Last fall and winter’s brouhaha over the so-called economic stimulus package got me thinking about how far off target most people are when they talk about “the economy.” To hear the politicians and commentators tell it, the economy is a big machine located somewhere in Washington, D.C. That machine requires a skilled operator, and elections are more or less occasions for choosing that operator. Sometimes the machine slows down and needs a stimulus — perhaps an infusion of cheap credit, or government spending, or even tax cuts. At other times it risks overheating and needs to be cooled down — perhaps higher interest rates or a tax increase.
This misapprehension is helped along by a good part of the economics profession, many of whose members see themselves as the aspiring mechanics.
To state the obvious: an economy isn’t a machine….