"The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression, and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S. The result is profoundly disturbing. In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration - check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check."
All this adds up to a pessimistic conclusion -- recessions just aren’t very predictable from economic data. The reason economists couldn’t foresee the Great Recession isn’t that they’re blinkered or closed-minded or arrogant or stupid -- it’s because no one could predict it, at least not with the kind of macroeconomic data that now exist.
So the future of macroeconomic forecasting -- and of macroeconomics itself -- might lie in a different direction than the one most researchers have been pursuing. Instead of focusing on consumption, investment and other easily measurable things, economists might try thinking more about subtle, long-term buildups of problems in financial markets.
While Smith doesn't put it this way, this is a pretty good argument for why we should pay more attention to economic history (one cannot do much better than reading Kindleberger to understand the dynamics of financial crises - even with no DSGEs in sight).
This is from an interesting Jennifer Rubin article (I would just add that the GOP has not been "conservative" for a very long time - they are all for intrusive government as long as it intrudes in ways they like):
Trump has indeed taken over the GOP, scrubbed it of principle, responsibility and decency and left its “leaders” nodding like bobble-heads as he runs through a list of rotten economic policies, which if they came from a Democrat, would be condemned. Those looking for some fiscal discipline, a market approach to trade, a pro-growth immigration policy, reasonable education and training ideas, respect for individual rights and a responsible, cogent foreign policy will need a new party.
Over the past decades, economists working on growth have ‘rediscovered’ the importance of history, leading to the emergence of a vibrant, far-reaching inter-disciplinary stream of work. This column introduces the second eBook in a new three-part series which examines key themes in this emergent literature and discusses the impact they have on our understanding of the long-run influence of historical events on current economics. This volume focuses on attempts by economists to shed light on the effects of European colonisers on development and culture across Africa and Asia.
"There is no escaping the fact that economics continues to be a moral science. Economists therefore have a moral responsibility to be transparent about the value judgements embodied in their theories, and to be prepared to debate them."
In his famous 1896 convention speech, William Jennings Bryan said, “The gentleman from Wisconsin has said he fears a Robespierre. My friend, in this land of the free you need fear no tyrant who will spring up from among the people. What we need is an Andrew Jackson to stand as Jackson stood, against the encroachments of aggregated wealth.” Bryan, who unsuccessfully ran for president three times, railed against the moneyed interests and the threat of foreign workers in ways that are reminiscent of both Andrew Jackson and Donald Trump. Like Trump, Bryan made his case less with substance than with salesmanship. A decade before Trump’s political ascendancy, Andrew O’Hehir in Salon Magazine (March 1, 2006) wrote this of Bryan: “[His] appeal evidently stemmed from his charisma, his delivery, his frank appeal to the listener’s emotions and his powers of persuasion, and not from what he actually said or the issues he nominally trumpeted…. Bryan inaugurated an era in which style and sentiment would trump substance, personal charisma would trump intellect or ideas.” Even Steve Bannon, Trump’s chief strategist, pointed out the similarities: "You have probably the greatest orator since William Jennings Bryan, coupled with an economic populist message and two political parties that are so owned by the donors that they don't speak to their audience. But he speaks in a non-political vernacular, he communicates with these people in a very visceral way. Nobody in the Democratic party listened to his speeches, so they had no idea he was delivering such a compelling and powerful economic message.”
As with Trump in the 2016 primaries, the existing power brokers of Bryan’s own party largely opposed his candidacy in 1896. In fact, Grover Cleveland, the sitting Democratic president, was opposed to Bryan’s candidacy; his strategy then was to bypass the traditional channels and take his message directly to the people, not quite through late night tweets, but from the backs of railroad cars that crisscrossed the country. Trump’s new messaging tactic was Twitter and Facebook; Bryan’s was the very act of traveling and speaking directly to crowds in person since the tradition of the day was for candidates to allow others to go out and speak on their behalf.
