Advancing a Free Society

Wishful Thinking Isn’t Economic Analysis

Saturday, April 7, 2012

In the 1985 Reith lectures, broadcast by the BBC, the OECD economist David Henderson coined the phrase “do-it-yourself economics.” These, he argued, were the practical ideas that ordinary people use to understand the economic world around them. In the world of DIY economics, he noted, public spending and exports are good because they create jobs; factories that produce things are more deserving of support than offices that produce intangible services; cheap goods made by foreigners threaten our jobs; and whatever is wrong, it is the government’s duty to do something.

DIY economics is alive and well in many countries. I’ll give three examples: hostility to banking, support for revenge taxation, and demands for more fiscal stimulus. Something of interest in all three cases is the length of causal chains. In the world of DIY economics there is never more than one step from cause to effect. This is one reason for its appeal. DIY economics is concrete and intuitive, and everyone can understand it.

HOSTILITY TO BANKING

The Occupy Wall Street and Occupy London movements have their roots in DIY economics. They contrast bankers’ bonuses with spreading unemployment among the people who make things with their hands. They blame banking for everything that has gone wrong since 2007. This is not an unrepresentative minority; a Pew opinion survey in October 2011 found that 39 percent of Americans supported Occupy Wall Street, more than would have supported the tea party at the time.

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