Thursday, July 14, 2011

No Magic Wand

by Lewis Sage

The fantasy world of Harry Potter, while exquisitely complex in its detail, is utterly simple in its basic structure.  There are a welter of characters, a tangle of plot twists, and heaps of Latinate spells.  But there is also a bright line that separates good from evil, the virtuous from the malevolent.  And that simplicity is a big part of what’s so appealing about the fantasy.  In more sophisticated literature, as in the world of adults, things are a bit more nuanced.
Unfortunately, in the public discourse about the US federal budget, we seem unable to keep more than one fantasy confrontation in our heads at a time.  We imagine that the threat – whatever it is – can be conquered with a final, cathartic battle between good and evil.  The problem is, we can’t agree on whether President Obama or Representative Cantor has the role of Voldemort.  Most of us know we’re frightened (even if we’re only frightened because lots of others are), but we’re not sure exactly what we should fear most.  Well, here’s what I’m scared of, both short- and long-term.
In the short term, I fear unemployment.  I’m deeply fearful because more than 14 million Americans are unemployed, many with little prospect of returning to work any time soon.  There are lots of subtle reasons to be troubled by unemployment, but I’ll settle for the immediate pain of 7,000,000 jobs that vanished between August 2007 and May 2009.
In the long term, I’m afraid that we are collectively unable to behave like adults.  As adults, we are supposed to have a capacity for deferred gratification, a willingness to accept the present cost of future reward.  Instead, we have spent the last fifteen years in a fantasy world where wishing makes it so.  We have wished that systemic deficit spending doesn’t matter when it supports a program or a war we favor, that tax cuts are good because we like having more money in our pockets, that we deserve – to paraphrase the Red Queen – “Restraint yesterday and restraint tomorrow, but never restraint today.”
Which leads to my final worry… for the moment.  In the real world, where spending cuts increase unemployment and tax cuts increase the deficit, I’m worried that we will go on believing that we live in a fantasy world where the Confidence Fairy (who haunts Paul Krugman’s nightmares) can wave an anti-tax wand and we’ll all live happily ever after. 

Dr. Lewis C. Sage likes intersections. Since 1991, he has taught Law and Economics, Mathematical Economics, and the Economics of Healthcare. A former Fulbright Fellow (Bulgaria 1995-6), he teaches an interdisciplinary Honors seminar, Enduring Questions, and is studying strategy in the NFL draft with faculty and students in Sports Management and Psychology. E-mail:

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This blog lives under the auspices of the Department of Economics whose mission has been to hold high the lantern beaming an "economic way of thinking" onto the world. Selfishness, rationality and equilibrium have been central to the teaching of an economic way of thinking rooted in the Renaissance. And, in this regard, the department has faithfully stayed the course. The intent of this blog, thinking out loud..., however, is to entertain exchanges which may challenge the centrality of economics as we teach it.