Okay, so the country came together and Barack Hussein Obama will be our next president. Moving on, it's time to get down to the nitty-gritty and look at what he's actually going to do.
First off, a kind of nitpicky point, which really isn't nitpicky at all. Here's a good post from Bill Buiter on the people that make up Obama's "Transition Economic Advisory Board" and...it's not the group of people I would have picked. Buiter points out that there are only four economists, but eight lawyers:
Except for a depressingly small minority among them, lawyers know nothing. They are incapable of logic. They don’t know the difference between necessary and sufficient conditions or between type I and type II errors. Indeed, any concept of probability is alien to them. They don’t understand the concepts of opportunity cost and trade off. They cannot distinguish between normative and positive statements. They are so focused on winning an argument through technicalities, that they no longer would recognise the truth if it bit them in the butt.Harsh, but mostly accurate. Lawyers are trained as advocates. It's their job to represent a particular constituency. Here, you've got Reich representing the unions, Granholm the car manufacturers, and so forth. Making economic policy, on the other hand, is about weighing trade-offs between different constituencies. Moreover, lawyers are trained to point out flaws, no matter how trivial, in the arguments of others, rather than to understand all of the relevant arguments and synthesize them in a more deep and substantive way.
The best public policy does not emerge from a competition between advocates of various constituencies. That's how you get disasters like the annual Farm Bill or every trade bill ever or Medicare Part D. Good policy comes from a group of serious people being open to all the relevant considerations and thinking hard about them.
What Buiter doesn't object to, but I will, is the six or so businesspeople on the board. I'll give Paul Krugman the mic:
The converse is also true: What people learn from running a business won't help them formulate economic policy. A country is not a big corporation. The habits of mind that make a great business leader are not, in general, those that make a great economic analyst an executive who has made $ 1 billion is rarely the right person to turn to for advice about a $ 6 trillion economy.Maybe this is all for show and publicity, but I'd feel a lot more confident if I could actually see Obama taking advice from some established economic thinkers besides Larry Summers. (Although I'd love to see Summers reprise his role as Treasury Secretary. All of the arguments against him are bogus.)
Why should that be pointed out. After all, neither businesspeople nor economists are usually very good poets, but so what? Yet many people not least successful business executives themselves believe that someone who has made a personal fortune will know how to make an entire nation more prosperous. In fact, his or her advice is often disastrously misguided.
I am not claiming that businesspeople are stupid or that economists are particularly smart. On the contrary, if the 100 top U.S. business executives got together with the 100 leading economists, the least impressive of the former group would probably outshine the most impressive of the latter. My point is that the style of thinking necessary for economic analysis is very different from that which leads to success in business.