Earth to Talking Heads: Cutting through the punditry on economics
(formerly: Pundit's Guide to Economics)
Chapter 1.2: Candidates for Best Metaphor
Some of the candidates: The Cave Man, the Natural Force, the Machine, the Small Farm.
The Cave Man. A kind of combination of the Invisible Hand with the Law of the Jungle, in this metaphor everyone looks out for himself, goes out into the world, comes back with the paycheck and takes care of his own cave. It may be the modest cave of the individual or the grand cave of the government. No need to look to a larger explanation. If you can’t make it, you suffer and fall. Hard life, but discipline and order require strict Darwinian discipline.
The Natural Force. This metaphor suggests that the economy is not the result of human behavior, but the expression of a natural force to which we adapt, like weather or geography. There is a natural rate of interest, akin to barometric pressure, which may lie obscured behind central bank intervention, but it is real, if hidden from direct view. There is a natural rate of unemployment which balances inflation and output, again not directly observable, but as real as the Invisible Hand. Attempts to adjust the economy are just attempting to adjust the readings on the instruments and without effect. They make matters worse if they encourage behavior that will contradicts the inevitable turn of the force.
The Machine. This metaphor differs from the Natural Force in that the manipulations of policy actually produce outcomes, and in a mechanically efficient manner. When the machine is tuned to its finest pitch, it will find the road, it will replicate the experience of the past. If inflation is high, hit the interest rate button. If government deficits are high, cut spending. Both the Natural Force and the Machine depend on more complex assumptions than the Cave Man or Invisible Hand, but a metaphor does not state its assumptions. They are implicit. The meaning most often transferred by the Natural Force is that we should stop meddling and accept what comes. By the Machine, that we should let the engineers do it. If the ship is on the rocks, it is a matter of engine speed.
The Family Farm. A metaphor that does involve steering, and assumes an evolution in the economy, one that has a winter and spring, is the metaphor of the small farm. One of its principal advocates, Robert Shiller, put it this way:
“Why is there such strong political support for fiscal austerity, for government cuts and layoffs, at a time of widespread unemployment? Maybe it’s because we have the wrong metaphor stuck in our minds, and it’s framing policy choices in a misleading way.”
“Consider our current thinking about taxes and government spending. We seem caught up in a “family belt-tightening” metaphor, in which the nation is a family that has outspent its income and is trying to get back in control. The family must cut profligate spending, save and pay down debts. It’s a powerful thought, of course, because we know that mismanagement of household finances can lead to a family’s ruin.
"But … this metaphor, when applied to the national economy, is fundamentally misleading. What is smart for the family is not smart for society as a whole. This idea, sometimes known as the paradox of thrift, is that when we all tighten our belts at once… we end up failing to save more, and instead are all worse off.”
("How National Belt-Tightening Goes Awry," New York Times, May 19, 2012)
In a previous piece:
On a traditional farm, when winter comes and there’s no need for planting, fertilizing or harvesting, it’s time for infrastructure projects. Farmers fix their barns, build fences or dig wells — important tasks that could be done in any season if there weren’t more pressing jobs to do.
If the winter is unusually long and cold, planting time is delayed and additional projects are undertaken. It’s all very simple and sensible: the idea is not to let people sit around idle, and to use down time to get important things done.
("Making the Most of Our National Winter," NYT, Oct. 15, 2011
Metaphors are the nut of widely held beliefs. They are useful to simplify complex issues, but there is no logical connection between the metaphor and the system to which it is applied.
The pundit should simply recognize the metaphor in play, and choose to challenge it with another, or simply accept it and debate within the elements of the particular metaphor. That is, for example, with the cave man, introduce the cave man’s wife who does the budgeting and whose prudence may argue for cooperation with the neighbors in the matter of children. The temptation to expose the faults of the particular metaphor with logic or evidence should be avoided. Once accepted, the metaphor becomes the basis for intuition and filters information. Logic is often treated as sophistry.