Blinder: Hard Heads, Soft Hearts

Blinder, A., 1987. Hard Heads, Soft Hearts: Tough-Minded Economics for a Just Society, Addison Wesley Publishing Company.

“Murphy’s Law of Economic Policy: Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently” (1).

Blinder argues that issues upon which a vast majority of economists agree are things like the link between high tariffs and decreased economic welfare, the bridge between rent controls and decreased housing quality and the connection between decreased taxes and increased employment (2).

An example of bad policy decisions being taken is given relating to Laffer and his intuition that there is a point where too much taxes will actually decrease tax revenue because it will reduce incentives to produce. Laffer used this logic to argue that the US could increase tax revenue by decreasing taxes. Blinder argues that this was uncontroversially seen as being improbably by economists.

“O’Connor’s Corollary: When conflicting economic advice is offered, only the worst will be taken” (4).

Another example of the above corollary is good advice that was not taken: in the early 80s, Reagan grew the federal deficit greatly. This, many argued, would increase interest rates, push the value of the dollar up and hurt exports. This good advice did little to affect policy.

“To economists, the theoretical case for free trade is as natural as mother’s milk” (7).

Blinder presents the case against tariffs against Japanese auto-makers. Then he presents a case for how economists can solve pollution problems by reducing incentives to pollute.

Is there a chance that this trend can be turned around? Maybe. Part of the problem is that economists have not been as eloquent as they possibly could be. Another seems to be a public’s desire for parsimonious answers when the “right” answer might involve a good degree of nuance.