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Macroeconomics Is About Technocratic Management: It Is Not a Theatre for a Morality Play

Karl Smith:

You Can’t Overwork Yourself By Smoking Joints and Watching Too Many Episodes of Jersey Shore: [P]eople are confusing cyclical prosperity with personal luxury. In your personal life you might feel like you are doing well because you have a new house or a new car, etc. However... we measure the cyclical wealth of nations... by employment and production. We say the economy is “doing well” when a lot of people are going to work and making stuff.... [I]t makes no sense to say that a recession is inevitable because we overconsumed. Because we bought too much it is now inevitable that we work less? Why does that make fundamental sense? Surely something is going wrong. Shouldn’t we be working more to pay for all the stuff we bought?...

The overconsumption theory... says that the recession is natural because we bought too much stuff during the 2000s. Too many houses. Too many big screens. That’s why you are not working now. Its balance. Steve Waldman says I shouldn’t tell people that economics is not a morality play. How about this then.... On what planet is it your just desert that after partying all night you are forced to sit on the couch rather than get the rest of your work done. Maybe in some perverse Brewster’s Millions kind of way. But, I don’t think that what the universe has in mind.

If suddenly everyone stopped buying big screen TVs and started building factories, investing in the future and laying the path for the next generation, then there would be no recession. There is a recession because fewer factories are being built. There is a recession because less work is being done.

Let me be very clear about this. I am not saying that it might seem as if the world works according to common sense but when you study hard and look at lots of equations then you will see that in some abstract way it is wrong.

No, not at all.

I am saying the overconsumption view is completely at odds with what is in front of our faces. It doesn’t even make basic logical sense. The morality play is one without any morals...