One of the quips in the new issue of Changing Times magazine is:
"These days, there is some advantage to being a trained economist. When you're out of a job, at least you'll know why."
After I laughed, I decided it wasn't funny. Today's economists don't agree on what causes unemployment. Or inflation. Or high interest rates.
They also don't agree on the best way to get rid of unemployment, inflation and high interest rates.
In fact, they're not even unanimous about whether we should really want to get rid of all these things.
They remind me of psychiatrists testifying in a criminal trial. When the prosecution brings in two eminent doctors who say the defendant is sane and perfectly capable of standing trial, the defense can counter with three eminent doctors who say the defendant suffers from mental disorders that make it impossible for him to cooperate properly with his lawyers.
The layman, who wants to respect and be guided by expert opinion, is left to wonder: "Who is talking sense and who is blowing smoke? Both sides can't be right."
Yesterday I listened as two young men with degrees in economics discussed President Reagan's address to the Congress. One took the position that cutting taxes will give people the incentive to work harder and to save more for investment, thus bringing down inflation. The other said, "Nonsense. This is a laid-back generation. It doesn't believe in the Puritan work ethic. If taxes are lowered, people won't have to work as hard to make ends meet, so they won't work as hard. Productivity will continue to decline but there will still be enough printing press money available to keep inflation boiling."
I'm not sure whether one needs training in economics or psychiatry to forecast what effect lower taxes will have.
Perhaps we ought to let the psychiatrists manage the economy for a while and see if they can do any better than the economists did.
If the psychiatrists do bring this period of soft money inflation to an end, perhaps their next assignment should be to figure out whether that's what we really wanted them to do. People who have borrowed huge amounts to buy homes at inflated prices might be hard put to repay their debts in hard money. POSTSCRIPT
My own reaction to the president's game plan is that we have no alternative. We must try it and hope for the best. If it doesn't work, we'll have to try something else.
Eventually, the economy will right itself. Then we'll be free to argue whether the improvement was brought about by economists who were wiser than their predecessors -- or just plain luckier.
No wonder economics is known as "the dismal science." REBUTTAL
A few days ago, I wrote about a new Visa card that is obtainable "without annual membership fees" only by those who are willing to begin their relationship with the issuing bank by borrowing at least $500 at an interest rate of 21 percent ($105 per year).
That didn't seem like much of a bargain to me, but Robert Heppe of Fairfax is more perceptive than I am. He received a similar mailing, and sent in his application card at once.
Heppe plans to repay the loan before the end of the first month, and pay $8.75 in interest on it. Meanwhile he will add the $500 to his present money-market fund, which has been yielding about 17 1/2 percent interest lately. So he will earn something over $7 while paying out $8.75, and will therefore have the card and its special advantages for less than $2.
In Heppe's case, the 1 percent rebate offered on all purchases charged to the card is of importance because each year he charges about $5,000 worth of hotel bills, airline tickets and other expenses to a credit card ("and that's a saving of $50 right there"). Heppe isn't concerned that this bank charges 21 percent interest instead of the usual 18 percent because he pays all his credit card bills promptly and thus avoids interest charges.
I have a feeling that Robert Heppe is not the kind of customer this bank's solicitation was designed to attract, and that the bank is not going to get rich on him. Banks prefer customers who borrow at 21 percent and then pay and pay and pay on the interest.