Looking Backward: Economics and the Cult of Yesterday

One reason that the nation has not made more progress toward an economic “recovery” is that the people in charge really don’t know what one would look like. The top economists in Washington don’t appear to have asked the obvious question, “Recovery of what—and for what?” Instead they have followed the old drill, tried to rekindle the old flame, and remained wedded to the old guideposts that leave them looking at yesterday and trying to see tomorrow.

Just recently, the president of France realized the stupidity. He has decided that his nation’s measures of economic health need to change to account for today’s challenges instead of yesterday’s. As Washington gears up to spend billions in more “stimulus,” it would help to ask exactly what it is trying to stimulate—and most importantly, exactly what would constitute success.


The Gross Domestic Product

Testimony of Jonathan Rowe
Co-director of the West Marin Commons
Before the U.S. Senate Committee on Commerce, Science and Transportation
Subcommittee on Interstate Commerce, Trade and Tourism
March 12, 2008

Mr. Chairman and Members of the Committee:

Let’s suppose that the head of a federal agency came before this committee and reported with pride that agency employees had burned 10% more calories in the workplace than they did the year before. Not only that – they had spent 10% more money too.

I have a feeling you would want to know more. What were these employees doing when they burnt those calories? What did they spend that money on? Most important, what were the results? Expenditure is a means not an end; and to assess the health of an agency, or system, or whatever, you need to know what it has accomplished, not just how much motion it has generated and money it has spent. . The point seems obvious. Yet Congress does this very thing every day, and usually many times a day, when it talks about this thing called “the economy.” The administration and the media do it too. Every time you say that the “economy” is up, or that you want to “stimulate” it, or get it going again, or whatever words you use, this is what you actually are saying. You are urging more expenditure and motion without regard to what that expenditure is and what it might accomplish – and without regard to what it might crowd out or displace in the process.


If the GDP Is Up, Why Is America Down?

Throughout the tumult of the elections last year political commentators were perplexed by a stubborn fact. The economy was performing splendidly, at least according to the standard measurements. Productivity and employment were up; inflation was under control. The World Economic Forum, in Switzerland, declared that the United States had regained its position as the most competitive economy on earth, after years of Japanese dominance.

The Clinton Administration waited expectantly, but the applause never came. Voters didn’t feel better, even though economists said they should. The economy as economists define it was booming, but the individuals who compose it–or a great many of them, at least–were not. President Bill Clinton actually sent his economic advisers on the road to persuade Americans that their experience was wrong and the indicators were right.