Not actually an economist, of course, but Peter Drucker speaks my language — from one bystander to another:
Schumpeter also knew that today’s short-term measures have long-term impacts. They irrevocably make the future. Not to think through the futurity of short-term decisions and their impact long after “we are all dead” is irresponsible. It also leads to the wrong decisions. It is this constant emphasis in Schumpeter on thinking through the long-term consequences of the expedient, the popular, the clever, and the brilliant that makes himi a great economist and he appropriate guide for today, when short-run, clever, brilliant economics — and short-run, clever, brilliant politics — have become bankrupt.
From ”Schumpeter and Keynes,” a chapter in The Ecological Vision, originally published in Forbes, 1983.
I read that within minutes of seeing Keynes’s famous passage in my feeds, via Krugman:
But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.
First let me say I don’t like the weather metaphor. Economic crises are largely affected by economic theories and ideas — for example, some people are suggesting this crisis was caused by widespread faith in laissez-faire. In turn, major economic crises tend to change people’s theories and ideas. Keynes himself understood how ideas change (in the very next quote after the last):
To understand my state of mind, however, you have to know that I believe myself to be writing a book on economic theory which will largely revolutionize — not, I suppose, at once but in the course of the next ten years — the way the world thinks about economic problems. When my new theory has been duly assimilated and mixed with politics and feelings and passions, I can’t predict what the upshot will be in its effects on actions and affairs. But there will be great change…”
In other words, economics isn’t about tempestuous or calm oceans, we actually shape the ocean upon which we sail. We “irrevocably make the future.” A landscape is a better metaphor — a desert, perhaps, with shifting sand, or a swamp with variable water levels — something that combines controllable and uncontrollable factors.
My second concern with Keynes’s quote is that while it’s true “we are all dead” eventually, we aren’t all dead at the same time. Keynes is dead and here we are, dealing with the effects of his ideas (and those of many other dead economists). And some day Krugman, Paulson, Bernanke, Brown, et al will be dead and many of us will be left to deal with some new, unforeseen crisis that’ll be caused in large part by the short-run measures being used to address this one.
And Drucker argues in the same chapter,
Keynes in a wiser moment remarked that the deeds of today’s politicians are usually based on the theorems of long-dead economists. And it is a total fallacy that, as Keynes implies, optimizing the short term creates the right long-term future. Keynes is in large measure responsible for the extreme short-term focus of modern politics, of modern economics, and of modern business — the short-term focus that is now, with considerable justice, considered a major weakness of American policymakers, both in government and in business.
