Jim Manzi continues his discussion with economist Karl Smith. Manzi has repeatedly asked Smith to explain why Manzi should have any faith in economists’ claims that fiscal/monetary stimulus will boost economic growth etc.
I am going to do a Mises.org on this, but for now I just want to excerpt from what Smith himself describes as a “defense of economics.” I think the term “lol” is used with reckless abandon nowadays, but I literally laughed out loud when I read this:
The second line I offer [in defense of macroeconomic models] is that of experience. That when economists had the helm we really were able to produce results. In the 1980s Central Banks were largely turned over to their economists who produced low inflation and low unemployment by manipulating the overnight lending rate.
Indeed, the two major failures in that period, Japan and the current recession, coincided with the overnight lending rate hitting zero and thus no longer being under the economist’s control. So our basic argument was that we can steady the economy so long as we have control over the overnight rate seems to be validated.