Saturday, August 13, 2011

Allan Meltzer, Another WSJ Opinion Writer and Expert Economist Who Replaced His Expertise with Mindless Ideology

That Must Be Required to Write an Economics Opinion in the WSJ

The Editorial and Opinion pages of the Wall Street Journal are graced (?) every couple of days by the writings of supposedly intelligent and highly educated Economists, all of whom set forth positions and recommendations that are in total contradiction to basic economic theory.  Apparently to write an opinion column in the WSJ, an Economist does not need to sell one’s soul, but one does need to temporarily renounce all of their basic learning about economics.

Today’s example is Carnegie Mellon Professor Allan Meltzer.  Mr. Meltzer has good credentials,

 Mr. Meltzer, a professor of public policy at the Tepper School, Carnegie Mellon University and a visiting scholar at the American Enterprise Institute, is the author of "A History of the Federal Reserve" (University of Chicago Press, 2003 and 2009).
A Great College
Do They Know about
Mr. Meltzer?

but from his writings one gets the impression he knows nothing at all about the field of economics. 

Time does not permit The Dismal Political Economist to explain all of the misstatements, errors and ideologically instead of fact driven policy recommendations, but here are a few.

Mr. Meltzer opposes the policy of the Fed to increase bank reserves because.

The main effect would be a further devaluation of the dollar against competing currencies and gold, followed by a rise in the price of oil and other imports

No Mr. Meltzer, this is exactly what we do want.  A weaker dollar will make U. S. exports more competitive, and increasing exports is exactly what you say you want to happen later in your article.  An increase in the price of imports will make domestic goods more competitive here in the U. S.  That is a good thing.

Mr. Meltzer advocates policy that is exactly the opposite of what is needed.

Increased domestic saving and slow consumption growth will help the transition to an export-led economy by reducing foreign borrowing.

Low consumption is what has deprived the economy of economic growth.  We need higher consumption, not lower.  And even if there is higher savings, that in no way leads to an export boom, particular if the U.S. has a strong dollar which is what you just recommended.

And for policy prescriptions, Mr. Meltzer says this

• Reducing corporate tax rates permanently to encourage investment (paid for by closing loopholes).

• Agreeing on long-term reductions in entitlement spending.

Year to Year Change in Core Inflation
Runaway Inflation?  Anyone See Runaway Inflation?

• A five-year moratorium on new regulations affecting energy, environment, health and finance.

• An explicit inflation target between zero and 2% to force the Fed to pay more attention to the medium term and to increase public confidence that we will not experience runaway inflation

Ah yes, it finally comes out, the requisite Conservative position that cutting taxes will encourage investment.  Econ 101 Mr. Meltzer, high consumption encourages investment, the opposite of what you just supported.  And who exactly is afraid of runaway inflation?  Really, who, other than Mr. Meltzer.  And do you really want to end new bank regulations given what the lax regulation of banks during the Bush administration did to the world economy?

And of course we have the Pollyanna bromide

What we need most is confidence in our future

Agreed, but how can we have any confidence in our future with people like Mr. Meltzer promoting the wrong policy for purely ideological reasons and the opportunity to write for the WSJ?  How??


1 comment:

  1. I am eternally grateful to that troll, Murdoch, for instituting a paywall between me and the WSJ.