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Ask HN: What is the role of economic advisors to a national leader?

4 points by Eoan ↗ HN
Edit: obviously, I don't know how to get this to show up under 'Ask', or whether that is the most appropriate place for it.

I'd post this as a poll if I could, as that is essentially what I am getting at. I'm hoping for enough responses for a statistically valid sample of the responding population. A previous version of this on another site got one poll response.

I wouldn't be surprised if there are zero responses to the question no matter what I ask, but I'll try to ask a fair question that most accurately reflects the situation, without going into too much detail:

Suppose there was a way for a country to create a lot of jobs without additional government spending. Due to less need for welfare spending or things like the Works Progress Administration that created jobs in the US during the Great Depression, government spending could actually decrease.

However, if one country used the system, other countries would know of it as well, and if they used it, profits of companies selling luxury goods in the first country would decrease. The 'cultural influence' of the first country could also decrease — if the first country was the US, perhaps fewer people would be interested in learning English.

The question is, what role do economic advisors have in this situation? In the US, this is the Council of Economic Advisors: https://www.whitehouse.gov/cea/

I will not quote it due to length. Other countries may have similar things. What best describes what advisors should do?

1) They SHOULD NOT do anything as a result of knowing about a system that does this.

2) They MAY or CAN share this system with the leader of their country.

3) They SHOULD share this system with the leader of their country.

4) They MUST share this system with the leader of their country.

I'd also ask, if economic advisors should not share this system, is there anyone who should? But I doubt I will get many responses even to the first question.

7 comments

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JanAcai
For me it's 3), although I'm no public policy expert. Why wouldn't they discuss a potentially great idea with the chief decision maker?
Eoan
Laziness or arrogance.

Like when the engineer and statistician W. Edwards Deming suggested improvements in manufacturing, but US manufacturers ignored him.

>Why were Deming's views on quality control initially ignored in the United States?

>Following World War II, Deming was largely ignored in the productivity-crazed United States. ... The message Deming made to the United States was that productivity without quality was a dead end. He attempted to teach engineers his philosophy, but the companies they worked for were focused on other things.

notahacker
Without knowing more I'd say the situation is contrived and artificial, and there's almost never a situation in which a nation improving its economic conditions makes its medium run economic output worse because it had never occurred to anyone else to do this and the other countries all copy it better.

There are real world tradeoffs like boosting the value of a country's currency making its exports a little more expensive to foreign purchasers of its manufacturing output, but your question is more akin to 'if I knew of a perpetual motion machine, should I hide it from the boss of my motor company'. The perpetual motion machine doesn't exist, and if it did, the benefits outweigh any potential losses to your company's existing revenue streams.

Eoan
>in which a nation improving its economic conditions makes its medium run economic output worse

It doesn't say that economic output would decrease, only that luxury goods sales would decrease. I will take this misunderstanding into future consideration. It is also a misunderstanding to assume that "the other countries all copy it better": the implication is that when the first country uses the system, it buys fewer luxury goods from other countries as well. However, people would be more divided on the benefit of a country BUYING fewer luxury goods. If people want expensive German cars and they can afford them, let them, right? But everyone in Germany presumably wants Germany to SELL more luxury cars.

Also, in regards to whether an unused system could be beneficial, it's worth pointing out that the overtime system was basically invented in the 1930's, during the Great Depression. Companies suggested it as an alternative to further mandated decreases in working hours.

notahacker
If the tradeoff is if we enact this policy we will have more jobs, a better budget balance and more money collectively and the only downside is our people will buy different types of goods and in particular fewer luxury goods from overseas, I can't imagine why any self-respecting economist wouldn't recommend the policy on purely economic grounds. Assessing which parts of the economy will be worse off and whether there will be a net benefit is literally what the advisers are paid for, and every policy or non-enactment of policy has an opportunity cost.

If the problem is that there exists a cost-free solution to economic growth but other countries adopting it might kill your economic base of exporting luxuries to them if they do it, it's probably safe to assume that either they will do it anyway or that they aren't doing it because they face other political barriers or adverse consequences.

If your solution is protectionism or luxury tax or devaluation or similar it's neither cost free nor something other countries haven't considered and don't have plenty of specific reasons why it's not a good idea for them even if it'll work for your economy.

And time and a half pay legislation not being copied by [e.g] the UK which also had a Great Depression cutting its industrial output, pays great attention to the US economy and generally has more generous labour laws kind of underlines the pointlessness of keeping good ideas secret in the assumption you'll be harmed by everyone else following your lead.

Eoan
>I can't imagine why any self-respecting economist wouldn't recommend the policy on purely economic grounds.

I would like to agree with that, but there's this: https://www.aljazeera.com/indepth/opinion/2012/10/2012102915...

"Most economists are not paid for knowing about the economy. They are paid for telling stories that justify giving more money to rich people."

Or another, more famous quote: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

Is that the case for economists? I can't say for sure. If people don't care whether economists actually try to fix problems, though, then it's more likely that they will not. That's what this question (not precisely a poll, but meant to be) was for.

>If your solution is protectionism or luxury tax or devaluation or similar

It's a way of getting people to work less. Relevant details about why it works 'mechanically' (as opposed to psychologically) include that rich people spend a lower percentage of their income than poor people; rich people tend to buy higher-profit or expensive items, meaning their spending goes to other rich people; limited possibilities for targeted pricing when income inequality is high mean that e.g. there are many homeless people at the same time as many homes are unoccupied; and possibly other things I'm forgetting.

I may not reply again.