Lies, damned lies, and … economics. Oh, and Donald Trump

It’s a bit weird that Donald Trump assumes he has any credibility whatsoever to assure anyone that a recession isn’t coming.^[1] After all, this is the same man who keeps fact checkers busy at an unprecedented rate, a man who revivifies the old dictum that you can tell a politician is lying by the fact his (it’s a really old dictum, so yes, ‘his’) lips are moving.

But even economists should have no credibility on forecasting recessions as, in their quest to be ‘scientifically’ ‘precise,’ they embed their ideological assumptions (most loudly, intellectually discredited neoliberalism^[2])—which they call ‘theory’—in statistical hogwash.^[3] The best we can say of economics, which I’m inclined to treat as the evil stepchild social science among human science’s children,^[4] is that they are intellectually less dishonest^[5] than Trump: surely, damnation by faint praise.

So what about the possibility of recession? There is currently considerable cause for concern on a number of fronts.^[6] It doesn’t have to be Trump’s trade war or any other single cause. It’s the preponderance of possible causes that worries. But finally, even if the field of economics is entirely full of shit, a proposition which I think comes close to the truth, there is a psychology at work that can, and I suspect probably will, produce a downturn.^[7]

As for Trump, his bullshit may reassure his base. But it won’t—and shouldn’t—reassure anyone else.

