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David Brooks and Cultures

[Guest post by James Downie]

In today's New York Times, David Brooks argues that liberals have dispensed with feelings and morals.

Many of the psychologists, artists and moral philosophers I know are liberal, so it seems strange that American liberalism should adopt an economic philosophy that excludes psychology, emotion and morality.
Yet that is what has happened. The economic approach embraced by the most prominent liberals over the past few years is mostly mechanical. The economy is treated like a big machine; the people in it like rational, utility maximizing cogs. The performance of the economic machine can be predicted with quantitative macroeconomic models.
These models can be used to make highly specific projections. If the government borrows $1 and then spends it, it will produce $1.50 worth of economic activity. If the government spends $800 billion on a stimulus package, that will produce 3.5 million in new jobs.
Everything is rigorous. Everything is science.

Obviously, what leaps off the page most throughout the column is the wild generalizing about liberals, but Brooks is not the first, nor will he be the last columnist to resort to clumsy stereotypes. But even the facts he is basing the stereotypes on are incorrect. Multipliers, which are the basis for statements like "unemployment benefits will produce $1.50 of economic activity for every dollar spent" in fact are quite inexact, and policymakers know that. The CBO's January assessment of various policy options, for example, marks the range for the multiplier effect of increasing unemployment benefits as between $0.70 and $1.90 per dollar, a range "designed to encompass most economist's views." (The low end is still $0.30 higher than the high end for extending the Bush tax cuts.) Yes, policymakers and economists give specific numbers, but they do so out of convenience. For similar reasons, Brooks would likely think it unnecessary for Gallup to report Obama's most recent approval rating as "between 45 and 51 percent approval and between 42 and 48 percent disapproval," rather than just "48% approval, 45% disapproval."

Conservatives, who are usually stereotyped as narrow-eyed business-school types, have gone all Oprah-esque in trying to argue against these liberals. If the government borrows trillions of dollars, this will increase public anxiety and uncertainty, the conservatives worry. The liberal technicians brush aside this soft-headed mush. These psychological concerns are mythological, they say. That’s gaseous blathering from those who lack quantitative rigor.
Other people get moralistic. This country is already too profligate, they cry. It already shops too much and borrows too much. How can we solve our problems by borrowing and spending more? The liberal technicians brush this away, too. Economics is a rational activity detached from morality. Hardheaded policy makers have to have the courage to flout conventional morality — to borrow even when the country is sick of borrowing.

Brooks later comments that he has had "hundreds" of conversations with businesspeople who are too "scared of the future" to invest. But he misses the reason liberals take the uncertainty complaint with a grain of salt: conservatives have been using it for everything, from the size of government, to taxes, to the deficit, to Obama's health care plan. Is "uncertainty" a problem in the current economic recovery? Yes, and liberals believe that government spending will help the economy, more than it will "increase uncertainty" while the private sector is still reluctant to spend money. Even if the previous sentence is debatable, though, what's not debatable is that the Republican plan for extending the tax cuts will lead to far more borrowing than the recovery plans liberals have tried to push through since the stimulus.

Skipping ahead to the end:

It’s become harder to have confidence that legislators can successfully enact the brilliant policies that liberal technicians come up with. Far from entering the age of macroeconomic mastery and social science triumph, we seem to be entering an age in which statecraft is, once again, an art, not a science. When you look around the world at the countries that have come through the recession best, it’s not the countries with the brilliant and aggressive stimulus models. It’s the ones like Germany that had the best economic fundamentals beforehand.
It all makes one doubt the wizardry of the economic surgeons and appreciate the old wisdom of common sense: simple regulations, low debt, high savings, hard work, few distortions. You don’t have to be a genius to come up with an economic policy like that.

As I said at the beginning, Brooks's conceit depends heavily on stereotyping a culture of "liberal technicians." He could be forgiven this common, venial sin if behind those stereotypes lay some well-founded facts. His choice of Germany, then, is strange for three reasons: first, Germany has more regulations, more distortions, and a lower GDP per hour worked than the United States, which makes the country 2 for 5 on his "common sense" criteria. Second, before the recent recession, Germany's economy had stagnated for much of the past decade, even shrinking in 2003, and unemployment hit nearly 11% in 2005. Third, as The Economist's Ryan Avent has said (emphases original):

Germany has committed itself to deficit cutting, but it is not cutting now. Germany is one of the few euro zone countries to increase its budget deficit from 2009 to 2010. And planned 2011 cuts are quite small relative to those in countries pursuing crash austerity programmes, which are also suffering very weak recoveries (Greece has yet to get out of recession, and Spain may be heading back in).
This doesn't mean that stimulus is the key to German success. But Germany is absolutely not an example of strong growth despite austerity.