The Pseudo-Science of Rubinomics

by | Dec 12, 2002

What is “economic analysis” when it comes from a newspaper? It’s usually just like Daniel Altman’s “Economic Analysis” column in the New York Times this morning: a montage of sound-bites from “experts” (or, if not experts — are there really any “experts” in the pseudo-science of economics? — then at least people, most of whom […]

What is “economic analysis” when it comes from a newspaper? It’s usually just like Daniel Altman’s “Economic Analysis” column in the New York Times this morning: a montage of sound-bites from “experts” (or, if not experts — are there really any “experts” in the pseudo-science of economics? — then at least people, most of whom you’ll never have heard of but who have impressive sounding titles from one institution or another, whom the author can nevertheless position as experts) all making whatever point the author wished to have made when he first set out to write the column and decided which of a limitless supply of “experts” to call, selected in order to make it seem that his point was a “consensus” (and not mentioning any “experts” whose comments didn’t fit in).

Believe me, I know how this works — I’m one of those economic “experts.” I get calls from reporters every day trying to get me to say what they’ve decided they want me to say before they even pick up the phone — and I know that I don’t get quoted unless I can sense what they want me to say and give it to them (they don’t usually make it hard — they’ll put the quote right in your mouth and say, “don’t you agree?” then quote you in print as having said just that).

That’s bad enough — but the worst of it are the little interstitial “explainers” that the reporters and columnists throw in between the “expert’s” quotes. At least the quotes have quote-marks around them, so any alert reader will understand that they are just opinion (even if “expert” opinion). These “explainers” are positioned in deliberate contrast to the quotes — as though they were facts, little elements of background that the writer thinks the reader needs to know in order to fairly evaluate the opinions. And here’s where it gets tricky, because those “facts” are almost invariably just more opinions — but they’re not labeled as such.

In Altman’s column today — a “consensus” of “experts” on how difficult and costly any economic stimulus programs will be — includes this little interstitial “fact” from Altman:

“When expectations for the government’s borrowing in the future rise, according to economic theory and some history, long-term interest rates in both the public and the private sector tend to rise as well.”

It sounds innocent enough, doesn’t it? But this isn’t a fact — it’s a political opinion, nonchalantly disguised as a fact. This single sentence sums up the core argument of what became known in the Clinton years as “Rubinomics,” named after Treasury secretary Robert Rubin, who was famous for using it as a drop-dead argument to block any talk about tax cuts.

Altman repeats this opinion of Rubin’s — but with no quotes and without naming Rubin, simply offered by way of background, a favor to the reader as it were, as though it were an established fact that the reader needed to know. Altman bolsters this fact as being supported by “economic theory” (as though there were just one economic theory, as though this were it, and as though this one economic theory were an axiom or a law of nature rather than just an argument used by a particular politician) and “some history” (as though “some history” were enough to prove a proposition in economics or anything else — it never is).

In point of fact, it’s simple to demonstrate “some history” — indeed, lots of history — that points to exactly the opposite conclusion. For example, those who are obsessed with government debt (and dead-set against tax cuts) are quick to point out with alarm that the Federal budget has swung back to deficit after several years of surplus, and that there are now deficits “as far as the eye can see” (as the saying always seem to be). Yet long-term interest rates are lower than they’ve been in 40 years — exactly and utterly the opposite of what Rubinomics would predict. Isn’t that “some history”?

And take a look at Japan. Japan’s budget is a deficit sinkhole, and its debt as a proportion of its GDP is by far the largest in the civilized world. Yet Japan’s long-term interest rates are the lowest in the civilized world — with a 10-year government bond rate of about 1%, they make our historically low rates look positively high. Again, exactly and utterly the opposite of what Rubinomics would predict. Isn’t that, too, “some history”?

Sure it is, but that doesn’t make the point that Altman wanted to make, so he didn’t mention it.

Economics is the only discipline that calls itself a science that seems totally immune to the scientific method. In any truly scientific inquiry, an hypothesis is subjected to experimental test, and if the test refutes the hypotheses even a little bit, then the hypothesis is wrong. They figure that the people who read the New York Times aren’t well informed enough to spot a lie when they read it, positioned as fact amidst a consensus of expert opinion. Maybe there’s “some history” to support that belief, too — after all, how are they to become well informed if they get their “economic analysis” from the New York Times?

Don Luskin is Chief Investment Officer for Trend Macrolytics, an economics research and consulting service providing exclusive market-focused, real-time analysis to the institutional investment community. You can visit the weblog of his forthcoming book ‘The Conspiracy to Keep You Poor and Stupid’ at www.poorandstupid.com. He is also a contributing writer to SmartMoney.com.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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