Must We Bash Economics?

excerpt from Jonathan Chait's The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics must signal that this is now the publisher-approved time to start praising the book. At any rate, I agree with Kevin Drum: "long story short, I liked it." Unfortunately, so far it only has one review on Amazon.com: "Don't waste your money. The author is indulging in ideological axe grinding. Books to read: The Road to Serfdom F.A. Hayek, Capitalism and Freedom Milton Friedman."

For the rest of us, though, it's a very good book. Indeed, it's put into my mind some disquiet with the sort of economist-bashing that some of my cronies like Ezra Klein and Chris Hayes seem to have decided (figures like Max Sawicky and Dean Baker, themselves economists with credentials are, needless to say, influential here) is integral to the project of progressive economic policy. One effect of the sort of characterizations of mainstream economics that you get from Chris and Ezra is to, in effect, propagate the notion that conservative economic policies are well-supported by a professional consensus inside the economics world.

Chait's book very convincingly shows that on the key dogma of present-day Republican Party policy thinking -- a monomaniacal obsession with cutting taxes -- this simply isn't the case. The ideas the Bush administration, The Wall Street Journal, and all the rest are working with are marginal, crackpot notions that are being mainstreamed through relentless message discipline. There isn't some army of orthodox neoclassical economists out there who think that returning to Clinton-era levels of taxation would wreck the economy, that retirement security can best be provided to all by expanding tax breaks for rich people, that health care can best be improved by expanding tax breaks for rich people, that sound education policy requires expended tax breaks for rich people etc.

Now, Ezra liked the book, too, so maybe there's not a ton of tension between these two arguments at the end of the day. But insofar as there is, I tend to see Chait's strain of argumentation as the more important one. It's be fine to see the politics of the economy conducted as a discussion among reasonable people who put a different weight on the reality of market failures, on the one hand, and the problems of public choice theory and regulatory failure on the other. What we have instead is a situation where, as Chait shows, vast areas of the policy debate are dominated by liars and crazy people like The Wall Street Journal's editorialists.

Comments

"Indeed, it's put into my mind some disquiet with the sort of economist-bashing that some of my cronies like Ezra Klein and Chris Hayes seem to have decided (figures like Max Sawicky and Dean Baker, themselves economists with credentials are, needless to say, influential here)"

Umm...

So favorably citing economists like Sawicky, Baker, and Galbraith is evidence of "economist-bashing"?

Are you Mickey Kaus now? Just because Ezra has usurped you is no reason to distort his points.

Posted by Petey | September 5, 2007 9:08 AM

Is it as common in political science and sociology to present generalizations as some sort of natural science 'law' as it seems to be in economics, at least when I encountered such?

Posted by El Cid | September 5, 2007 9:12 AM

Wow, I had to read that post about ten times to understand the point Yglesias was trying to make. Then it turns out he was setting up a strawman to knock down. I can't for the life of me understand why both arguments aren't equally valid and important. Sounds like Chait is arguing that the Republicans have been relying on snake-oil saleman for the past thirty plus years (no suprises there) and that Klein/Hayes think that some economists are idiots. Where's the contradiction?

Posted by Rihilism | September 5, 2007 9:21 AM

As if _The Road to Serfdom_ wasn't full of ideological ax griding! (Capitalism and Freedom, too, though a bit less noisily- maybe ax poishing there.) This isn't to say that Hayek should not be read- some of his stuff is very good and interesting, but _Road_ is a propaganda book written for political reasons full of predictions that didn't come true at all.

Posted by Matt (not the famous one) | September 5, 2007 9:31 AM

I think there's a distinction between economics the academic field, and economics the professional community. The thing about this:

The ideas the Bush administration, The Wall Street Journal, and all the rest are working with are marginal, crackpot notions that are being mainstreamed through relentless message discipline. There isn't some army of orthodox neoclassical economists out there who think that returning to Clinton-era levels of taxation would wreck the economy, that retirement security can best be provided to all by expanding tax breaks for rich people, that health care can best be improved by expanding tax breaks for rich people, that sound education policy requires expended tax breaks for rich people etc.

is that the relentless message discipline applies to a whole lot of for-real academic economists, who may recognize supply-side nonsense as nonsense in their academic work, but don't call it out, and are willing to be associated with it, for political reasons.

It's be as if the situation on global warming were exactly the same as it is now in terms of what gets published academically, but large numbers of respectable climate scientists were willing to sign onto op-eds denying that there was any proof that global climate change was happening.

Posted by LizardBreath | September 5, 2007 9:51 AM

This (Matt's) argument makes no sense. In order for Klein & Hayes to be wrong, you'd have to argue that mainstream/orthodox economics (which does not include people like Sawicky and Baker) is open to a progressive economic/political program and contributes something to the development of said program. You can't argue that though, because it's so obviously not true.

Posted by albert | September 5, 2007 10:10 AM

vast areas of the policy debate are dominated by liars and crazy people

Oh, this is true in so many other areas as well...

