The Witch Hunts Continue
The Washington Post recently invited some people to offer ideas on how to fight inflation. A majority of these suggestions aren’t just bad, they are stunningly bad. Behold!
Robert Hockett recommends that the government makes America produce again.
The president and White House Cabinet, in consultation with experts from industry, should plan a national reindustrialization across industries in every region of the country, and the Federal Financing Bank within Treasury can fund projects devised by all relevant federal agencies.
We can once again make the United States the world’s workshop for democracy. That will reverse not only inflation, but also four decades of decline.
If this sounds like a good old industrial policy, that’s because it is. Why it never works see this, and this, this, this, this, this and this. And those people who think that the best way to ‘fight’ China is for the U.S. to adopt Beijing’s anti-market/pro-industrial policy approach, check this out.
Lauren Melodia recommends government-subsidized child care to address …
…our nation’s complex history of underfunding, undervaluing and under-compensating care work and women’s labor more broadly [generating] the gender pay gap … where they make 83 cents on the dollar to men. … [T]he child-care industry is built around low wages and thin, unsustainable profits that have contributed to the failure of the market to deliver a greater supply of child-care centers to meet demand.
Lastly, the government’s existing consumer subsidies program, while making child care more affordable for many, has not resulted in the growth of the supply of child care.
It would take too long here to correct all the fallacies and the overall economic illiteracy in Melodia’s allegations about a ‘pay gap’ and other market ‘failures.’ It’s also amazing that some truly believe that constraining the supply of child care through minimum wage and other requirements was ever the way to address high prices. Some reading on this particular question can be found here, here and here. Oh, and don’t miss this warning from the Cato Institute’s Ryan Bourne about letting the government take over child care.
William Spriggs recommends more taxes on wealthy investors.
This passage would be funny if it weren’t so depressing. The economy proved itself to be remarkably resilient considering that the government ordered much of it shutdown, and then created all sorts of disincentives to return to normal at a time when people were panicked about getting sick. As for the idea that class-warfare taxation is the solution to inflation, read Dan Mitchell here.
Lindsay Owens recommends antitrust intervention:
[N]o one is claiming that taking on corporate consolidation and profiteering will “fix” inflation on its own…. corporate concentration has hollowed out and nearly eliminated redundancy in our supply chain… This extreme consolidation has also left us with a bare-bones workforce and just a handful of companies in industries that are absolutely essential to the functioning of our supply chains.
Second, monopolies leave us more vulnerable to price-gouging, collusion and pandemic profiteering. …
The whole thing is amazing, including the language of profiteering. I am the first one to complain about cronyism, but in my view it’s the existence of government’s ability to grant corporate privileges that creates such noxious business behavior. Upon reading things like this piece, there is a part of me that wishes that these economically ignorant people experience life in alternate universe where all their favorite government policies are implemented. In any case, a few things on this here, here and here.
Todd Tucker recommends price controls:
I wrote about Tucker’s proposal here.
But of all the many wackadoodle analyses in the Washington Post piece, the wackiest-doodliest is the one offered by Darrick Hamilton and Derreck Drummer, who assert that inflation is a plot to hurt Progressives:
I think this one speaks for itself.
Feb 9 2022 at 2:04pm
Is there a word for when you propose N things and only a fraction are even remotely reasonable but framing it as though they are all equally good alternatives?
Feb 11 2022 at 8:23am
If there isn’t, there should be. It’s something like the opposite of the hairy arm technique (where you intentionally leave in unattractive elements so your core idea will not be criticized). “Legitimacy by association” is the closest I can think of to describe it.
Feb 9 2022 at 4:34pm
Only 3 out of 12 of them even really tried to answer the question as opposed to just flogging irrelevant hobbyhorses (arguably 4; Adam Posen’s answer that inflation is unavoidable we just need to ride it out isn’t a solution but perhaps a fair response). Matt Darling’s and Michael Strain’s responses were worth reading but wow, what low signal/noise ratio in this article.
Feb 9 2022 at 5:54pm
You were a glutton for punishment in reading all of those mini screeds. I took a look at the two pages and quickly moved on.
As an aside: My battles with the supply chain finally ended today after the new range and compact washing machine finally came in almost three months after ordering them (promised delivery back in November was the end of December). The Bosch washer came from Germany and the Cafe range from Mexico.
Knut P. Heen
Feb 10 2022 at 8:12am
Looks like price inflation is contagious. We now have an inflation of bad arguments too.
Thomas Lee Hutcheson
Feb 10 2022 at 8:13am
Any suggestion that does not focus on Fed policy is irrelevant to fighting inflation. Many are based on looking at economics as a zero-sum game.
Spriggs, if it implies a lower structural deficit, at least is growth enhancing in the long run.
Feb 10 2022 at 6:23pm
Hayek dedicated The Road to Serfdom to “socialists of all parties.” He may well have dedicated his masterpiece to the “ignorant of economics of all parties.”
Patrick I Barron
Feb 11 2022 at 10:03am
The WSJ itself ran a front page article a few weeks ago that asked what is causing inflation (actually, the correct malady is “higher prices”). Nowhere did the so-called WSJ expert reporter mention the unprecedented expansion of the money supply.
Feb 12 2022 at 10:12am
I have often wondered over the past two years why today’s orthodox economists completely ignore monetary aggregates when they so obviously explain everything about inflation. If they had paid any attention to M2 last January, they would have known that inflation would be spiking to at least 5%, I pointed this out in my blog post last March “Ain’t Nothin’ but a Party” which I hope you find time to take a look at.
I think there are 3 main reasons. I would be interested in your thoughts.
Monetarism is associated with Milton Friedman, who was a conservative and is therefore anathema.
If economists admitted how simple it all is, they couldn’t justify their esoteric models or their PhD’s, or their jobs. Most economics today would be revealed to be a sham. (See Wizard of Oz: The man behind the curtain.)
They have no clue how the banking system works. Since the financial crisis, Quantitative Easing has driven huge growth in “base money” with no effect on inflation. They don’t realize that simply goosing bank reserves has minimal impact on the economy until it is lent out. And banks are not making loans because the industry was effectively nationalized by Dodd Frank and Basel III. (Also, payment of interest on reserves.) No rational bank management today will take any risk.
P.S. For some reason I was unable to paste the link to my blog post. It is on my blog cantercap.wordpress.com
N. Joseph Potts
Feb 12 2022 at 1:47pm
I think it’s the Chinese.
Feb 13 2022 at 9:15am
Much lower bank capital requirements against loans to the government than loans to e.g., small businesses and entrepreneurs, de facto cause credit/money to be injected into less productive activities.
That dooms you, sooner or later, to suffer inflation.
Comments are closed.