On the Language of Economics on NPR's Marketplace

Last December, I spoke with Sean McHenry for a segment on NPR’s Marketplace about the meanings behind the words economists use. While only a short excerpt aired today, the full exchange dove into the philosophical, historical, and political layers that underlie economic language, especially through the lens of Adam Smith and the evolution of economic thought.

We began with Smith, not the pop-icon version who supposedly preached markets above all else, but the Smith who drew from Newtonian mechanics to describe economic processes. Smith’s idea that market prices gravitate toward natural prices wasn’t just a metaphor, it was grounded in his belief that economic laws were as natural and immutable as the laws of physics. This analogy wasn't poetic fluff; it was the intellectual architecture of 18th century economics.

This matters because metaphors shape how we understand the world. Terms like natural rate of unemployment or neutral interest rate don’t just describe, they legitimize. They imply inevitability, naturalness, and neutrality, even when real-world consequences (job loss, mortgage spikes) are anything but neutral.

Smith's project was a materialist science concerned with the accumulation of wealth. For him the natural functioning of the economy did not lead to optimal outcomes. Still, the intervention of the mercantilist and feudal institutions impaired the natural process of wealth accumulation. After the marginalist revolution of the late 19th century, interventions affected the natural tendencies of the market to produce optimal outcomes. That is the world in which we still live, when it comes to economists metaphors. Meaning a world in which markets do produce optimal outcomes, unless there imperfections.

We also discussed the ideological undertones of terms like churn in labor market language. While economists may use it as a tidy description of movement in and out of jobs, for someone who's lost work, the term can feel like a euphemism that sanitizes real economic pain. It's this kind of language, precise, clinical, but emotionally distant, that can obscure the lived experience behind the data. The notion is that there might be pain, but in the long run that will not be a problem (Keynes was reacting to this notion with his famous quote about all being dead in the long run).

In my history of thought course at Bucknell, I walk students through how economic terminology evolved, from classical theories of value to modern utility and preference-based models. We interrogate the shift from political economy to economics, and what gets lost when we strip politics (class conflict) from the analysis. Even terms that seem neutral, like neutral interest rate or natural rate of unemployment, are packed with assumptions about how markets work, very often skewing issues of power, and distributional conflict.

Economics has long striven to present itself as a hard science, borrowing the language and posture of physics. But unlike physics, economics deals with entrenched political structures and it is harder to separate the ideological and analytical elements in a particular theory. The profession’s reliance on technical jargon and tidy models sometimes masks the messy, contested, and deeply political nature of the economy itself.

As one of the editors of the upcoming fourth edition of The New Palgrave Dictionary of Economics, I’m part of a team trying to decolonize the dictionary, bringing in voices from underrepresented regions, grappling with the absence of concepts like power, and reassessing the dominance of certain Western-centric assumptions. I also it requires a return to some of the forgotten ideas of the classical political economy authors that made the political or socially conflictive element of the reproduction of society central to their analytical inquires (see my Palgrave lecture here).

Language is never just descriptive. It is to some extent normative. It tells us what to value, what to question, and what to accept as given. Political economy, at its best, can be a powerful tool for understanding and improving social conditions. But that requires constant reflection, not just on models and data, but on the words economists use, the histories economists tell, and the blind spots economists perpetuate.

You can catch the edited interview on NPR’s Marketplace with Sean McHenry here.

More on the possibility and risks of a recession

So both the (inverted) yield curve and the Sahm rule indicate a recession. This together with two months of slower employment creation, and the slightly higher unemployment rate, has many wondering whether the economy will crash soon. I discussed before -- a while ago, before the pandemic recession, that had nothing to do with the yield curve -- why an inverted yield curve doesn't necessarily mean a forthcoming recession. The Sahm rule, like the inverted yield curve has an impressive track record. It suggests that if three month moving average of the rate of unemployment rises 0.5 or more above the minimum of the same averages for the previous twelve months a recession is under way. Figure below, although scale doesn't help, shows that we are at 0.57 for last August [ominous music here].

This is essentially an a-theoretical measure, contrary to the yield curve which could have different explanations, including the Wicksellian one used by the mainstream. It expresses basically a trend. Unemployment rates go up in recessions, and after a while going up, you're basically in one. The two episodes in which it fails, as far I can tell, were in 1959 and 2003. No clear reason for why, as opposed to housing market measures that failed in 1951, 1967, and perhaps now (if you believe me), because of two wars (Korea and Vietnam) and fiscal packages (Bidenomics).

In a few weeks now, the Fed is very likely, almost certainly really, going to reduce interest rates. I don't expect that to stimulate the economy much, and it certainly will not create any danger about an inflationary resurgence. Also, as I noted on Marketplace a week or so ago, there are some positive signs about the economy. Real wages at the bottom are growing, and consumption went up. And no, you should not be concerned with the low savings rate. I was a little less sanguine that I sound in that short soundbite, but overall I think that's correct.

Sure enough a recession could certainly imply a return of Trump, and Trumponomics. I doubt that it would cause inflation and that his election would deepen the recession, as some had argued. Not because tax cuts for the wealthy would stimulate the economy. But the truth is that Republicans in power don't care about the deficit or debt. They care about cutting social benefits, and about facilitating the lucrative relations between the corporate sector and government. What Jamie Galbraith called the Predator State. Trumponomics shares with Reaganomics, and other GOP supply side voodoo economics notions, a persistent characteristic. It is always against unions and higher wages, and always for lower taxes for the wealthy.

Dems are less consistent, but certainly less keen on both (and Kamala seems to have accepted Bidenomics and the pro-union agenda). The problem with that is that it has opened the door for right wing populism. The differences with previous versions of conservative economics are subtle, and in some sense rhetorical, since they do very little for working people. On right wing populism economics and their connection to the working class, and the problematic relation of Dems with the working class, I suggest the recent piece by Kim Phillips-Fein on the London Review of Books. She says:

"In 1968 George Wallace talked to a working class that was afraid of dispossession. Trump speaks to workers too, but more directly uses the language of money and corporate success; his appeal derives from identification with the boss -- reflecting the extent to which he seeks to win the allegiance of small business owners. Just as American political institutions have been hollowed out since the 1960s, so has the country's political economy, in ways that have helped to increase Trumps' appeal."

The self-made man myth, an American neologism (Henry Clay, if I'm not wrong), is incredibly corrosive. I hope I'm right and we can avoid a recession, and Trump.