Free-Association Economics


June 23, 1993|By JOAN I. GRECO

New York. -- At times like these, when a new economic plan is brought forward and a swarm of economists descend upon it -- each certain that the plan will doom us or certain that the plan will save us -- even the most credulous may begin to question whether these economists really know anything.

Well, it is time to put these questions to rest. The answer is that economists don't know anything special. However, by careful use of techniques developed in related academic disciplines, we may all be able to help make economics a more worthwhile pursuit.

Why don't economists know anything special? Because economics is simply a social science, like psychology; it attempts to find patterns and make predictions about human behavior. Unlike psychology, however, economists are not able to conduct controlled experiments to test their theories. You can put a white rat through a maze to see how fast it will learn, but you can't cut its capital-gains tax to see how fast it'll invest.

So economists are forced to study our very uncontrolled world and argue over which one of the zillion things that happened on Monday caused one of the zillion things that happened on Tuesday. While economists have accomplished much under these severe handicaps -- such as making up cool names like ''M1'' for the money supply -- they have a lot of difficulty when it comes to explaining what the economy was, is, or will be doing.

The good citizen should not despair. Economics is about human behavior, and Sigmund Freud showed us that one could plumb the depths of the psyche by the process of free association. We can evaluate President Clinton's economic plan the same way -- by turning off the laser beam, looking within ourselves and going with whatever pops into our unfocused heads.

In order to get you going, I will share with you some of the insights I reached using this method. But remember, these are just examples -- it's up to each of you to try this on your own.

Q: Should there be more spending cuts?

A: OK, I am envisioning . . . dinner. A bunch of my friends and I are going out to dinner. At the end of the evening we are going to split the check evenly. So what do I do? I eat like a pig. Order the lobster. That's what my friends are doing, anyway, and I'll be damned if I'm going to subsidize their fancy meal.

That's what government spending is. We're all going out to dinner and splitting the check 200 million ways. So you know we don't really need everything we ordered. We could have done without the appetizers. We hardly touched that second round of margaritas. Frankly, if we were paying for it ourselves we would have ordered the chicken. So yeah, definitely. More spending cuts.

4 Q: What will be the impact of the tax increases?

A: I am envisioning . . . a Godzilla movie. Godzilla is the tax. He's attacking a town nestled on a cliff. The people in the town are money.

What happens when Godzilla starts lumbering toward the town, jTC breathing fire and screeching? Do the townspeople stand around, ready to welcome 'Zilla with open arms? No. They run away. Most aren't so foolish as to jump off the cliff to their deaths, but they'll try everywhere else they can think of to hide. Godzilla will still find a few losers in the street when he gets there, but not nearly as many as he thought.

So what we see here is: (1) It's not true that rich people will just sit at home and sulk and stop making money if their taxes go up. That's like avoiding Godzilla by jumping off a cliff. (2) It is true that people will do everything else they can to avoid paying the taxes. So Godzilla's got to think, if all those screaming dollar bills are going to run away anyway, are there some places that he'd rather see them run than others? Maybe Godzilla should stomp on some wasteful tax shelters and get the folk fleeing to more productive parts of town.

Q: Were the '80s really so bad?

A: I am envisioning . . . my co-op. I bought it in 1987 with a five-year balloon mortgage; now the entire principal is due, no one will refinance the mortgage, and the place is worth about half of what I owe on it. So, yes. The '80s were bad.

See how easy that was? Now you try it at home. Perhaps, if we all work at it, we can make a respectable social science out of economics after all.

Joan I. Greco is a television writer.

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