Economist Wise Quotes

There is an old saying, or should be, that it is a wise economist who recognizes the scope of his own generalizations.

The clever economists who tell us that we don’t need British agriculture and that our farms should be turned into national parks seem to ignore the rather obvious snag that an unfriendly country could starve us into submission in a week. But to me a greater tragedy still would be the loss of a whole community of people like

Some very elegant dishes were served up to himself and a few more of us, whilst those placed before the rest of the company consisted simply of cheap dishes and scraps. There were, in small bottles, three different kinds of wine; not that the guest might take their choice, but that they might not have any option in their power; one kind being for himself, and for us; another sort for his lesser friends (for it seems he has degrees of friends), and the third for his own freedmen and ours. My neighbour . . . asked me if I approved the arrangement. Not at all, I told him. "Pray, then," he asked, "what is your method upon such occasions?" "Mine," I returned, "is to give all my visitors the same reception; for when I give an invitation, it is to entertain, not distinguish, my company: I place every man upon my own level whom I admit to my table." . . . He replied, "This must cost you a great deal." "Not in the least." "How can that be?" "Simply because, although my freedmen don't drink the same wine as myself, yet I drink the same as they do." And, no doubt about it, if a man is wise enough to moderate his appetite, he will not find it such a very expensive thing to share with all his visitors what he takes himself. Restrain it, keep it in, if you wish to be true economist. You will find temperance a far better way of saving than treating other people rudely can be. . . . Remember, then, nothing is more to be avoided than this modern alliance of luxury with meanness; odious enough when existing separate and distinct, but still more hateful where you meet with them together.

Still, one should not ignore the upside of political faith: its ability to neutralize the public’s irrationality. A leader who understands the benefits of free trade might ignore the public’s protectionism if he knows that the public will stand behind whatever decision he makes. Since politicians are well educated, and education makes people think more like economists, there is a reason for hope. Blind faith does not create an incentive to choose wisely, but it can eliminate the disincentive to do so. Whether this outweighs the dangers of political faith is an open question.

As the brilliant economist-educator Russell Roberts points out, chroniclers of the cult of celebrity have an extensive pedigree. Writing in The Theory of Moral Sentiments in 1759, Adam Smith points out, 'We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous.' This perfectly anticipates the modern day cult around Z list celebrities. He argues that a fascination with others who are loved is part of our natural desire to be loved ourselves. So a natural obsession with celebrities is funneled toward managers, regardless of their virtue.

In Economics as almost everywhere else, with all our cleverness, we have become decidedly less wise, while knowing more and more about less and less. We have lost the sense of proportion--so indispensable for every economist--while analysing the curiosities of hypothetical economic situations and forgetting what has a bearing on real economic life. In spinning out the fine threads of the New Economics, we forget the most elementary principles of economics, and while stressing what might at best in highly exceptional circumstances we overlook what are almost perennial truths. While proudly parading our elaborate equations we unlearnt that simple common sense which consists in reckoning with human reactions and institutions as they really are.

The economist Paul Romer distinguishes between complacent optimism, the feeling of a child waiting for presents on Christmas morning, and conditional optimism, the feeling of a child who wants a treehouse and realizes that if he gets some wood and nails and persuades other kids to help him, he can build one.108 We cannot be complacently optimistic about climate change, but we can be conditionally optimistic. We have some practicable ways to prevent the harms and we have the means to learn more. Problems are solvable. That does not mean that they will solve themselves, but it does mean that we can solve them if we sustain the benevolent forces of modernity that have allowed us to solve problems so far, including societal prosperity, wisely regulated markets, international governance, and investments in science and technology.

One government policy that libertarians accept is provisions of national defense, since no private solution is likely to prove satisfactory. A private group that attempted to field an army and defend the country would find it difficult to exclude any individual person from the benefits of its protection, since any activities that deterred potential attacks or warded off actual attacks would defend everyone within the country. Thus, most people would not voluntarily pay for national defense provided by a private group, so it is hard for such an activity to be profitable enough to induce adequate private provision. That is, national defenses is what economists refer to as public good. The conclusion that government should provide some national defense applies to narrow self-defense activities, such as fielding an army that deters enemy attacks and responds to attacks that do occur. In practice, however, nations perform many inappropriate actions under the mantle self-defense, most of them harmful. On action that goes beyond strict self-defense is preemptive attacks on other countries, as in the invasion of Iraq. In rare instances preemptive strikes might be legitimate self-defense, and by moving first and preventing extended conflict, a government might save lives and property both at home and in the threatening country...In most instances of preemptive attack, however, the threat is not obvious, undeniable, or imminent. The justification for military action is therefor readily misused whenever leaders have other agendas but wish to hide behind the guise of self defense. Thus, preemptive national defense deserves extreme suspicion, and most such actions are not wise uses of government resources. Another problematic use of a country's self defense capabilities is humanitarian or national-building efforts that purport to help other countries. One objection to such actions might be that the helping country pays the costs while foreigners receive the benefits, but this is not the right criticism. The compassion argument for redistributing income holds that government should be willing to impose costs on society generally to raise the welfare of the least fortunate members. It is hard to see how logic would apply only to people who already residents of a given country.

