Is There an Economist Anywhere Who Understands The Real World?

The May 15th issue of The Economist, on page 38, carries this story, "The Perils of Being Small". The gist of the story is that the Labor Department has just now discovered that small businesses are more likely to lay off employees than are medium sized or large businesses.

To explain that fact, the Treasury Department has an economist named Alan Krueger who has come up with, not one, but two explanations, one sillier than the other. One is that larger firms have higher fixed costs invested in training and the other is that larger firms can borrow money easier than small firms.

Neither one of those cockamamie theories have anything to do with running a small business and I have run a couple so I speak with some experience (in any case, a hellovalot more than Alan).

First of all, a small business is a very fragile thing to run. Your margin for error in almost every decision is about zero.

So here we have this small business with, say, ten employees. Sales drop and cash coming in drops. There is not a lot of cash in the bank so I have to do something pretty soon, or my expenses will exceed my income, otherwise known as bankruptcy.
So I can increase sales, but how do I do that? My customers are all hurting too.

Or I can reduce my expenses. Nothing I can do about rent most likely, or about taxes either. We have already reduced our cost of materials as much as we can without sacrificing quality. The one thing I can do is reduce payroll expenses. Note: The One Thing I Can Do. It has absolutely nothing to do with training expense as in Alan's theory. In fact, the one employee I will lose first is the one with LEAST training because he/she is the least valuable. And go to the bank and borrow money so I can keep him/her on the payroll in case things get better some day?
That is the last thing I will do! That idea is just plain nuts!!!

Here is a word of advice. Don't let Alan anywhere near your small business because he doesn't know Jack about reality.

And that summarizes the problem the U.S. faces today, none of the economists on the President's team knows Jack about the real world so they produce silly theories for the basis of government action. Did you notice that this whole problem started with my sales are down? If the government understood the real world they would be working on getting those sales to increase instead of producing crappy new income tax rules that simply create more paper work, the last thing in the world I need.