As David Frum wrote a July 29 Wall Street Journal article, “Both men championed constituencies that formerly occupied a position of cultural and political dominance: small farmers in Bryan’s case, the white working class in Trump’s. Both of those constituencies had been economically ravaged for years beforehand: by 20 years of price deflation for the small farmers, by a generation of declining wages for the white working class.” Indeed, the socioeconomic shifts of the late 19th century are similar in many ways to those of the early 21st century – both were periods of economic and political transformation. In the late 19th century, farm laborers saw expanding global trade and accelerating industrialization as a threat to their traditional ways of life. Tight money imposed by the gold standard was partly responsible for that deflation that hurt the indebted farmers whose debt burdens were exacerbated by falling prices.
Despite his failure to ascend to the presidency, Bryan was transformational within his own party, pushing it away from the laissez-faire of Grover Cleveland and toward the progressivism that emerged most fully under Franklin Roosevelt. It remains to be seen whether Trump will accomplish a similar long-term shift in the Republican Party, but there are already signs of an 1896-style realignment in 2016.
While there are obvious parallels between Bryan and Trump, they disagree on plenty: Bryan doubted the efficacy of what would later be called ‘supply side economics,’ which Trump seems to embrace, and he opposed protective tariffs (in the late 19th century, those tariffs were supported by the McKinley Republicans). But the two men seem to have shared one central tendency in addition to their populist appeal that should be troubling: opposition to an open, tolerant society reflected in its transparent and responsive political institutions. This shared tendency is perhaps most evident in their similar views on immigration. Trump’s call to ban Muslim immigrants is representative of a worldview similar to the one that led Bryan to support the Chinese Exclusion Act (in effect from 1882 until 1942 and one of the most significant restrictions on free immigration in American history). In fact, Bryan called for applying similar exclusionary policies “to the same classes of all Asiatic races.”
This aspect of both Bryan and Trump – the separation of “us from them” – can manifest in numerous ways in specific policies, but the biggest problem with it may ultimately be that it dulls our sense of empathy for others. The great 18th century moral philosopher Adam Smith wrote of the importance of our innate ability to place ourselves into the shoes of others, imagining their experiences; for Smith, this use of our imagination was in fact the source of justice. We disapprove of certain actions against our neighbors out of a cultivated sense of moral right and wrong that comes from this empathic tendency. But Smith also recognized that there are limits to our ability to identify with others. As Peart and Levy (2005) put it, there is a sympathetic gradient that we all face in which the individual comes first, followed by family, friends, neighbors, fellow countrymen, and then humanity overall. One of the biggest long-term threats of demagogues like Trump and Bryan is the steepening of that gradient – not only separating Americans from the rest of the world, but pitting certain Americans against others. In the end, such a strategy can obviously be politically successful, but it poses a serious threat to the underlying decency of an open society. A free and open commercial society can, in fact, promote moral development by allowing strangers to interact with each other. As the 19th century philosopher John Stuart Mill once put it, “economical advantages of commerce are surpassed in importance by those of its effects which are intellectual and moral. It is hardly possible to overrate the value, in the present low state of human improvement, of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar. Commerce is now what war once was, the principal source of this contact.” Closing us off from the rest of the world poses a threat to both our material prosperity and, more importantly, to the cultivation of our ethics.
 Michael Wolff, “Ringside With Steve Bannon at Trump Tower as the President-Elect's Strategist Plots ‘An Entirely New Political Movement,’” November 18, 2016, The Hollywood Reporter.
 See Bryan’s newspaper, The Commoner, December 6, 1901.
"Vernon Smith emphasizes the Scottish Enlightenment’s close attention to how complicated people are, and how many different motives drive even their economic decisions. He wishes that more economists would read Adam Smith’s other great work, The Theory of Moral Sentiments, a text which Smith revised no less than six times and regarded as his most important book. The Scottish Enlightenment revolutionized how we think about the nature of reason itself. There is a place, Smith argues, for conscious deductive processes that establish social institutions, such as constitutions. But there is another form of rationality, which is every bit as important. It’s embodied and conveyed through time by habits, customs, and rules. We often don’t fully understand the importance of such traditions, as Edmund Burke noted, until we’ve lost them. A hallmark of Smith’s work is his study of how such knowledge helps to mold political and economic outcomes."