Keeping it on the road: a metaphor for the economy?
Each metaphor has the potential simultaneously to inform and misinform: Every one contains some elements of truth but is necessarily incomplete and potentially misleading. In my view, a "useful" metaphor provides more insight than distortion.
A favorite source of metaphors for the economy is the automobile. Politicians promise to "jump-start" the economy, to "look under the hood and see what's wrong" with it, to "turn it around and get it moving in the right direction," and to "fine-tune it."
The first frame of a recent political cartoon depicts the president and an opposition leader in a car labeled "U.S. Economy." The opposition leader throws out a toolbox labeled "Stimulus Plan." The next frame shows a stalled car and the president asking for his toolbox. This cartoon provides a good point of reference for considering just how apt this metaphor really is.
The automobile metaphor is, unfortunately, both common and prejudicial. Specifically, the seemingly neutral metaphor distorts one's view of a market economy and creates a strong presumption in favor of an interventionist stance. In this paper I explore how the metaphor provides a biased perception of an economy's tendencies and of government's abilities. I also describe the automobile/mechanic combination that might be required for the metaphor to be fitting, and I suggest an alternative metaphor.
Steering the Economy
Suppose that a car is in good running order. Even a car in good repair requires steering. Most economists once accepted that the economy, like an automobile, requires continual steering. The 1966 Economic Report of the President is typical: "Compared with the previous cyclical record, the postwar recessions have been far shorter, considerably milder, and substantially less frequent.... This improvement in the postwar record was aided by the deliberate discretionary steps taken by the government...."(3) In this account, the government uses discretionary fiscal and monetary policy to steer the economy along the path of relatively smooth growth. The report contrasts this picture with what allegedly went before, the weaving path followed by a laissez faire economy.
Even as this view was in its ascendancy, Milton Friedman leveled a series of devastating attacks.(4) Incorporating his criticisms into the driving metaphor yields surreal results. If the government is a driver, it is one that suffers from severe visual impairment. We never know where we are along the road or what turns or twists lie ahead.
Being deprived of acute vision is not the only problem. The would-be driver must reckon with the system's steering linkages. A market economy does not react to steering as a car does. Our knowledge of the actual economy's linkages is profoundly deficient. Worse than this, the linkages change depending on, among other things, what economic actors expect government to do. Rather than steering a Ferrari, the driver struggles to direct a Model-T with linkages cobbled together by Rube Goldberg on a bad day. There is more: Actors in the economy routinely work to influence policy; this is like having the steering wheel try to direct the driver's hands.
Still, we must do something, right? What happens without some attempt, however clumsy, to steer the car? The answer is that it will "steer" itself, albeit with occasional lurches. Both economic analysis and historical evidence say that the market economy is a self-directed mechanism. Business cycles happen, but market forces put the economy back on track. The "car" has an automatic pilot.
That might not be good enough. The Council of Economic Advisors, quoted above, says that stabilization policy makes cycles less intense. Maybe even a myopic driver cursed with an unreliable and possibly perverse steering mechanism is better than the automatic pilot.
Probably not. Christina Romer reports that the apparent reduction in cyclical severity results from changes in how we construct estimates of economic activity. Using a consistent technique, she finds no evidence of increased stability since government began to pursue discretionary anticyclical policies. While Romer's findings are not definitive, they suggest that the Council gave the government credit for a statistical apparition. (5) Romer's findings do not imply that government actions have no effect. Rather, they question whether policy actions that have been taken have predictably beneficial effects on economic activity.
Further, government policies can make matters worse. As a spectacular example, many analysts conclude that the Great Depression's enormity resulted at least partly from government mistakes: Both monetary policy and fiscal policy were contractionary during the Depression's early stages, and the Smoot-Hawley Tariff added to recessionary pressures. These actions are consistent with having the Keystone Kops, not a competent driver, directing the economy along the road (or, rather, into a ditch).
Fixing the Car
The cartoon's opposition leader throws out the toolbox just before the car needs repair. If only the kit were still available, repair would be forthcoming. The picture is clear: The economy is a lifeless mechanism that needs intermittent repair, not just steering. A presumably competent mechanic, acting in the public interest, must undertake the repair. Both aspects of the analogy are dubious.
It is not obvious that market economies require "fixing" of the type depicted. Being human institutions they are imperfect, but this does not mean they are broken. Ours is a world of imperfect information and limited resources, one where undesirable and even horrible things happen. Someone seeing these events might conclude that institutions must be changed. Such temptation should be resisted, however, unless we can expect the new institutions to be better than the current ones.
