Chương 32: Economists Don't Understand Economics

As Isabella had predicted, it was an article about the stock market crisis.

Mayor Harker hasn't been sleeping well these past few days. Since the stock market crash, his office has been receiving hundreds of letters every day. Some people are crying about going bankrupt, some are questioning why the city government is not doing its job, and some are threatening to get rid of him in the next election.

That morning, he called the administrative director, Humphrey, into his office.

"Humphrey, we have to do something. The stock market is crashing, the economy is going to collapse, we can't just sit here," Mayor Hack said.

"Yes, Mayor. And what do you intend to do?"

"I will gather the best economists and have them advise me."

"An economist?" Humphrey raised an eyebrow slightly.

"Yes. I need to know the cause of this crisis and how to deal with it."

"Yes, Mayor. It's a very wise decision. However, Mr. Mayor, are you aware of the economists' problem?"

"What's the problem?"

"The problem with economists is that they never understand economics."

Mayor Harker was stunned.

"What do you mean by that?"

"What I mean is, Mayor, economists are a very special group of people. They use very complex mathematical formulas to explain very simple phenomena. Then they use very simple conclusions to guide very complex realities."

"For example, if you ask an economist why the stock market crashed, he will tell you that it was because market expectations changed, investor confidence was low, there were liquidity problems, and so on."

"Isn't this wrong?"

Humphrey turned around and smiled.

"Of course, Mr. Mayor. But that's saying nothing at all. It's like asking a doctor why a patient died, and the doctor saying, 'Because his heart stopped beating.' That's certainly true, but it's completely useless."

Mayor Harker frowned.

"So you mean economists are useless?"

Humphrey quickly waved his hand:

"No, no, no, Mr. Mayor. Economists are very useful. Their usefulness lies in the fact that when you need to make a decision, you can find an economist to support your viewpoint."

"What do you mean?"

"For example, if you want to increase government spending, you can find an economist who will tell you that increasing government spending can stimulate the economy, create jobs, and boost consumption."

"If you want to cut government spending, you can find an economist who will tell you that cutting government spending can reduce the deficit, stabilize the currency, and restore confidence."

"If you want to raise taxes, there are economists who support it. If you want to cut taxes, there are also economists who support it."

Humphrey's smile grew even brighter:

"So you see, Mr. Mayor, the greatest use of economists is to provide theoretical support for the decisions you have already made."

Mayor Haque remained silent for a moment.

"Then why should I even bother gathering them?"

"Of course you should call them in, Mayor. If you don't, the public will think you're not taking this crisis seriously. But if you do call them in, the public will think you're seriously studying the problem."

Just then, there was a knock on the office door.

"Come in," Mayor Hack said.

The person who came in was a young man, about twenty-five or twenty-six years old, wearing glasses, and looking somewhat nervous.

Humphrey introduced, "Mr. Mayor, this is your new private secretary, Bernard Woolley. He just graduated from Columbia University with a degree in public administration."

"Hello, Woolley," Mayor Hack said.

"Hello, Mr. Mayor. It's an honor to work for you," Woolley said respectfully.

Humphrey continued, "Woolley will assist you with your daily tasks. He is very intelligent, very hardworking, and very... loyal."

"Okay. Woolley, you make the arrangements for me. I need to gather five of the best economists for a meeting at City Hall next Monday."

"Yes, Mayor." Bernard took out his notebook.

"What kind of economist are you looking for?"

"Inclination? An economist is just an economist, isn't he?" Mayor Hack was stunned.

"Oh, the difference is huge, Mr. Mayor," Bernard said earnestly.

"For example, the mainstream neoclassical school believes that the market will self-correct, and government intervention will only make things worse. The Austrian School goes even further, believing that any intervention is poison and will prolong the crisis."

"Wait," Mayor Hack raised his hand.

"Isn't anyone thinking the government should do something?"

