Monday, March 06, 2017

Hey, wanna balance the budget?

I have often commented that government budgets are nothing but a reflection of our priorities and, therefore, our moral decisions.  But then, well, nobody cares for my comments anyway!

That kind of a bottom-line on budgets as priorities is easily conveyed through a wonderful "game" that Brookings has put together.  In this game, the player is asked to figure out ways in which the federal debt can be decreased.  For this, the player has to first identify three goals as the targets while working on balancing the budget.  I chose the following: Climate change, social safety net, and investing for the future.  Within each, the game offers specific policy proposals to choose from, the resulting action adding to or decreasing the debt.

Those three reflect my priorities.  It will not be any surprise to anybody who has known me even for a couple of years that I went with a carbon tax; increase in social security payroll tax; and enacting immigration reform.

It is all about the priorities.  Budgeting and economics require us to make clear upfront the question that a graduate school professor talked to us about in his guest lecture: What do you want to maximize?

Answering that question is not the same as answering 2+2 = 5.  What we try to maximize depends on our preferences, which means I am making moral decisions--like how enacting immigration reform is to me not merely a budgetary issue but also a statement on what it means to be human and to respond to the trials and tribulations of the undocumented and their children.

Even after this step, it is not as if economics is a science. Far from it.
Economics provides the illusion of science, the veneer of mathematical certainty.
 It is a big-time guessing game, in which the experts do provide all the ceteris paribus caveats and the degree of confidence that they have.  However, when talking with people in the real world, they simplify the message and let people believe that it is all science.
We economists should be more humble and honest about the reliability and precision of statistical analysis.

So, go ahead, play that budget game.  Think for yourself, instead of outsourcing "thinking" to an economist or--worse--to this president!

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