How National Belt-Tightening Goes Awry
By ROBERT J. SHILLER
Published: May 19, 2012
WHY is there such strong political support for fiscal austerity, for government cuts and layoffs, at a time of widespread unemployment?
Maybe it’s because we have the wrong metaphor stuck in our minds, and it’s framing policy choices in a misleading way.
Clearly, metaphors and other symbols carry real weight in our thinking, as has been shown by George Lakoff, a cognitive linguist at the University of California, Berkeley, and Mark Johnson, a philosopher at the University of Oregon. In their 1980 book, “Metaphors We Live By,” they argue, “Our ordinary conceptual system, in terms of which we both think and act, is fundamentally metaphorical in nature.”
Our metaphors are like the icons on our computer screen, little pictures by which we condense complexities into manageable packets to refer to in our decision-making. Our brains may be hard-wired for them.
Consider our current thinking about taxes and government spending. We seem caught up in a “family belt-tightening” metaphor, in which the nation is a family that has outspent its income and is trying to get back in control. The family must cut profligate spending, save and pay down debts. It’s a powerful thought, of course, because we know that mismanagement of household finances can lead to a family’s ruin.
But perhaps the most important lesson conveyed by the great economist John Maynard Keynes is that this metaphor, when applied to the national economy, is fundamentally misleading: what is smart for the family is not smart for society as a whole. This idea, sometimes known as the paradox of thrift, is that when we all tighten our belts at once, the economy is so weakened that we end up failing to save more, and instead are all worse off. When that happens, some collective action — government stimulus — is needed.