Fun reading on economic trends for fans of the `dismal science'
Washington Bedtime Stories: The Politics of Money and Jobs, By Herbert Stein. New York: Free Press. 381 pp., $19.95. There aren't many witty economists. Practitioners of what has been called the ``dismal science'' are more likely to be boring than amusing. Herbert Stein, chairman of the Council of Economic Advisers under President Nixon, is a rare exception.
When Mr. Stein chooses, he can entertain as well as inform. His humor is frequently sardonic, reflecting considerable skepticism if not cynicism. But since these essays primarily deal with national economic policy where there is often a large gap between the word and the fact, that may just be realism. In any case, Stein's wry wit makes many speeches and essays in this collection fun reading for those with an interest in economics.
The book contains 43 short pieces. Some of the humor, particularly in the talks to economic associations, may be in-house - for economists, or those who follow the economic scene closely. Sometimes the theme of one article may be repeated in another article. Some readers may have seen some of the essays published in the Wall Street Journal, Newsweek, Fortune, or Commentary.
After almost 50 years in Washington as a bureaucrat, economic researcher, presidential adviser, observer, and commentator, Stein has learned much - including humility. ``Economists,'' he says, ``do not know very much.''
That may be no surprise.
Stein slyly adds, however, that ``other people, including the politicians who make economic policy, know even less about economics than economists do.''
There are some 110,000 economists in the United States, according to a survey by the Bureau of Labor Statistics. Stein is one of an estimated 15,000 of these economists working in Washington, of which about 11,000 are with the federal government. He's a senior fellow at the conservative American Enterprise Institute.
``Economists who are selling consulting, lectures, and writing undoubtedly find that the market wants clear, firm opinions,'' notes Stein. ``True, the market is large and diversified and there is a niche in it for economists who reveal uncertainty, because some audiences find candor refreshing, once in a while. But on the whole, certitude pays money.'' Certitude also pays in attention.
``The media will only quote the economists who have unequivocal opinions. If you tell the reporter that you don't know, he won't quote you,'' notes Stein. ``So whatever may be the distribution of uncertainty among economists, the public only gets to hear from those who have certain opinions.'' (Stein suspects that personal history has much to do with the opinions of economists. It's certainly not just a matter of the facts determining their views, because the economic facts are hard to determine.)
Politicians also like certainty in economic views, particularly if it goes along with their predilections.
``There is a saying among politicians that you should not propose any policy that cannot be explained on a bumper sticker,'' writes Stein. ``That is probably a little extreme, but explainability is certainly a limit on the ideas that a politician will explain.''
President Nixon, he recalls, hesitated to close the ``gold window'' - an aspect prior to 1971 of the international monetary system - until he figured out how to explain such a step.
But if economists do not know all they would like to know or claim to know and politicians do not make very good use of what economists do know, why does the US economy work very well by historical standards?
One reason, Stein explains, is that policy is the outcome of a group process in which there are checks and balances and continuous opportunity for revisions. Thus there are restraints against extreme changes of policy to which the economy cannot adapt. When there have been follies, they are remediable.
He concludes: ``What makes the economy function well is that a hundred million people get up every morning and go to work, doing the best for themselves that they can. As long as that happens the economy will be strong enough to resist policy errors, within a considerable range, and provide time for corrections.''
It is such intelligent observations that make this book worthwhile.