Identifying good policies can be really difficult, and appearances can be deceiving. It’s easy to point at unionized Detroit during the 1950s and 1960s and say “see? Labor unions brought us prosperity!” It’s also easy to point at European welfare states and national health care programs and say “see? Socialized medicine can work!” As my adviser said about the French welfare state, they can enjoy such high standards of living now because “they’ve spent the next two generations’ incomes.” Imagine that I were to pawn the title to my car, take out a home equity loan, and claim prosperity by counting only the cash in my wallet and the new deposits in my checking account. I could then wallow in apparent prosperity for a while. Eventually, it will come time to pay the bills, and there’s a limit to the amount of time you can spend liquidating capital before it runs out.
This is why we need economics. Bad policies that seem good at the moment – or even that look good for years or decades – can be identified for what they really are with sound economic analysis. Unfortunately, few wish to hear and politicians want to hear least of all.