Millions of Americans are desperate for work, runaway government spending clouds the future and Democratic and Republican candidates are busy making one thing clear: They're light years apart on what to do about it.She goes on the described the different world views...
On planet Republican: The economy is backsliding, and the president is to blame. His stimulus spending did more harm than good, and his big-government rules are strangling businesses. The answer is repealing health care, energy and financial regulations and cutting taxes. That should spark investment and create jobs. Tackling the deficit requires huge spending cuts, just not at the Pentagon. The unsustainable guarantee of Medicare and Medicaid must change.
In the Democratic universe: The economy's slowly improving, thanks to government spending that helped fend off a depression. Another dose of targeted spending will help. Republican policies in the Bush administration — cutting taxes and eliminating rules — brought on the financial crisis and budget deficits. The rich should help dig us out by paying higher taxes. The Pentagon's budget must be cut, but entitlement spending can be controlled without drastically altering the social safety net.
Each set of believers tries to seize the intellectual high ground by enlisting the support of public "experts" who attempt to speak with authority. Paul Krugman writes columns for the New York Times zealously excoriating those who push for spending cuts and austerity http://www.nytimes.com/2012/06/01/opinion/krugman-the-austerity-agenda.html?_r=1. Rheinhart and Rogoff in their book "This time is different: Eight Centuries of Financial Folly" provide data to support their contrary position. However, data to support either side has inherent flaws: it is always retrospective and correlative. While the work they do are adequate to receive accolades and academic recognition, the work is not capable of bridging the gap between moving what is believed into the domain of what is known and fact.
I have to appreciate the perspective of Ariel Rubinstein in his book "Economic Fables"
This is how I usually begin lectures on economics and social issues: I would like to start with what I believe every academic should do when appearing in public, especially when speaking about political and controversial issues – to clarify the extent to which he is incorporating his professional knowledge in his remarks, whether he is expressing views with the authority supported by academic findings, and what part of his comments are nothing more than his personal thoughts and opinions. And so, I would like to declare unequivocally, without hesitation and even with a bit of pride, that my words here have absolutely nothing to do with my academic knowledge. Everything I say here is personal, based upon the entire range of my life experience, which also includes the fact that professionally I engage in economic theory. However, to the best of my understanding, economic theory has nothing to say about the heart of the issue under discussion here. I am not sure that I know what an option is; I am not attempting to predict the rate of inflation tomorrow nor the productivity index in manufacturing the day after tomorrow. Of course, I am aware of the fact that you have invited me here to speak because I am a professor of economics who is supposed to know all this, and my ignorance definitely embarrasses me. So you ask why I have come here? Because as an economic theorist, I would like to state that economic theory is exploited in discussions about current economic issues, and I don’t like it…, to put it mildly.I have blogged on a similar topic, identifying the dangers of scientists moving from the realm of science into the realm of advocacy (http://georgiacontrarian.blogspot.com/2010/09/science-skepticism-and-advocacy.html).
What this boils down to are belief systems. I must admit that my belief system encompasses a belief that complex economic systems are most durable when they are controlled by market forces. There are lots of articles and books both supporting and contesting my belief system. I realize that I may be able to find empiric evidence to support my beliefs, but I will never be able to prove that my beliefs are "right". Neither will Krugman or Rheihart and Rogoff. Each will sway some very smart and well meaning people. Each will be used to drive particular political agendas. One side may dominate for a period of time and partially implement portions of their agenda and some outcome will come about.
Social selection pressures play out over periods of time well beyond the life expectancy of anyone who might be able to appreciate fully the impact of any single decision or belief sets. I believe that my belief system is correct (in that adoption of such will mean more will benefit in the long run) but understand that it is simply a belief system, supported by the evidence that I believe is most important, and that I will not be alive long enough to see an unambiguous answer to the question of whether my beliefs are basically on target or flawed.