Economists Without Economics
May 02, 2011, 03:33 AM
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My quoting Paul Krugman's nostalgic reminiscences about his upbringing has set off a broad but not particularly deep discussion (e.g., Kevin Drum, Alex Tabarrok, Matthew Yglesias).

The funny thing is how economists and economically-minded writers ignore the economists' toolbox of concepts, such as ceteris paribus (all else being equal) and opportunity costs, that are most relevant for thinking about the actual issues raised by this topic. For example, Krugman himself says that he wouldn't want to go back because now, "You can get really good coffee just about anywhere." Similarly, Tabarrok reasons: "I remember those idyllic summers of the 1970s earning a few extra dollars mowing lawns-80,000 amputated fingers, hands and mangled toes and feet every year back then and just 6,000 today. Would I even let me kid use a mower from the 1970s?"

The point of thinking about the past is not to decide whether or not we'd rather live there. Since we don't actually have time machines, we aren't confronted with an all or nothing choice between living in the past and living in the present. Uninventing advances in coffee-making machines or lawnmowers isn't on the table. The point is to understand the past to help us make decisions in the present to make the future better.

For example, Benjamin Franklin explained in the 1750s why, all else being equal, a less populated America would be better for the average American's future than a more populated America, and the implications for immigration policy.

Please note that the relevant issue for policymaking isn't whether or not the future will be better or worse in some overall sense than the present or the past, the issue is to choose the policy now that would make the future better than alternative futures in which worse policies were chosen now. Fortunately, we have analytical tools for considering tradeoffs resulting from policies. Unfortunately, these are tools that are almost never used whenever the topic comes within a country mile of immigration.

The immigration policies that most of these pundits advocate have had tremendous effects of various kinds on the affordability of family formation, but most pundits would rather discuss side issues like coffee and lawnmowers.

My policy suggestion has long been that when you find yourself in a hole, the first thing to do is to stop digging. But that is not so much an unpopular view amongst the punditry as one that simply can't be remembered for more than a few seconds at a time because it so orthogonal to the dominant ideologies.