THE ECONOMIST FALLACIES WEALTH CONVERGENCE AND DIVERGENCE NATURE AND CONVENTION

Saturday, March 25, 2017

THE ECONOMIST FALLACIES WEALTH CONVERGENCE AND DIVERGENCE NATURE AND CONVENTION

There are so many......

 

Here is a good one.

 

People get caught in this one all the time. People like Keynes, Thurow, Piketty, Krugman, etc. 

 

They say, on the one hand, following, say, Keynes, etc., things like 'wide income and wealth disparities between rich and poor, and concentration of wealth at the top of a national economy (whatever that means under globalization)  is bad.

 

So they are against large wealth divergence, rail against it, say government is not doing its job, and something more should be done about it by government.

 

They isolate it artificially to a domestic economy level, and then blame nation state du jour officials for dropping the liberal ball by not regulating this terrible wealth aberration. It is visible, and evil, and controllable, so they argue as pundits. They also say that government can spend for social welfare programs, and act as an engine for recovery from slumps in a domestic economy, arguing that government is smart enough to do that sometimes, and it can even pick winners among choices about how the domestic economy will behave or react to a government stimulus or restraint. They argue that it is the role of government to affirmatively act as a social safety net mechanism for poorer citizens as part of its very job as a government.

 

Now, on the other hand, they take a sweeping view of inexorable global economic tendencies for equalization of economic opportunity, and raise the banner of bringing up all boats by free and open trade everywhere, greatest good for the greatest numbers, comparative advantage, laissez faire, things like that. They don't want governments to try to stand in the way of this benevolent  and in any event inevitable natural process.

 

If it happens to lead to gross wealth convergence across national lines, between rich and poor countries, that is an unavoidable consequence of forces which in any event cannot be stopped or regulated properly by any government. Governments which try only get in the way of unstoppable market forces.

The Economists' Nature and Convention Fallacy: Wealth divergence is conventional, wealth convergence is natural.

One might also point out that defining wealth divergence as national, while defining wealth convergence as global, is a different, but related, Economists' Fallacy. 

We can save this different economists' fallacy, and further discussion of it, for a later post. 

It brings into play the conservative economists' side of the nation versus globe distinction very nicely.