As an economist who earned a law degree and now teaches in a law school, I am always interested when news organizations discuss the economics profession. The overwhelming motivation for my lateral career move was that the economics profession is deeply ideological in the worst possible way: Its norms and expectations are strongly tilted toward conservative-friendly conclusions, but it hides behind the veneer of "science" to make it appear that there is nothing subjective about the enterprise.
This is not to say, of course, that one cannot reach non-conservative conclusions from economic models. And it is certainly true that there are liberal economists out there. Even so, the field has come to be dominated by an approach that rewards and emphasizes methods and techniques that strongly skew the analysis toward conservative results.
For example, when the world's most prominent liberal economist, Paul Krugman, wants a "reality check" for his conclusions, he has said that he runs his analysis through models that assume hyper-rational actors, efficient markets, and so on. He emphasizes that he does not believe the assumptions underlying those models, but he thinks it is useful at times to use highly unrealistic models to test his conclusions. Fair enough, but why would he default to the Chicago School's models?
One could argue that, if even those models support liberal conclusions, then one's rhetorical position is strengthened. But Krugman acts as if there are no other reality-checking possibilities out there. He casually dismisses "Post Keynesians" on the basis that they are supposedly obsessed with assumptions and not outcomes. That is true of the models that he embraces, however, and I cannot help but notice that it is the conservative economists who always get Krugman's (grudgingly) respectful attention.
Even so, there is a fundamentally interesting pair of questions that underlies any discussion of the economics profession: Are economists actually influential, and if so, how did that happen?
Justin Wolfers, a mainstream economist at the University of Michigan (who appears to lean left-ish, based on my limited exposure to his writings), writes for The Upshot section of The New York Times. Recently, he addressed those paired questions, in a column intriguingly titled "How Economists Came to Dominate the Conversation." There, he answered the first part of the question above (Are economists influential?) overwhelmingly in the affirmative, showing the heavy reliance on the views of economists in both The Times (with their influence growing notably over time), and in the Congressional Record over the last generation. Moreover, he noted that other academic disciplines -- history, psychology, sociology, anthropology, demography -- have seen some growth in their influence, but nothing like economists'.
Interesting, in its way, but when Wolfers actually tries to answer the question in his column's headline -- How did this happen? -- he has almost nothing to say. His first answer is that economists' influence is cyclical, going up during bad economic times and down when times are good. However, his own data show that economists' influence, even during its recent dips, is much higher than in earlier decades. Also, other than a brief time in about 2000 when they were tied with historians (driven, I suspect by discussions about the historically unprecedented Bush-Gore election), economists clearly dominate the other social sciences.
Wolfers ends the piece with his second explanation, crediting economists' influence to "the discerning tastes of our audience in the marketplace of ideas." His tone is cheeky, but that really is the only explanation he offers: Economists are influential because they deserve to be. Forgive me if I find this unconvincing.
Apparently, someone at The Times was similarly unconvinced, because they subsequently ran a "Room for Debate" column with contributions from three economists and three sociologists, based on the question, "Are Economists Overrated?" I tend to find the "Room for Debate" series tedious and unsatisfying, for reasons not worth exploring here. Even so, this debate had a few notable highlights and lowlights.
The sociologists generally took the position that economists have a pretty bad track record on any number of real-world issues, that they are too narrow in their approach, and so on. The most notable argument, however, was from Philip N. Cohen of the University of Maryland, who argued that economists' apparent influence derives from the fact that they tell rich people what they want to hear:
But economists’ influence is largely proportional to the degree with which their analysis comports with the interests of those who make the most influential decisions. The free market orientation, individualist logic and materialist values of some economists serve well the captains of industry (or, nowadays, of finance), who in turn reward their compliant consultants with privileged perches around the seats of power.Cohen, however, then notes a paradox: "If their influence is dependent on their contribution to already-powerful agendas, maybe economists don't have as much real influence as it seems." In other words, economists are overrated because they are simply sock puppets, led to believe that their genius has caused the powerful and the wealthy to listen to them with rapt attention, when in fact economists are disposable and interchangeable mouthpieces for those who are willing to pay top dollar to those who are willing to say useful things. Economists are overrated, then, not just because their track record is so bad, but because their supposed influence is a mirage.
