There is an interview on Truth Out,  Dean Baker: Why Didn’t We Make These Guys Run Around Naked With Their Underpants Over Their Heads?

Economist Dean Baker is co-director of the Center for Economic and Policy (CEPR) in Washington, DC. In his most recent book, “The End of Loser Liberalism: Making Markets Progressive,” Baker argues that the market is politically structured to ensure that income flows upward. He provides a range of strategies to reframe economic debates and offers proposals to reshape the economy to serve the interests of the majority of the population instead of a small elite. The book is available to be downloaded for free at CEPR’s web site.

This wide ranging interview gives some indications of where economists on the right and the left have gone wrong.  His discussion of what is wrong with the idea of “Loser Liberalism” economics is particularly in sync with my complaint about how progressive politicians justify their economic policies.

This is not to say that Dean Baker is without his own weaknesses.  At one point he talks about his discovery about Microsoft where he says:

I’m an economist down in D.C. and I didn’t know that Bill Gates was using every slimy hook and crook in the world to build an illegal monopoly – not a clue.

He is referring to his earlier discussion of what a reporter told him:

… Gates had been signing agreements with Compaq and Hewlett-Packard, the major computer companies at the time, where they would agree to pay him for every computer they shipped, whether or not it used DOS, the precursor to Windows. When I taught antitrust to undergraduates, the classic example was how John D. Rockefeller had the railroads pay him for every barrel of a competitor’s oil that they shipped. People dispute whether it’s true, but this was basically the same story: I was told that Bill Gates was having Compaq pay him for each computer that they shipped that had one of his competitors’ software systems.

Certainly almost all of us in the high tech electronics industry knew that Microsoft was doing this. It astounds me as much as it astounds him how he could have been so clueless.

This is an admitted weakness of understanding that Baker had that eventually corrected itself.  There are a few other weaknesses in his theories in this story that I don’t think he sees yet.

To point out one minor bone of contention, he says:

At the very least, that point where inflation rises is not stable, because we got the unemployment to 4% with little acceleration of inflation. There eventually was an uptick in inflation in 2000, but it was due to commodity prices in world markets; this had little to do with the unemployment rate in the US

There is nothing wrong with the facts of what he is pointing out.  My complaint is that he gives short shrift to understanding the factors that make the relation between inflation and unemployment shift.  On the up side of inflation, he does recognize the pressure from commodities, although some could argue that this was caused by high levels of consumption from high levels of employment.  What he doesn’t spend enough time on are the causes of keeping wage inflation in check even with relatively high employment.  There were societal shifts such as the great outsourcing of jobs that he could have mentioned.

At the beginning of the article, Baker started talking about the fallacy some economists fall into when they apply historical data to current situations.  When applying such data, it is the economist’s duty to think about whether or not there have been changes in the factors that produced the historical results.  I am just point out a case where Baker fails to apply that lesson to his own explanations.

I am not really faulting the interview, I guess.  What I am pointing out is that the reader should bring into play her or his own insights when reading anything.  Sometimes those insights can enhance what you are getting from the material you are reading.

I have downloaded the book “The End of Loser Liberalism: Making Markets Progressive,”. It starts with the following paragraph:

Money does not fall up. Yet the United States has experienced a massive upward redistribution of income over the last three decades, leaving the bulk of the workforce with little to show from the economic growth since 1980. This upward redistribution was not the result of the natural workings of the market. Rather, it was the result of deliberate policy, most of which had the support of the leadership of both the Republican and Democratic parties.