Thursday, April 04, 2013

Another Economist Commits Politics

-- Posted by Neil H. Buchanan

Last week, I wrote a post here on Dorf on Law in which I discussed an odd phenomenon: the modern economist discussing politics.  Far too often, such men (and they are almost always men) say things that are either embarrassing or simply inexplicable.  The real problem, however, is not that they are stepping outside of their field of expertise.  People do that all the time, not always with bad effects.  What makes it especially unfortunate when modern economists try to talk about politics is that their training and their professional norms affirmatively reject the idea that it is important to understand anything other than economic theory.

Describing an economist's thoughts as "philosophical," or "historical," or "political," or -- heaven forbid -- "sociological" is the gravest insult that can be leveled against a modern, orthodox economist.  (I am, of course, engaging here in an examination of the "professional sociology" of economists.  How humiliating!)  There are a few successful economists who do work outside of the rigid structures of orthodox theory, and who try to explain actual human behavior, but they do so only under the safe cover of high-level mathematics.  And economists who have never taken seriously any of the critiques of orthodox theory still regularly rise in the profession to the point where they are called upon to opine about economics in the real world, and to weigh in on economic policy discussions in Washington.

The discussions among economists about real-world issues tend to follow one of two lines: (1) "If only those idiot politicians would listen to the truth from us, we could fix things," or (2) "How to choose policies is a normative matter, better left to philosophers and politicians than to economic scientists."  Neither the content of graduate training in economics, nor the profession's expectations and rewards, have equipped economists to say much more than one of those two evasive punts (and, strangely enough, sometimes both, almost in the same breath).

The result of all this, as I noted last week, is that modern, orthodox economists often find themselves "committing politics" without the necessary skills or knowledge.  Some economists happen to have developed those skills or knowledge otherwise, but it is hit-or-miss (mostly miss).  Especially when economists want to be "politically relevant," they quickly default to the political talking points.  On fiscal policy, that almost always means that they ignore what their training has actually taught them -- that deficits are a poor measure of fiscal rectitude, and that governments' budgets need not be balanced every year, or over time -- in favor of saying safe things about "fiscal responsibility" by balancing the budget.

Of course, it is not as if non-economists do much better.  An extreme example of a professional bloviator going off the rails was David Stockman's screed in this past Sunday's New York Times.  As Professor Hockett explained well here on Dorf on Law on Tuesday, Stockman (who, based on no expertise whatsoever, was selected to serve as budget director under Ronald Reagan) is not merely off his rocker, but he joins his fellow hard-right travelers in fearing the need to manage the world -- that is, to exercise judgment and to make policy choices.  Stockman imagines that it is possible to have a modern economy that requires no monetary policy, and no fiscal policy (because there is, apparently, no need for government at all).  It is a testament to America's degraded political culture that people like him are -- years after their undeserved moments of fame -- still given prime space in the Times.

But I digress.  My point is that I am not saying that economists commit the worst errors, but simply that their errors are almost endearing (while still being infuriating) in their naivete.  The latest example can be found in an op-ed by Jeffrey Sachs, a highly decorated economist who is now identified as a "professor of sustainable development" at Columbia.  Despite his unfortunate hand in the "shock therapy" episodes in the former Soviet Union (which he now evidently regrets, but which themselves were extreme examples of ill-equipped economists committing really, REALLY bad politics), Sachs's views are generally on the left end of U.S. politics.  (He runs the Earth Institute, and he appears to be deeply committed to fighting global poverty.)

Sachs was moved to write an op-ed, "On the Economy, Think Long-Term," for Monday's NYT, in which he argued in favor of federal investments in projects that are likely to create long-term growth.  He argues that we should focus on "three priorities for this new, long-range perspective: infrastructure, energy and job skills."  All of which is quite welcome.  He describes some very nice ideas about how to invest in the long-term health of the economy, in ways that are aimed at helping middle class and poor people.  That none of his ideas are new should not be disqualifying, because we need more voices -- especially widely known voices like his -- repeating these arguments.

What, then, is my complaint?  Two things.  First, he begins by making a truly odd claim, a claim that falls in the all-too-familiar category of false equivalence: "Republicans continue to hawk their age-old remedy, demanding cuts in government spending, tax rates and regulation so that market forces can respond in due course. Democrats, meanwhile, push just as stridently for their familiar fixes — short-term spending programs like the 2009 stimulus package enacted during President Obama’s first term."

Wow.  Democrats are just as strident as Republicans, and they only push their "familiar fixes" of short-term stimulus?  Democrats have all but dropped any hope of further stimulus, but even when they do push for it, there is always a focus on using the currently unemployed people and resources in the economy to invest in infrastructure, energy, and education -- Sachs's big three priorities.  The very point of proposing these investments is that they would serve double duty, by stimulating the economy immediately while increasing future growth.  There is always the possibility of resorting to Keynes's ironic suggestion to have the government bury tubes of money, but that is only a fall-back when Republicans refuse to spend money wisely.  When people are unemployed, it turns out to be better to employ them in useless tasks than not to employ them at all.  But that is obviously not Plan A.

Why, then, is Sachs claiming that Democrats are not in favor of exactly what Sachs favors?  One tempting answer is that he is being politically savvy.  He has spent a fair amount of his adult life dealing with non-economists, and he certainly can figure out that political discussions go much better when one can sagely intone that both sides are wrong, and that we need to come together to solve our problems, blah blah blah.  Maybe he is just making the necessary incantations to be taken seriously inside the temples.

If that were true, however, he would not have written this: "If Mr. Obama were to stop angling for more temporary stimulus and instead put forward sound programs for job training, low-carbon energy and modernized infrastructure, he would most likely carry the public and eventually win the political battle."  This is my second complaint: Sachs is claiming that the politics would get better if Obama would only talk about investment rather than stimulus.  But Obama has, in fact, been putting forward sound programs for long-term investments.  He has clearly been thinking too small, but nearly every Obama speech talks sensibly about investments rather than quick fixes.

Maybe Sachs is really just saying what I have been saying for years: That Obama should have the courage of his convictions, and stop being afraid to make a big push for a major new wave of public investments.  If so, it is curious that Sachs felt it necessary to make clearly false assertions about the political facts on the ground.  But at least, unlike so many other economists, he managed to get the policy recommendations right, even while mucking up the political analysis.