Friday, October 10, 2008

Tax cuts and one more reason why a small minority of successful economists might support Republicans

With regard to Mark Thoma's post today, Tax Cut Follies:

First, now or in the near future would be a fine time to raise taxes (on the wealthy) if you first enact and get started more than offsetting stimuli to demand in spending on extremely high return government projects of the type that the pure free market will grossly underprovide due to well proven in economics market problems like externalities, asymmetric information, inability to patent, and many more in any university intermediate economics textbook.

Such projects include alternative energy -- how about stimulating demand by spending an additional $100 billion on that over the next year instead of giving $100 billion to people in tax cuts and asking that it's spent on fashions, cars, and big screen TVs, not to mention Rolex watches and yachts. Wouldn't greatly diminishing the monumental risks of global warming and the resources going to terrorists be a better way of increasing spending to stimulate demand?

I've listed reasons before why a small minority of successful economists would support Republicans:

1) There are relatively few successful university economists who support the Republicans, so there is much less competition for plum and high paying jobs in Republican administrations and propaganda tanks. Becoming a Republican crony can mean a lot of money and/or very high level government jobs, like Mankiw's job as Chairman of the Council of Economic Advisers in George W. Bush's administration. He's also currently a fellow at the American Enterprise Institute. Mankiw has a strong incentive to please the Republicans by misleading for them.

2) He may be an extreme libertarian (more economic than social obviously), and very willing to mislead for that cause, even if he knows it hurts total economic, scientific, and medical growth greatly, and embarrasses him professionally.

3) He may be plutocratic, and willing to mislead for that cause, even if he knows it hurts total economic, scientific, and medical growth greatly, and embarrasses him professionally.

4) He may have Slipperyslopeaphobia -- for details see my blog post.

5) A well intentioned reason -- He may think he can affect change to the historically disgraceful and brain dead Republican party better from the inside than from the outside, and in order to stay inside he can't displease those in control too much.

6) If every intelligent, well trained economist leaves the Republican party, imagine how incompetent their appointees will be. Obviously a party this cronyistic will be extremely reluctant to appoint Democrats. The perfect example is Ben Bernanke. He's a Republican from way back, before the party was taken over by extremists. If he had left, he wouldn't have been appointed to be the head of the Fed by Bush. If all competent economists had left, Bush would just have appointed an incompetent Republican ideologue. So Bernanke's staying in the Republican party left a qualified economist that they could appoint, but obviously his views and understanding of the economy are not simple-minded Republican. His actions have been very Keynesian and intelligent.

I'll add another one which may be applicable to Nobel winner Robert Mundell:

7) Mental instability or illness -- Anyone who has seen the movie "A Beautiful Mind" knows that a Nobel Prize winning economist can suffer from severe mental illness. What evidence is there that Mundell may suffer from mental illness? Princeton economist Paul Krugman writes in his book, "Peddling Prosperity" (pages 87-88):

His academic reputation rests largely on a series of papers he wrote in the early 1960s, as his native Canada wrestled with the question of whether to peg its currency to the U.S. dollar...The fact is that around 1970 Mundell veered off from conventionality in a number of ways. Some of these were superficial: He began to wear his hair long and speak in a slow mumble. Some were more significant: Mundell dropped out of the usual academic round of conferences and seminars, and began holding his own conferences in a crumbling half habitable villa he owned near Sienna. Most importantly, Mundell completely abandoned his former intellectual style; since 1970 he has written little, and what he has tends to be marked by extravagant rhetoric, accusing his fellow economists of "Sheer quackery" in espousing ideas that he himself held when younger.