But right now I’m stuck. I have no idea how the United States economy is doing. And the closer I look at the data, the more contradictory it looks. … Yeah, but what happened in 2008 was a once-a-century kind of storm. If you always think that the big one is imminent, most of the time you’ll turn out to be wrong.
Neil Irwin, Is the Economy Really in Trouble? A Debate, New York Times, October 30, 2015.
Yes, but why would anyone, especially an economist, think that the once-a-century kind of storm rule still holds for economic matters. This century is unlike any other century before it, in so many ways. For the first time in human history, virtually every inhabitant on the planet is connected to every other inhabitant through commodity markets, communications systems, transportation systems, and a global financial system.
If economic theories and models can still be applied in any valid way, they can only be applied to the single world economy. National governments exist, nation boundaries exist, but national economies do not exist, except as ghosts of their former selves. If an economy is a system that produces and distributes wealth, then it is glaringly apparent that the economic activities found within a national boundary do not constitute an economy.
To get un-stumped, economists must abandon the ghosts of economies past. What’s keeping them stuck with an analytic approach that is a century behind the times?