How do the economists defend themselves? Diane Coyle, of the University of Manchester in England, argues that economists deserve to be influential because they believe that there is no free lunch. That is, economists are unpopular (but influential) because they are willing to point to hard truths and difficult tradeoffs. She believes that this is hardwired into economic analysis. She acknowledges that economists "do over-reach sometimes" and that they need to be "humbler." Somehow, however, she concludes that because economists are the people who tell hard truths, they are the only defense against economists who are hubristic and opportunistic.
As nicely counter-intuitive as that sounds, however, she never really explains why economists are uniquely qualified to "call bullsh*t" on people (my words, not hers). There are other people "offering difficult answers," not just economists. Professor Coyle's argument, then, amounts not to a defense of economics or economists, but merely to the unexceptional statement that we should listen to people who are not snake-oil salesmen.
At least Professor Coyle is living firmly on this planet, and her arguments are not ideological. Peter Blair Henry, the dean of NYU's business school, is much less humble. His central claim is that the growth of underdeveloped countries in the last two decades flows directly from their following conservative economists' advice "to reform their economies and embrace a bigger role for markets, freer trade, countercyclical fiscal policy and greater openness to foreign capital." Suffice it to say that this argument is highly contestable.
Dean Henry, however, is not finished: "If economists had adequate influence, policymakers in the U.S. and Europe would already have followed the example of developing countries and implemented structural reforms of their own, such as simplifying the tax code and making it easier to hire and fire workers." Yes, the problem with the U.S. and Europe is that it is too difficult to fire workers! The neoliberal vision lives on. Although this blog post is not the place to revisit the arguments against that approach, it is useful to note that Dean Henry is precisely the kind of person whom Professor Cohen was describing, that is, an economist who eagerly says things as if they were undeniably true, and which are exactly what the "captains of industry and finance" want to hear. That does not necessarily make those arguments wrong (although they are), but it certainly makes it more difficult to take seriously Dean Henry's claim that economists should "adopt a modest stance."
All of that, however, is merely prelude for the full-on, raging defense of economics from Professor Charles Plott of CalTech. Professor Plott comes across like the embarrassing uncle who shows up at a family gathering, and after too many drinks starts to fulminate about the things that are stuck in his craw. Most of his piece is devoted simply to describing the "ubiquitous successes demonstrat[ing] that the basic science is healthy." It is all about "[t]he science," which is supposedly providing answers to "promote wealth and increase efficiencies."
What are these successes? Professor Plott essentially says that economics is used a lot, so it must be successful. There are theories that purport to explain "flash crashes," and companies use economics to try to understand things. There are economic theories about antitrust, regulation, and environmental policy. Yes, these theories exist. So what? Well, "no theory outside economics can claim to do a better job." Of course, if one were to point to other theories beyond those that Professor Plott prefers, he could simply call those "economic theories," too, because economists are nothing if not opportunistic. This is the ultimate non-science: There is no falsifiability when the theory is so elastic that it can be adapted to any situation.
Finally, what about ideological bias? "Because economics addresses policy and policy involves social values the profession and the theory itself evolved to keep ideology and science separate. All major professional economic associations have by-laws that prohibit the association from taking stands on policy issues." So, there is a rule that says that we must "keep ideology and science separate." Problem solved. Still doubtful? "[E]conomic models are constructed to separate policy opinions from the underlying science, with social goals implemented separately to assess unintended consequences and costs." Which simply makes me wonder where he is looking, because economic models are, and must be, constructed with policy views in mind, and with social goals obviously built into the analysis. (See, e.g., Dean Henry's faux-scientific assertions above.)
The final joke: "Economics is different. It stands out because of its accomplishments given the very small amount of basic research support it receives (less that one half of 1 percent of the National Science Foundation budget)." I do not like it when I find myself at a loss for words, but ... wow. Just wow.