Thursday, July 31, 2014

The Trouble with Non-Economists talking about Economics

Murray N. Rothbard once said:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

This maxim applies even more so for academics, who, unfortunately, oftentimes mistakenly presume that possessing superior knowledge in their respective fields of expertise necessarily means that they possess superior knowledge over ALL matters. Perhaps due to vanity, academics tend to suppose that all of their prejudices from A to Z hold value for no other reason than they are academics.

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Unfortunately, many academics outside the field of economics who possess little to no knowledge about even the basic fundamentals of economics do not hesitate to make sweeping pronouncements about the subject. A good example of this is one Robert J. Fouser, who is an associate professor of Korean language education at Seoul National University.

Now I have never met Professor Fouser and I have never spoken to him. All I know about him is that he is a Korean language professor at Seoul National University. Therefore, since all I know about him is his occupation, I will give him the benefit of the doubt and assume that he is an excellent linguist and an expert in the Korean language. In fact, I will go further and even assume that he is a gentleman whose only wish is for everyone in the world to be happy. However, that does not mean that his opinions about anything outside of his field of expertise carry any more weight than the opinions of anyone else.

That did not stop Professor Fouser from pontificating about the state of the Korean economy or the need for “economic democracy” in his editorial in The Korea Herald.

He began by saying:

Talking to ordinary people is the best way to check the pulse of a nation. Last week, I was lucky to be able to take the pulse of Korea through long talks with friends who also happen to be ordinary people. The talks paint a picture of a nation deeply troubled by worry and self-doubt. Above all, the overwhelming message is that the Korean dream is slipping away.

What sorts of criteria must people meet in order to be considered “an ordinary person?” He does not say. Furthermore, assuming that “pulse of Korea” means “the overall mood of the Korean people,” then is talking to a few friends all that is needed to discover the mood of this entire nation? If that's the case, I think all those people at Pew Research Center should quit their jobs and find more meaningful employment elsewhere.

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He also adds rhetorical flair when he says, “Opportunity comes through reforms that break down barriers and help create fair competition.”

Just what does “fair” mean exactly? The fact of the matter is that there is no objective standard of “fairness.” What is “fair” tends to be strictly in the eye of the beholder. So what does Professor Fouser mean when he says “fair?” I guess we will never know. But even if we did get to learn what he thinks the word should mean, would it matter? I think not.

Just like so many unemployed hipsters who think that they have “figured out” what capitalism is, Professor Fouser also felt confident enough to give his diagnosis when he said:

The essential problem is that capitalism, particularly the variety that developed in Korea, relies on expanding markets for its prosperity.

Where have I heard that from before? Oh right, it was Karl Marx who said it first in the Communist Manifesto when he said:

The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connexions everywhere.

You'd think that the Ghostbusters would have gotten around to taking care of the ghost of Karl Marx by now.
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Never mind that capitalism is not actually a conscious living being but merely an idea; an economic system which is defined by the private ownership of property. Never mind that capitalism is merely an economic system that allows people the opportunity to pursue their desire to seek greater prosperity, which is not the same as a need to seek greater prosperity. Never mind that prosperity can be had even without “expanding” to new markets abroad. As long as there are any human needs that are unsatisfied, there is no limit to do business, even within Korea's own humble market.

But why try to explain all that when he already knows what “the essential problem of capitalism” really is?

Then Professor Fouser went on to say:

A relatively small number of nations with technological advantages monopolized high-value goods. These nations boomed because they had a growing consumer and production base at home and competitive advantages in exports... Japan, once known for its massive trade surpluses, has seen a trade deficit for 24 months in a row since June 2012.

What does it mean to monopolize something? A monopoly occurs when a single business entity owns all the market for a given product or service. By definition, there can be no other competitive agent. When was the last time any country in the world had a monopoly on any good? I will await patiently for that answer.

Next, is having a growing consumer and production base and competitive advantages in exports all that are needed to get rich? They are certainly important, but they are not the be-all and end-all of gaining riches. If they were, India would be one of the richest countries in the world, and Switzerland would be one of the poorest! Professor Fouser did not mention a single word about other necessary qualifications that a country has to meet in order to break away from the chains of poverty such as the supremacy of the rule of law, the reliability of institutions, low levels of government corruption, the importance of culture, work ethic, education levels, women's rights, the effects of war and peace, or history.

Even if he had mentioned all of that, he would have only begun to scratch the surface about how some societies get rich while others remain poor. But why worry about such fine details? It's all about the Big Picture, I'm sure.

It's like as though no one in the history of the world has ever attempted to study this subject before!
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And just what the hell is wrong with trade deficits? If trade surpluses are so great, seeing how the United States ran a trade surplus in nine out of the ten years of the Great Depression, the 1930s should have been a ten-year long party for Americans!

Conventional wisdom seems to go like this – The Japanese economy's performance has been lackadaisical. Japan has had trade deficits for twenty-four months in a row. Therefore, trade deficits must be bad.

Then, using that same logic, seeing how the United States ran a trade surplus for nine out of ten years during the Great Depression, is it correct to say that trade surpluses must be bad?

Neither a trade deficit nor a trade surplus means a damned thing when it comes to the overall health of an economy. There are many reasons, some of them known and others unknown, as to why an economy flourishes or flounders. Trade deficits and trade surpluses are not one of them. This may be difficult to understand for many people but, believe it or not, economies are far too complex to draw simplistic causal connections.

This should be your level of skepticism when someone claims to have a simple solution to fix the economy.
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So, after having used shoddy research methods, normative statements that can mean anything depending on the reader, and one economic fallacy after another, Professor Fouser finally says:

Focusing on inequality is the first step toward restoring the Korean dream. To do so, Korea needs to move beyond the din of petty politics and revive the national discussion on “economic democracy.”

At this point, I ought to explain how the entire concept of “income distribution” is tendentious; that the concept is flawed from the very start because it takes the existence of wealth for granted, that wealth exists somehow – never mind how it came into existence – meaning that the only thing that people need to be concerned about is that it has to be distributed and apportioned among everyone. Never mind who is going to do the apportioning or how or for whom and damn the morals and damn the consequences!

But nitpicking the arguments that he stated alone were exhausting enough as it was.

I'll say it again. I'm sure that Professor Fouser is an excellent linguist and an expert in the Korean language and a gentleman of noble intent. But perhaps it might be prudent for him (and others) to stick to what he is good at and leave the subject of economics to economists.

Oh, wait.  Never mind.
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