Trump vs Koch: Success At Business Is Not Equal To Understanding Economics
Wealth doesn’t indicate economic wisdom
Here’s a refrain that I’m being bombarded with by e-mail and on Facebook; this particular version is a Facebook comment by someone named Thomas Marise (whom I don’t know):
Dan Loeb's Third Point returned 11% in its flagship Offshore Fund and 13.2% in its Ultra Fund for the first quarter. For April, the Offshore Fund was up 1.7%, while the Ultra Fund gained 2.3%. The S&P 500 was up 6.2% for the first quarter, while the MSCI World Index gained 5%. Q1 2021 hedge Read More
Trump has proven time and again he knows his stuff when it comes to economics. He has a personal wealth of $10Billion proving his understanding. Hard to argue with results.
Such a claim is illogical, even if we assume — falsely — that Trump earned every cent of his monetary fortune honestly, rather that at least some of it through government-orchestrated theft.
Knowing how to run a business is not the same thing as knowing economics. To assume that the two domains of knowledge and expertise are the same is an error equivalent to assuming that a successful NASCAR driver is thereby an expert automotive engineer. Of course, it’s possible for a successful NASCAR driver to know something about automotive engineering, just as it’s possible for a successful business person to know something about economics.
But success at each of the former tasks (driving a race car and managing a business) is not the same thing as, and requires very little familiarity with, the latter domains of knowledge (automotive engineering and economics).
Strong evidence — indeed, virtual proof — that knowing how to run a business successfully does not imply knowledge of economics is supplied by the great economics-policy differences that separate successful business people. Charles Koch, for example, is a far more successful business person than is Donald Trump, yet Mr. Koch’s understanding of economics differs markedly from Mr. Trump’s. If success at business were a sufficient indicator of deep and expert knowledge of economics, it would be nearly impossible to explain the deep differences that separate Mr. Koch’s professed understanding of economics from Mr. Trump’s.
More generally, genuinely successful business people differ wildly amongst themselves in their expressions of economic understanding. Indeed, business people differ far more widely amongst themselves in their economic understanding than do economists (whose differences, while real, are nowhere near as great as they are often portrayed).
It follows that successful business person X’s claims about the economy cannot be presumed to reflect the knowledge, reflection, and understanding of someone who genuinely knows economics.