Economic Death by Analogy

Brian Beutler ponders the psychological underpinnings of neo-Hooverite takes on the alleged need for federal fiscal cutbacks in the face of a financial crisis:

Meanwhile, I’m not really sure where this mindset comes from, except, perhaps, from a simplistic understanding of economic hard times. When times are hard at home, after all, you scrimp and save and avoid exorbitant expenditures. You keep working hard and hold on to the belief that prosperity will return sooner than later. Maybe under different circumstances you take out a loan and start a business and hope it’s successful enough to make you rich and famous — but now you have children. You really want them to go to college. And so you can’t in good conscience take on the risk.


But countries aren’t like households. When times are tough the last thing they need is for the government to freeze out discretionary spending. And, paradoxically, the Great Men of History who so badly want to be president wouldn’t be doing their countrymen any favors by choosing this particular moment to suddenly restrain their vision.

I think that’s mostly right. Another way of making the point is that it illustrates the dangers of substituting an analogy for actually understanding what’s happening. Indeed, you hear all the time from people making an argument against deficits a line about how your family needs to live within its means and so the federal government should, too. Now as it happens, I think there definitely are situations in which deficit reduction is the right policy. But no matter what, that analogy is never right. The United States of America is effectively immortal, it can coerce people into giving it money, it can print currency, and it is in a million other highly relevant ways not remotely analogous to an ordinary family or even an ordinary business enterprise.