Can Obama Lead the U.S. Out of Recession?

Russ Roberts rightly says “no,” and also strikes the right note of professional modesty:

So it’s a time for humility rather than hubris in my profession. Obama’s economic team, for all its brain power and good intentions, is in uncharted territory. There’s no recipe or manual or roadmap for getting the economy back on track. No one is quite sure how to correct imbalances in financial markets and the housing market. And no one knows how to create confidence, the biggest element lacking in the current economic climate.

No man or woman runs the economy. No man or woman or team of people can possibly plan the evolution of the economy in the coming months. America will come out of the recession but the time and pace are unknown. Obama can help. But he can just as easily slow down any recovery. Some part of the current mess we’re in is the result of erratic government policy that has added to the uncertainty facing consumer, investors, and entrepreneurs.

I certainly don’t mind aggregate demand economics as long as folks realize the limits of the stuff. I take it that one of the main lessons of living macro is that a stable framework of well-wrought rules tends to do better in the long run than periodic attempts to trick folks with the government’s amazing money-printing and money rearranging powers. I think this sort of thing would get through to people better if it were possible to to communciate the economy’s strategic micro-foundations: an economy is a massive, immensely complex coordination game. Maybe we’d like to think that there are Big Chiefs with scalpels and tweezers for fingers, but the fact is Big Chiefs have hams for hands. If the economy is a glassed-in ant colony and a recession is a confusion of non-connecting tunnels then “corrective” government intervention is banging the glass with a fat fist, like Fonzie banging a Jukebox. Barack Obama may be one cool cat, but the government ain’t no Fonzie. Mostly you get disoriented ants.

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