Max Borders, building on themes that I regularly harp about, presents an interesting simile: the economy is like an ecosystem. It’s a good description, and has the advantage of portraying economic realities to people who have no interest in economics. The message is clear: if you mess with the economy, you have no idea of what the ultimate consequences will be. As with ecology, economists have only some high level and incomplete understanding of what the rules are. Will “fixing the economy” with a stimulus package cause things we want to happen or things we don’t want to happen? We’ll get some of both. How much? Don’t know. When? Don’t know. Who will be helped and who will be hurt? Don’t know. All we do know is that we’ll pay a big price to get whatever results we get, even if the results are something we don’t want. Ecosystems are like that. So is the economy.
Originally published January 14, 2009
UPDATE: Someone else has had similar thoughts!