"Of course, Mr. Mayor. For example, the institutional school of thought would say that this is a complex social system problem that needs to be studied gradually. There are also those who advocate for some public works construction, but this is not very popular in academia."

Mayor Hack looked at Humphrey.

"So whose advice should I listen to?"

"It depends on what you want, Mr. Mayor," Humphrey said.

"If you want to follow the orthodoxy and proceed cautiously, summon the authority of the neoclassical school. They will tell you to tighten the budget, maintain confidence, and wait for the dawn—this is the spirit that the president is also conveying."

"What if I want to appear proactive?"

"Then you can look to those non-mainstream scholars who suggest limited intervention. But then you'll need to be prepared for debates with the mainstream economics community and Washington. And their proposals are also inconsistent."

Mayor Harker felt dizzy again.

"What if I gather economists from different schools of thought and have them discuss it together?"

Humphrey's eyes lit up.

"That would be even better, Mr. Mayor. They'll argue endlessly, neither able to convince the other. In the end, you can say that the issue is too complex and requires further study. Then you can form a committee..."

"It's the committee again!" Mayor Hack almost shouted.

"Yes, Mayor. The committee is the best way to solve all problems."

"But the stock market has crashed! The economy is doomed! We can't just let this drag on!"

"Mr. Mayor, please calm down," Humphrey said.

"The stock market crash is indeed a problem, but it's not something the city government can solve. It's a problem for the federal government, a problem for the Treasury, a problem for the Federal Reserve."

"So what can we do?"

"All we can do is show that we care about this issue."

"But in reality, we didn't do anything."

"No, no, no, Mr. Mayor," Humphrey corrected.

"We did a lot. We showed care, we demonstrated determination, we conveyed confidence."

Mayor Haque slumped into his chair.

He said weakly, "Woolley, go and make the arrangements. Gather five economists, one from each school of thought. Have them come to the meeting next Monday."

"Yes, Mayor." Woolley wrote it down, then hesitated for a moment.

"Mr. Mayor, I have one more question."

"What's the problem?"

"These economists' appearance fees..."

Mayor Harker's eyes widened: "An appearance fee? They want to charge an appearance fee?"

Humphrey chimed in, "Of course there's a fee, Mr. Mayor. Economists are expensive. Generally, a consultation with a well-known economist costs a hundred dollars an hour."

"One hundred dollars?"

"Yes. And this is a friendly price. Private companies would charge much more."

Mayor Haq took a deep breath.

"Okay. Then let's pay. From which budget?"

"This..." Humphrey and Woolley exchanged a glance.

"The current budget has been fully allocated, Mr. Mayor. If you require additional funding, you will need to apply to the City Council."

"How long will it take?"

"If all goes well..."

"I understand," Mayor Hack interrupted him.

"Six months."

"Yes, Mayor. You're really getting more and more familiar with our work processes."

Humphrey smiled with satisfaction.

After the meeting, Mayor Hack remained alone in his office. Bernard brought him the afternoon briefing, and Hack called him over.

"Bernard, this economic crisis... I thought Humphrey would at least warn me about it."

Bernard stopped, thought for a moment, and answered seriously:

"I don't think he understands economics, Mr. Mayor. Mr. Humphrey studied classical literature."

Harker rubbed his temples, thinking of the city government's chief economic advisor:

"And what about Dr. Frank Spencer? He's our chief economic advisor."

Bernard straightened his posture slightly, a hint of regret on his face:

"I'm afraid he's even less likely to understand economics, Mr. Mayor."

Harker was stunned: "Why? He's an economist!"

"Yes, Mayor."

Bernard nodded and added, "Precisely because he's an economist."

Isabella finished reading and laughed again.

"That Humphrey is awful."

She looked up at Arthur.

How did you come up with these ideas?

"Observe," Arthur said.

"If you observe carefully how politicians and bureaucrats do things, you'll find that they all follow the same pattern."

"This article will be in the paper tomorrow. I have a feeling it will be more popular than the first one."