Economics and Economic Policy

The relationship between the field of economics and U.S. economic policy making is not a strong one.  Political considerations intervene decisively.  Nonetheless, aspects of the way economists define and explain the world can lend legitimacy and intellectual force to economic policies chosen for political reasons.

This is the case with the use of geopolitically defined units of analysis (e.g., U.S economy, Michigan economy, Detroit economy) by economists.  This way of defining macroeconomic units of analysis reinforces and legitimizes an economic policy making approach that virtually limits the plausible range of policy options to those that only address domestic economic activities and relationships and only U.S., state, and local governmental policies.  It helps U.S. policy makers largely exclude global economic and geopolitical trends, transnational economic relationships, transnational institutions, international law, and multinational trade and investment agreements from policy discussions with the U.S. people.

This is not a theoretically sound approach to economic policy making (and one can argue that this is becoming increasingly clear as year upon year of dismal rates of employment and income growth in the U.S. accumulate), but it is preferred because it is politically safer than publicly broaching the idea that the U.S. is but one of many nations, only one part of a much larger world, not a world unto itself.

U.S. political culture is steeped in such phrases as “manifest destiny”, “the American way”, “America’s global leadership”, “American character”, “America’s unique role in history”, and “American exceptionalism” and these ideas are deeply embedded in how American voters define themselves and the world in which they live.

“A majority of Americans — 61 percent — believes that God has uniquely blessed America.” [emphasis added] (Religion and America’s Role in the World, Religion and Ethics Newsweekly, Pew Forum on Religion and Public Life, October 24, 2008.)

“Americans widely agree that the United States has a unique character because of its history and Constitution that sets it apart from other nations as the greatest in the world. … 66% say the United States has ‘a special responsibility to be the leading nation in world affairs.'” (Jeffrey M. Jones, Americans See U.S. as Exceptional; 37% Doubt Obama Does, Gallop, December 22, 2010, )

And despite their geographic mobility and the dispersion of many of their families across multiple states, Americans put considerable stock in the belief that state governments should exercise more economic power than does the federal government.

Policy makers find it politically treacherous and policy experts find it professionally treacherous to advocate economic policies that explicitly or implicitly undermine these widely shared and strongly held beliefs.  By organizing their research activities, research findings, and policy statements around the concepts of a U.S. economy and state economies, economists provide an intellectual rationale for an economic policy approach that is inherent in U.S. political culture.

This alignment of economic thinking with the political needs of U.S. policy makers need not be cynical or corrupt (with some exceptions, of course).  It is sufficient to see it as an artifact of a conceptual view held over from the 20th century which economists are not inclined to question.  U.S. economists are as prone as other Americans to view the U.S. as unique among nations and to have that view reinforce their continuing use of U.S. boundaries and state boundaries to define macroeconomic units of analysis.  U.S. economists are also as prone as other professionals to align their career choices with prevailing opportunities, so they can’t be expected to seek out or promote ideas that would lead them to challenge the policy advice preferences of U.S. policy makers, which are constrained by voter belief in American uniqueness (and, of course, by policy maker belief in American uniqueness).

To conclude, U.S. field of economics is unlikely to lead the way to economic policies that will restore employment and income growth in the U.S.  U.S. economists do not have sufficient intellectual independence from U.S. political culture and U.S. policy makers to be the policy entrepreneurs the U.S. needs.