Rather than be passively nudged into acting wisely, he believes, we can be learn to be risk-savvy with the rule of thumb and so choose to act wisely ourselves.

As our emerging self-portrait makes clear, we are motivated by far more than cost and price. So instead of turning first to markets to mediate our social and ecological relationships, the twenty-first-century economist would be wise to start by asking what social dynamics are already in play. What are the values, heuristics, norms and networks that currently shape human behaviour—and how could they be nurtured or nudged, rather than ignored and eroded?

Rostow hinted at his uncertainty of what might lie over that horizon, briefly acknowledging ‘the question beyond, where history offers us only fragments: what to do when the increase in real income itself loses its charm?’4 But he did not follow his own questioning through, and for understandable reasons: it was 1960—the year of John F. Kennedy’s election bid on a promise of 5 percent growth—and for Rostow, a soon-to-be presidential adviser, it was wise to focus on keeping that plane in the sky, not on pondering when and how it would ever land.

Life on Earth has the chance of another five billion years in its favour, at which point our star, the sun, will start to die. Earth’s Holocene-like conditions could continue for another 50,000 years—as Chapter 1 described—if we humans learn to navigate the Anthropocene without pushing our planet into a far hotter, drier, and more hostile state. The economies that we create could keep on thriving—not growing, but thriving—for millennia too, if we manage them wisely.

First, reframe the purpose of taxes to help build social consensus for the kind of higher-tax, higher-returns public sector that has been a proven success in many Scandinavian countries. And remember, the verbal framing expert George Lakoff advises to choose your words wisely: don’t oppose tax relief—talk about tax justice. Likewise, the notion of public spending is often used by those who oppose it to evoke a never-ending outlay. Public investment, on the other hand, focuses on the public goods—such as high-quality schools and effective public transport—that underpin collective well-being.57 Second, end the extraordinary injustice of tax loopholes, offshore havens, profit shifting and special exemptions that allow many of the world’s richest people and largest corporations—from Amazon to Zara—to pay negligible tax in the countries in which they live and do business. At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide, representing an annual loss of more than $156 billion in tax revenue, a sum that could end extreme income poverty twice over.58 At the same time, transnational corporations shift around $660 billion of their profits each year to near-zero tax jurisdictions such as the Netherlands, Ireland, Bermuda and Luxembourg.59 The Global Alliance for Tax Justice is among those focused on tackling this, campaigning worldwide for greater corporate transparency and accountability, fair international tax rules, and progressive national tax systems.60 Third, shifting both personal and corporate taxation away from taxing income streams and towards taxing accumulated wealth—such as real estate and financial assets—will diminish the role played by a growing GDP in ensuring sufficient tax revenue. Of course progressive tax reforms such as these can quickly encounter pushback from the corporate lobby, along with claims of state incompetence and corruption. This only reinforces the importance of strong civic engagement in promoting and defending political democracies that can hold the state to account.

Some of Becker’s most compelling research concerned altruism. He argued, for instance, that the same person who might be purely selfish in business could be exceedingly altruistic among people he knew—although, importantly (Becker is an economist, after all), he predicted that altruism even within a family would have a strategic element. Years later, the economists Doug Bernheim, Andrei Shleifer , and Larry Summers empirically demonstrated Becker’s point. Using data from a U.S. government longitudinal study, they showed that an elderly parent in a retirement home is more likely to be visited by his grown children if they are expecting a sizable inheritance. But wait, you say: maybe the offspring of wealthy families are simply more caring toward their elderly parents? A reasonable conjecture—in which case you’d expect an only child of wealthy parents to be especially dutiful. But the data show no increase in retirement-home visits if a wealthy family has only one grown child; there need to be at least two. This suggests that the visits increase because of competition between siblings for the parent’s estate. What might look like good old-fashioned intrafamilial altruism may be a sort of prepaid inheritance tax. Some governments, wise to the ways of the world, have gone so far as to legally require grown children to visit or support their aging moms and dads. In Singapore, the law is known as the Maintenance of Parents Act. Still, people appear to be extraordinarily altruistic, and not just within their own families.

For me personally and for the entire Fed, Don’s retirement was a great loss. He is an outstanding economist and a wise policymaker, admired and trusted by colleagues throughout the Federal Reserve System and at central banks around the world.

Fellow economists get very cross with me when I tell them that we face a choice: we can keep pretending we are scientists, like astrologists do, or admit that we are more like philosophers, who will never know the meaning of life for sure, no matter how wisely and rationally they argue. But were we to confess that we are at best worldly philosophers, it is unlikely we would continue to be so handsomely rewarded by the ruling class of a market society whose legitimacy we provide by pretending to be scientists.