This week, Ben Bernanke made the transition from being the most powerful man in the global economy — Chairman of the Federal Reserve — to one of the most feckless: an economics blogger. Welcome, Ben! Come on in, the water is lukewarm and crowded.
I kid, sort of. After all, as a world renowned economist and former Fed Chair, Bernanke’s words are more influential than your average finance writer’s. He’s already engaged another famous economist, Larry Summers, in a debate over the concept of “secular stagnation,” which has garnered a lot of attention on the Internet.
Secular stagnation is a concept that was first introduced by economist Alvin Hanlin toward the end of the Great Depression to describe an economy that was permanently depressed due to a lack of demand for investment. Larry Summers resurrected this term in a 2013 speech, and the idea has been discussed thoroughly by economists who are beginning to believe that slow growth in the U.S. and other advanced economies shows that we “might be suffering from more than the hangover from a financial crisis,” as Berkley University economist Barry Eichengreen put it.
Economists don’t agree whether we’re experiencing a period of secular stagnation (Bernanke is in the there’s-no-stagnation camp), and those who do differ on the causes. Some blame the lack of productivity enhancing technological developments or the fact that we’ve already reaped the benefits of trends like women entering the workforce and universal education. Others blame the increase in life expectancy in the developed world, which has increased demand for safe assets and lowered demand for risky but high-yielding ventures.
The merits of each argument aside, it’s probably a nice change of pace for Ben Bernanke to return to an academic debate after so many years in which his decisions would have real effects on so many across the world. But the term “academic” doesn’t just refer to the setting of the debate. It also means, “theoretical or hypothetical; not practical, realistic, or directly useful.”
The arguments Summers and Bernanke are having simply won’t affect public policy because even if they do end up coming to a conclusion, they’d have to convince the public to go along with their prescriptions. If somehow Summers and Bernanke were able to agree that we’re experiencing secular stagnation, the chances are that they’d be able to convince the public and Congress to accept the sort of debt-funded infrastructure-spending binge that would be the proper policy response are less than remote.
The track record of the economics community in moving public opinion isn’t great. From carbon taxes to the eliminating the mortgage interest rate deduction, the list of issues that the economics community nearly universally supports, but the public does not, is long.
One reason for this is that what makes economic sense is often policies that require short-term pain for long-term gain. Voters usually don’t like policies that result in any sort of pain. But another reason economists have trouble capturing the public’s imagination is because they speak in esoteric language and are very humble about what they know and what they don’t.
There are a few economists, however, that have abandoned the sort of comportment that the economics community favors for the sort of rhetoric that motivates voters. Paul Krugman won a Nobel Prize for his work in international trade theory, but is better known as a liberal firebrand who spends his days getting under the skin of small-government conservatives from his post as columnist for the New York Times. In 2013, he admitted during an episode of Morning Joe that in his many years of writing and trying to convince actual politicians to execute what he believes is the correct path, he’s had to abandoned nuance. As he said back in 2013, referring to his plan for promoting a more robust recovery:
“Ideally I’d say let’s have a plan to reduce the budget deficit five years from now, ten years from now while at the same time doing stimulus for the economy. [But] Washington doesn’t work that way. If you spend a lot of your time talking about how debt and entitlements are a problem, the message that we need to promote jobs right now gets lost.”
In other words, he assumes that politicians, and voters, don’t walk and chew gum at the same time. Keep it simple. Get to the point, and try not to confuse.
That’s how an economist gets 1.33 million Twitter followers and becomes a household name. Ben Bernanke is about 1 million followers behind his former Princeton colleague, and he’ll have to dispense with the cordiality and nuance if he hopes to catch up.
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