 Jim // Apr 26, 2012 at 12:30 am

    Oh dear, you have a Facebook commenter ^^^

    I feel like this is a good place for the What Economists Do post: http://www.economistsdoitwithmodels.com/2012/02/17/what-economists-do-now-with-more-infographic/

  • 4 Punditus Maximus // Apr 27, 2012 at 9:47 am

    ” I have no reason to believe it’s any different on the other side.”

    Why? The two sides actually are pretty different.

    That said, the old trope that the President doesn’t have much to do with the economy isn’t super-consistent with the enormous differences in economic performance under Democratic and Republican Presidents. Under Dems, economic growth is much larger, is more broadly shared across the income spectrum, and is sustained throughout the Presidency. Under Republicans, economic growth declines during the Presidency, is smaller as a whole, and is concentrated at the top of the income spectrum.

    The thing is, both of these truths are exactly what you’d expect from these two organizations. Democrats are largely believed to be better on the economy, to care more about equality in growth, and to stay focused on growth. Republicans are parasitic elites who concentrate on making sure growth doesn’t happen to lower income levels and are content with lower growth totals to achieve that goal.

    These charts sometimes include Hoover and Roosevelt, which may not be fair, but you can run the numbers yourself; the patterns remain when you start strictly postwar with Truman.

    http://philebersole.wordpress.com/2010/07/15/u-s-economy-under-democrats-and-republicans/

  • 5 Punditus Maximus // Apr 29, 2012 at 12:55 am

    And…crickets. There’s a certain kind of lazy cynicism that defines our elites’ politics these days. This blog shows a lot of that intellectual laziness.

  • 6 On The Chief Economic Adviser’s Real Job??? | Economists Do It With Models | Last Name Lai // Apr 30, 2012 at 2:48 pm

    […] On The Chief Economic Adviser’s Real Job??? | Economists Do It With Models […]

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