It just goes on and on, this talk of confidence, animal spirits, and what not. It now seems pretty plainly true that the thrust of prescriptive macroeconomics is propaganda. That's why, in this post, I wasn't even joking when I asked whether anyone had empirical evidence for the poor economic effects of state-sponsored propaganda, or whether we've just given up on it because we think it's wrong.
Anyway, Robin Hanson, picking up on the macro-as-mind-control meme writes:
The consensus among macro-economists seems to be that people can in fact be fooled by such stimuli, but as Tyler indicates, it is not clear which policies most fool us. In particular, the more public attention we give to the stimuli, the less they might work. We might make people realize that they need to compensate via saving, and the more we scare folks into thinking we need huge stimuli, the more we might scare them away from normal economic activity levels.
So should we stop explaining macro-economics during this crisis, and stop saying how desperately we need stimuli?
The answer, of course, is that no one knows–especially not the macroeconomists!
Will Ambrosini is annoyed by all the macro bashing, and says that one can see that modern macro is successful, if one knows about the best new stuff. But when asked in comments what advice he'd give the president, Will says:
I’d have him give speeches about positive prospects for growth (”your company will turn the corner! your wages will go up!”); I’d have him talk about how this recession is a short term bump in the road. No more talk about how shitty things are (without, of course, denying the statistics… I assume Obama’s a better rhetorician than I am). Pessimism feeds on itself so to the extent the president controls expectations, he should try to improve them. Even though I don’t think the President has that much control over expectations, I think Obama’s rhetoric of transformation is more useful than his rhetoric of crisis.
I’d advise him that any actions he takes should reinforce his positive message.
Well, why not try this?
Somebody please tell me why anyone thinks Larry Summers is better at mass mind-control than Scarlett Johansson?