Tim Duy has published an interesting commentary on how economists should respond to the incoming Administration’s plans to intervene in the economy to save manufacturing jobs. It takes on traditional economic thinking about trade, growth, and regional adjustments. It argues that frictions that resulted in losses – in jobs, livelihoods, in tears to local social fabric – are real, that they caused the outcome of this year’s election, and they can’t be ignored going forward.
Certainly. What do we do, though, about the demand for and supply of easy solutions? We could re-run history and ask what could have been done 10, 20, or 50 years ago to limit these frictions. But what does that get us?
Today we can ask whether those at the edges of the modern economy can be saved. We have considered that question for many years, and the solutions remain unclear. For example, what about subsidizing the costs of relocation to areas where workers are in greater demand? Is that an easy, simple, and effective solution?
One problem with our thinking here is that we assume that the system wants to solve hard problems. Imagine that instead politicians want to solve easy problems for which they can easily claim credit. Or that in the case of hard problems they know that symbolic gestures are often effective enough given short time horizons.
In the current environment it’s more important that academics remain humble about the limits of our proposed solutions. That we recognize that we’re better at documenting problems than fixing them. That the demand for simple solutions is great. And that politicians are better at solving political problems than fixing long-run structural problems in the performance of the largest and most dynamic economy in the world.