Every day the news is filled with articles tracking, predicting, or misrepresenting the current state of the U.S. economy. Many of these articles and posts are written with a jaunty confidence that seems to imply that the author actually understands the workings of the American economy. Don’t fall for that nonsense.
The American economy is a massive, unplanned, uncoordinated, uncontrollable contraption that has been assembled by an uncountable gaggle of geniuses and idiots through three centuries of trial, error, invention, innovation, obsolescence, and political opportunism. While some economists understand specific elements of the economy, like the labor participation rate or the completely mythical Laffer Curve, no one understands the entire construct. These subject matter experts are like auto mechanics who know all there is to know about fuel pumps, but who have never seen an actual automobile.
This is not to demean economists, many of whom are capable of leading normal lives. Their task is beyond Herculean. Economic activity is every activity. Get up in the morning, don’t get up. Go to work, don’t go to work. Read a book, watch cable news, eat a grape, walk the dog, buy a house: every act, every decision, has an economic impact which mostly can’t be measured and can never be fully understood.
While the actual economy is far too vast to be accurately visualized, we can imagine a model that approximates our ability to understand and control it:
Think of the American economy as an enormous clanking machine; part colonial age, part industrial age, and part information age; rattling along in the sub-sub-basement of some marble-columned government building in Washington DC. The machine fills several rooms, and there is no place to stand where you can see the whole thing. Parts of it are wheezing and banging and leaking wispy streams of steam; other parts are warm and quietly vibrating; while still other parts are cold and covered with dust. New parts have been bolted, welded, or duct-taped to old parts, and nothing has ever been removed.
Assembled from mismatched pieces by millions of anonymous people over twenty generations, the machine has no blueprint, no schematics, no instructions, no technical manual, no parts list, no operator’s guide, no documentation of any kind. There are levers and dials and switches, but most are unlabeled and no one knows what they do. A few (interest rates, money supply, and tax rates among them) are discolored from regular use, but even their effects are almost entirely guesswork. A few display screens and gauges seem to measure something, although no one is quite sure what (GDP? Labor participation? Stock market value? Consumer confidence?). There is no on-off switch, and no discernible power source. No one can turn it off, and no one controls it, least of all the president, who inexplicably is held accountable for the actions of three hundred and thirty million people.
So keep this picture in mind next time you read an article or post about the workings – past, present, or future – of the U.S. economy. You won’t learn anything about the economy, but you’ll sleep better.
September 22, 2017