Freedom Caucus in Charge: Implications for Economic Policy

9/27/23

I remember taking my first economics course in college and feeling like I had just unlocked the key to understanding how the world works. I’m especially talking about the macroeconomic part of the course. Macroeconomics, for the uninitiated, involves the study of large-scale economic issues, such as economic growth, inflation, and unemployment. The counterpart to macroeconomics, of course, is microeconomics, which concerns itself with individual economic agents, such as the consumer or businesses facing different degrees of competition. The macroeconomics of my time was largely based on the foundation of Keyne’s General Theory. In that book, Keynes provided a framework to understand how fiscal and monetary policy could be used to achieve various economic policy objectives.

The critical lesson I (and every other economics student) learned was how to assess the effect of any policy change. We do this by assuming ceteris paribus conditions — i.e., that everything else remains the same, except for the change in the policy. The problem is that in the real world, ceteris paribus conditions don’t hold. Thus, when economists posit the effects of implementing some economic policy, those projections must be tempered by the realization that other effects, possibly offsetting or possibly augmenting, may come into play…