There’s really no such thing as ‘the economy’
What matters is creating conditions that let people make good decisions, William Watson says.
‘The economy’ is just these tens of millions of people interacting in myriad ways.
I spent last weekend helping to teach 25 Canadian journalists about how economists think about the world. It’s a program the Fraser Institute puts on, in the belief that better-informed journalists will help produce a better-informed public — to the extent the public listens to journalists, that is.
Journalists are fun to teach. They ask questions for a living. And, like economists, they tend to be skeptical. So, unlike in many university courses, there’s lots of lively discussion and no concern at all about whether what’s being talked about will be on the exam. There is no exam.
But in their economic views — at least coming into the workshop, though maybe not leaving it — journalists are a lot like other Canadians. Which is to say their instincts are classically Keynesian. Whenever my fellow instructors and I talked about lowering taxes, withdrawing subsidies or ending supply management, the question always came whether the change would be good for “the economy.”
“Feed the beast” is an expression journalists know well. Their beast is the vast expanse of empty pages or silent hours of airtime that have to be filled every day. Like most Canadians I talk to, they seem to see the economy the same way, as a beast that has to be fed and placated.
It’s fed with government spending and placated by Bank of Canada governor Stephen Poloz, our designated beast whisperer. When it becomes morose or angry, trouble follows.
In one exchange, we were talking about whether a lawyer deciding to stay at home and take care of her kids while they were young would be good or bad for “the economy.” At that point, I found myself paraphrasing Margaret Thatcher’s famous dictum “There is no such thing as society.” She is still regularly pilloried for it, but it’s true: There really is no such thing as society.
There are only the individuals, families, groups, associations and organizations that make it up. They are all so disparate that it’s silly to think of “society” as an organic or any other kind of whole.
The balance of opinion in Canadian “society” may believe this or that. But name something every single Canadian agrees on — OK, apart from how it’s good when we win gold medals in hockey.
In exactly the same way, “there is no such thing as ‘the economy.’” There are only the people, groups, associations, etc., that make it up. “The economy” is just these tens of millions of people interacting in myriad ways. And they do want to interact. They want to work, earn, spend, save and so on. What we’re about in economics is creating conditions whereby they can do so with as little encumbrance as possible.
In this sense, our lawyer weighing the cost of child care against the benefits of going back to paid work is the economy. Whatever she decides is best for her is best for “the economy.”
True, if she does stay home, law firms may begin to worry about a shortage of lawyers. But, if so, there’s an obvious solution: Pay her more. Or pay for her daycare. As for the rest of us: Should people really be required to leave their kids with others and go out and earn income so we can all benefit from their greater purchasing power by selling them more of whatever it is we produce?
If we all worried less about “the economy” and more about creating conditions for people to make good decisions for themselves, we’d all be a lot better off.