Any repair must be effected by government. Government, however, differs from the cartoon's driver/mechanic in two important ways: It is not distinct from the mechanism being repaired, and it does not have detailed knowledge of the mechanism being repaired. Government is not a disinterested, informed agent, separate from the economy. Rather, it is part of a larger system, subject to pressures to serve specific interests. Marxists argue that business interests mold government to serve their purpose. One need not adopt this extreme view to recognize the metaphor's limitation. Further, even if government agencies were disinterested and dedicated to serving the general interest, they have limited information. Both diagnoses and repair programs must contain guesswork.
Fine-Tuning the Car
The economy-as-mechanism metaphor frequently involves calls to "fine-tune" the economy. This term's meaning is not obvious. If fine-tuning involves setting the car's timing and then letting it run, then the metaphor suggests relatively moderate government involvement. For example, one might envision setting up a tax-and-transfer system in which net flows to the government are cyclical, buttressed with a program of unemployment insurance. Indeed, most modern economies have such "automatic stabilizers." Of them, Robert Gordon says, "The Great Depression would have been considerably less severe if the high postwar marginal tax rate ... had been in effect during 1929-32." (6) (If automatic stabilizers indeed worked this way; but if the economy since the Depression is as cyclical as earlier, as Romer reports, something is wrong. The implication seems to be that either discretionary policy has been destabilizing or the economy has become inexplicably less stable, offsetting the stabilizing effects of automatic stabilizers.)
This fine-tuning of the structure to make it less rickety differs from tine-tuning of the mechanism while it operates. This second view of fine-tuning is an extreme version of repairing the inherently flawed machine when the mechanic diagnoses serious difficulties, discussed above. Calls for this sort of fine-tuning are subject to the criticisms leveled against "Fixing the Car." In any event, using the "fine-tuning" aspect of the metaphor should be avoided because it confuses, while a metaphor should inform.
Figures of speech, Donald McCloskey says, "think for us," so we should choose them carefully. (7) Given our infatuation with automobiles and our concern with their performing reliably, using this analogy predisposes us to a possibly unwarranted view of the economy's behavior and the government's role in directing it. We should use the analogy with caution, if at all.
Friedrich Hayek's Nobel Memorial Lecture offers an alternative, along with sage advice: Given the limited knowledge we can master, doing more good than harm requires using available knowledge, "not to shape the results as a craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does...." (8) This metaphor recommends humility but not inaction. The government/gardener must define and enforce property rights, a daunting task when common-property issues related to the environment are considered; establish and execute anti-trust policy; define and implement monetary policy; and so forth. There is much to do and much room for disagreement about what to do. This alternative metaphor points out the longer-term (and uncertain) nature of policy actions. It warns us not to expect instant gratification.
Of course, there is vast room for debate about how the gardener should intervene. Analysts favoring much government involvement can use this metaphor to state their case. Indeed, early in his administration, President Clinton spoke often of "growing the economy." At the other end of the spectrum, critics of government activism (like Hayek) use the metaphor to caution against too much of what they view as meddling. This situation is as it should be. A metaphor should help us to organize our thoughts and make our case. It should not prejudge the argument.
The economy-as-automobile metaphor promotes activist government policy. A more neutral metaphor, the economy as a garden, allows one to illustrate and even advocate roles for government but does not implicitly insinuate that a hands-on policy predictably improves our economic lot.
1. Raymond Gozzi, Jr. "Our Inflationary Language: A Metaphor of Communication," ETC., 50, No. 4: 478-481, 1993-1994.
2. Raymond Gozzi, Jr. "The Metaphor of the Market," ETC., 47, No. 4: 403-406, 1990-1991.
3. Council of Economic Advisors. Economic Report of the President, 1966. Washington: Government Printing Office, 1966.
4. Milton Friedman. A Program for Monetary Stability. New York: Fordham University Press, 1960.
5. Christina Romer. "Spurious Volatility in Historical Unemployment Data," Journal of Political Economy 94, No. 1: 1-37, 1986.
6. Robert J. Gordon, Macroeconomics, Third Edition. New York: Little, Brown, 1984.
7. Donald N. McCloskey. The Rhetoric of Economics. Madison: University of Wisconsin Press, 1985.
8. Friedrich August von Hayek, "The Pretence of Knowledge," Nobel Memorial Lecture, December 11, 1974; reprinted in American Economic Review, 79, No. 7: 1-7, 1989.
J. Wilson Mixon, Jr. is Dana Professor of Economics in the Department of Economics at Berry College (Mount Berry, Georgia). The author thanks Robert Frank, Raymond Gozzi, Jr., and Michael Patrono for helpful suggestions.
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|Author:||Mixon, J. Wilson, Jr.|
|Publication:||ETC.: A Review of General Semantics|
|Date:||Sep 22, 1995|
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