1. ^[1]Stephen Collinson, “Fretful Trump goes on attack as economy fears cloud 2020 hopes,” CNN, August 19, 2019, https://www.cnn.com/2019/08/19/politics/donald-trump-economy-2020-election-china-trade-war/index.html↩
2. ^[2]Mark Blyth, Austerity: The History of a Dangerous Idea (Oxford, UK: Oxford University, 2013); Jason Hickel, “Progress and its discontents,” New Internationalist, August 7, 2019, https://newint.org/features/2019/07/01/long-read-progress-and-its-discontents; Daniel Stedman Jones, Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics (Princeton, NJ: Princeton University, 2012); Robert Kuttner, “Austerity never works: Deficit hawks are amoral — and wrong,” Salon, May 5, 2013, http://www.salon.com/2013/05/05/austerity_never_works_deficit_hawks_are_amoral_and_wrong/; Dennis Loo, Globalization and the Demolition of Society (Glendale, CA: Larkmead, 2011); Thomas Piketty, Jeffrey Sachs, Heiner Flassbeck, Dani Rodrik and Simon Wren-Lewis, “Austerity Has Failed: An Open Letter From Thomas Piketty to Angela Merkel,” Nation, July 6, 2015, http://www.thenation.com/article/austerity-has-failed-an-open-letter-from-thomas-piketty-to-angela-merkel/; John Quiggin, “Austerity Has Been Tested, and It Failed,” Chronicle of Higher Education, May 20, 2013, http://chronicle.com/article/Austerity-Has-Been-Tested-and/139255/; David Stuckler and Sanjay Basu, “How Austerity Kills,” New York Times, May 12, 2013, http://www.nytimes.com/2013/05/13/opinion/how-austerity-kills.html; David Stuckler and Sanjay Basu, “Paul Krugman’s right: Austerity kills,” Salon, May 19, 2013, http://www.salon.com/2013/05/19/paul_krugmans_right_austerity_kills/↩
3. ^[3]Hites Ahir and Prakash Loungani, “‘There will be growth in the spring’: How well do economists predict turning points?” Vox, April 14, 2014, https://voxeu.org/article/predicting-economic-turning-points; Richard Alford, “Why Economists Have No Shame – Undue Confidence, False Precision, Risk and Monetary Policy,” Naked Capitalism, July 19, 2012, https://www.nakedcapitalism.com/2012/07/richard-alford-why-economists-have-no-shame-undue-confidence-false-precision-risk-and-monetary-policy.html; Ha-Joon Chang and Jonathan Aldred, “After the crash, we need a revolution in the way we teach economics,” Guardian, May 10, 2014, https://www.theguardian.com/business/2014/may/11/after-crash-need-revolution-in-economics-teaching-chang-aldred; Barry Eichengreen, “Economists, Remove Your Blinders,” Chronicle of Higher Education, January 12, 2015, http://www.chronicle.com/article/Economists-Remove-Your/151057/; Paul Krugman, “How Did Economists Get It So Wrong?” New York Times, September 2, 2009, https://www.nytimes.com/2009/09/06/magazine/06Economic-t.html; Paul Krugman, “Triumph of the Wrong?” New York Times, October 11, 2012, https://www.nytimes.com/2012/10/12/opinion/krugman-triumph-of-the-wrong.html; Andrew Simms, “Economics is a failing discipline doing great harm – so let’s rethink it,” Guardian, August 3, 2019, https://www.theguardian.com/commentisfree/2019/aug/03/economics-global-economy-climate-crisis; Mark Thoma, “Restoring the Public’s Trust in Economists,” Fiscal Times, May 19, 2015, http://www.thefiscaltimes.com/Columns/2015/05/19/Restoring-Public-s-Trust-Economists↩
4. ^[4]David Benfell, “The mother of the social sciences,” Not Housebroken, August 19, 2019, https://disunitedstates.org/the-mother-of-the-social-sciences/↩
5. ^[5]It’s impolite to call it intellectual dishonesty, but when we see a methodology as thoroughly corrupt in its execution as we see here, one has to suspect that that is precisely what we are dealing with: Mike Konczal, “Reinhart/Rogoff-gate isn’t the first time austerians have used bad data,” Washington Post, April 20, 2013, https://www.washingtonpost.com/news/wonk/wp/2013/04/20/reinhartrogoff-gate-isnt-the-first-time-austerians-have-used-bad-data/; Paul Krugman, “The Excel Depression,” New York Times, April 18, 2013, http://www.nytimes.com/2013/04/19/opinion/krugman-the-excel-depression.html; Lynn Stuart Parramore, “Meet the 28-year-old Student Who Exposed Two Harvard Professors Whose Shoddy Research Drove Global Austerity,” Alternet, April 19, 2013, https://www.alternet.org/2013/04/meet-28-year-old-student-who-exposed-two-harvard-professors-whose-shoddy-research-drove/↩
6. ^[6]Jon Hilsenrath, “After Record-Long Expansion, Here’s What Could Knock the Economy Off Course,” Wall Street Journal, June 3, 2019, https://www.wsj.com/articles/after-record-long-expansion-heres-what-could-knock-the-economy-off-course-11559591043; John Kemp, “Global economy is probably in recession,” Reuters, August 7, 2019, https://www.reuters.com/article/uk-global-economy-kemp/column-global-economy-is-probably-in-recession-idUKKCN1UX1OF; Colin Kruger, “‘Insane levels’: Can a world where profitless companies are flying last?” Sydney Morning Herald, August 10, 2019, https://www.smh.com.au/business/companies/insane-levels-can-a-world-where-profitless-companies-are-flying-last-20190808-p52f3d.html; Damian Paletta, Thomas Heath, and Taylor Telford, “Stocks tank as another recession warning surfaces,” Washington Post, August 14, 2019, https://www.washingtonpost.com/business/2019/08/14/stocks-tank-another-recession-warning-surfaces/; Tim Wallace, “‘Very real’ recession risk as economy contracts for first time in seven years,” Telegraph, August 9, 2019, https://www.telegraph.co.uk/business/2019/08/09/recession-risk-now-real-economy-contracts-first-time-seven-years/; Tim Wallace, “World economy faces a risk that’s far bigger than Trump’s trade war,” Sydney Morning Herald, August 9, 2019, https://www.smh.com.au/business/the-economy/world-economy-faces-a-risk-that-s-far-bigger-than-trump-s-trade-war-20190809-p52ffs.html↩
7. ^[7]David Benfell, “As a possible or probable recession looms, neoliberalism evades challenge. Yet again,” Not Housebroken, August 14, 2019, https://disunitedstates.org/2019/08/14/as-a-possible-or-probable-recession-looms-neoliberalism-evades-challenge-yet-again/↩