Just What The Hell Is Trump & Tucker Carlson's School Of Economic Thought?

[mvd10]

Most politicians don't adhere to a coherent school of thought. I don't even think we have a definitive list of schools of economic thought. There is overlap everywhere. At best you could say that politicians believe in certain macroeconomic concepts or ideas (when it fits them). Macroeconomics is a lot more abstract than some people think. In advanced macroeconomics you basically learn to solve DSGE models or RCK models . Now obviously these models can have policy implications, but it's way more abstract than what most policymakers face.

Nationalist economics, it's the economic thought of right-wing nationalist parties throughout Europe (Le Pen, Wilders, Danish People's Party, The Finns, SD and elements of the AfD

I am specifying nationalist and not populist as the progress party in Norway and UKIP have more traditional economic views.

But all of this is irrelevant because Trump's economic thought is not being put into action (apart from protectionism) due to people in his cabinet.

In what way is Trump's economic thought not being put into action? He quite literally campaigned on large tax cuts and deregulation. He vowed to defend medicare and social security, but I don't think he ever said something on other welfare programs. And his tax plan was even more insane that the tax cut he got through.

While Carlson is critical of swift technological change I also doubt whether he's as ''statist'' as some of these parties can be.

[mvd10]

I'm not really an expert on this, but I mainly lump everything in 3 macroeconomic schools. New Classical, New Keynesian and Post-Keynesian (probably the closest to Keynes himself).

New Classical macroeconomists think that consumers and producers are fully rational and always optimize their utility. Real Business Cycle theory is an example of this. In the RBC models there are no sticky wages or prices. Monetary policy is irrelevant because wages and prices quickly adjust and fiscal policy is irrelevant because people anticipate the government's budget constraint (a deficit now should mean a surplus later technically). Recessions are caused by productivity shocks and technology shocks. If unemployment is high during a recession this is efficient because people choose to work less because of lower productivity and therefore lower wages, if unemployment is low during a boom period this is efficient because people choose to work more because of higher productivity and wages. According to this theory markets always clear and the allocation of goods always is optimal, so the government should not stimulate demand during recessions. This isn't a very common view btw (and even though it has its merits I don't really believe it myself, too many unrealistic assumptions), but it's still relatively mainstream. The problem with this theory is that it relies on strange exogeneous technology shocks. When you ask a RBC theorist what these technology shocks are they often don't really have a good answer and I don't really think we can explain recent recessions with these ''technology shocks''.

With this view I guess you could somewhat defend Republican deficit hypocrisy (opposing stimulus because of the deficit while support deficit-busting tax cuts). If people are fully rational they'd know that a $800bn stimulus program will mean future taxes. In the worst case people just save the additional $800bn in order to pay the future expected taxes, so no change in consumption. Meanwhile Trump's tax cuts were meant to make the tax code more attractive towards saving and investment. It blow a huge hole in the deficit so technically it should drain private investment and undermine the goals of the tax cuts. But again, people could anticipate the future tax increase and save an amount of money proportional to the size of the tax cut, therefore meaning that the deficit won't drain private investment (in a closed economy investment is savings minus government deficit, the deficit increases but savings increase by the same because people anticipate higher future taxes and investment doesn't change, meanwhile the tax code is more favourable to savings so people might even save more and investment further increases). Now there are a lot of ifs and buts and it's not a widely shared view, but I guess this is the sole economic rationale for Republican hypocrisy (again, I'm not convinced myself).

New Keynesian macroeconomics basically takes New Classical models and adds some market failures. Wages and prices do not longer immediately adjust, so monetary policy is relevant (if wages don't immediately adjust a monetary expansion would get unemployment down before workers start demanding more wages and unemploymeny goes back to the natural rate). The difference between New Keynesianism and old Keynesianism/post-Keynesianism is that New Keynesianism is more dynamic (they acknowledge that you can't ''micromanage'' the entire economy because it consists out of people who generally have rational expectations and mostly adjust their behaviour when the government does something) while the difference between New Keynesians and New Classical macroeconomists is that New Keynesians don't make extremely rosy assumptions about markets being always perfect. The vast majority of mainstream macroeconomists probably is New Keynesian tbh.

I don't know a lot about post-Keynesians tbh. I guess they're the closest to Keynes' original work and they probably are the most sceptical about the ability of markets to adjust and the inherent stability of markets?

Feel free to try to get Trump in a coherent economic school lol. Most politicians have a certain worldview that involves way more than just economics and then they go on to form their economic viewpoints based on their worldview.