It Took This Long?

Greg Mankiw, a well-respected Harvard economics professor wonders if all of the smart economists working for Obama have explained to him that price controls are a bad idea.

I’m certainly no Harvard econ professor, but did it really take Mankiw this long to question Obama’s economics team?

They lost me a year ago with the word “multiplier”.

If they believe their multipliers on the economic impact that results from government spending (i.e. $1 of government spending results in more than $1 of economic activity), that are derived from multiple regressions on imperfectly aggregated and lagging historical economic data from times that might be different than these times and future times, then I think they’re crazy.

True measure: If their models were really that good at predicting the future, they should have been able to prove it by using their models to grow wealthy.

I’m not sure it can be said any better than F.A. Hayek’s character in the Keynes vs. Hayek rap video of such economic models:

I’ll begin in broad strokes, just like my friend Keynes
His theory conceals the mechanics of change,
That simple equation, too much aggregation
Ignores human action and motivation

And yet it continues as a justification
For bailouts and payoffs by pols with machinations
You provide them with cover to sell us a free lunch

Then all that we’re left with is debt, and a bunch