In defense of economic thinking

My colleague Damon Linker recently wrote a piece entitled “How economic thinking is ruining America,” arguing that political considerations such as community, loyalty, citizenship, and the common good have been “sacrificed on the altar of economic profit-seeking.”

As an economic thinker myself, I was bound to find some disagreement with Linker’s view. But there is also a fair amount of common ground. As Linker argues, the years since the 2008 recession have been rough: “Inequality is up, while growth, job creation, and middle class wages are running far below historic norms. That’s enough to drive even the cheeriest American to despair.”

One economic measure, of course, that is not down is corporate profits, which are at all-time highs relative to the size of the economy. The same thing is true for the incomes of the top 1 percent. So Linker is absolutely correct to argue that corporate profit-seeking has been allowed to override political and cultural loyalties and restraints. The middle class has been trampled into the dirt.

But is that really a product of economic thinking? Or is it a product of a broken political system that funnels insider access, tax cuts, and bailouts to the well-connected, while largely ignoring the concerns of the middle class?

Read More At TheWeek.com

10 thoughts on “In defense of economic thinking

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  2. Oh wail ail wail the middle class are in trouble. Well all I can say is welcome to how its always been for the working class.

  3. I think the increased profit are from:
    1. better management standards (corporate finance-wise). This is only over the last 30 years or so, not really since 08
    2. Decreased competition allowing companies to decrease costs faster without having to pass that on to customers
    3. Companies favoring profitability over other values, like increased resilience to corporate failure (deeper mgt talent pools, redundancy etc) or providing better value to the non-shareholder stakeholders (local communities, employees)

    I was going to write about.. continued power of management over labor costs via regulatory capture (government favoring corporate interests over worker interests) and ability to outsource labor and ability to use technology to decrease costs, partly by increasing productivity, partly by improving supplier chains. But if the free market worked “as advertised,” these would just result in lower costs to customers and have profit margins staying stable.

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