Posted by latts | September 5, 2007 10:10 AM

No one ever voted for tax cuts because they were persuaded by supply-side economics. OK, maybe Jack Kemp, but almost no one, and certainly not enough Congressmen and Senators to legislate anything. The policy debate -- dominated as it is by crazy people and liars -- serves to give cover to politicians who pass tax cuts to win the favor of and donations from rich people who really care about these things. (The policy debate itself reaches most people through media which funds itself by selling advertisements, often to these rich people.) If you want to fight back, you can't do it by trying to persuade people that supply-side economics is bunk. Most people know that already.

Posted by Tyrone Slothrop | September 5, 2007 10:41 AM

Tyrone is right. People vote Republican because they want lower taxes and want government programs to reward "deserving" folks (i.e., the middle class) and not the poor. From Bush they've gotten lower taxes and economic stasis. Things were very good when Bush came in, and they haven't changed much. Chait's charges of a "hijacking" are pathetic. American politics today is no more under the control of a "tiny coterie" than it was under FDR.

The enthusiastic reception of Chait's book among liberal bloggers suggests that the younger generation wants to dig up the corpse of Walter Mondale. I voted for Walt, and I can assure you, he'll lose just as badly the second time around. Liberals desperately want to believe that they can win the presidency on domestic issues. They can't. Democrats need to get a foreign policy they know and understand and believe in.

Posted by Alan Vanneman | September 5, 2007 10:48 AM

Can someone reassure me before I buy it that this book isn't just an rehash of the first half of Krugman's 'Peddling Prosperity', minus the economics?

Posted by Peter | September 5, 2007 10:52 AM

I take issue with Matt's last sentence. He seems to imply a distinction between "liars" on the one hand and "crazy people like the Wall Street Journal's editorialists" on the other. The mendacious hacks on the WSJ editorial board certainly should be recognized as liars as well as crazy.

Posted by Gene | September 5, 2007 11:03 AM

I don't give a shit about cutting taxes or not. I care about free trade vs. fair trade. I care about economists not being able to model X, so deciding that X has no importance, where X is "power", or "CEO Salary", or "irrational behavior", or "ignorance".

I care about very reasonable questions that economists refuse to ask:

a) did moving off gold actually improve things
b) is free trade really free
c) are jobs and job skills and industries as fungible as they claim
d) how coercive is tenure to research outcomes?

Posted by jerry | September 5, 2007 11:10 AM

Neoclassical economics is a pseudo-science, because it tries to bend the world to fit its model instead of the other way around. Its believers are forever accusing people of acting "irrationally", which, to an economist, means "not in accordance with our theory".

There are economists out there doing valid science; they are generally called behavioral economics, and are studying how human beings actually behave.

Posted by Joe Buck | September 5, 2007 11:53 AM

"The enthusiastic reception of Chait's book among liberal bloggers suggests that the younger generation wants to dig up the corpse of Walter Mondale."

I'm not getting much love from neoliberals like Jon Chait or hip lefty bloggers. They don't seem to appreciate my plan to raise taxes in order to expand welfare and public housing programs.

If you're going to use me as a straw man, please have the common courtesy to remember that I'm not dead yet. Thank you.

Posted by Fritz Mondale | September 5, 2007 11:55 AM

"Don't waste your money. The author is indulging in ideological axe grinding. Books to read: The Road to Serfdom F.A. Hayek, Capitalism and Freedom Milton Friedman."

You can't refute a theology.

Posted by Davis X. Machina | September 5, 2007 11:59 AM

Neo-classical economics really is a theology. Read Hayes' description of the anger that its adherents express when challenged about their operating myth (people always act as rational economic actors); they react very similarly to religious zealots who are challenged to prove the existance of God(s).

Posted by Father Figure | September 5, 2007 12:09 PM

What's the difference between economics and science? One is science. (not quite sure what I mean here).

This post is a bit off topic. Its about science and public policy versus economics and public policy or social science and public policy.

I've been flabbergasted at the right wing attacks on Global Warming. For example, yesterday I was listening to right-wing radio, and a caller called in who said, "I was watching TV last night and Discover channel said that the sun is getting hotter. I think that is causing global warming, not human activity."

Quick, earth scientists, check out Discovery Channel!

In an area of scientific specialty, its impossible for a non-scientist to have a meaningful opinion independent of scientists. That is, all opinion is filtered through specialists. So, if the great consensus of earth scientists is that there is global warming created by human activity, that's it. You may doubt the veracity, and think the predictions are weak -- they've been wrong in the past -- but if you are not a scientist you cannot come up with your personal hypothesis. The scientific consensus pretty much has to be accepted as the scientific consensus. Perhaps flawed, but its the best we've got. (like democracy)

Why are right wing nuts given the freedom of coming up with their pet theories? I think its because people use political science and economics as models. In these fields, the line between experts and others is fuzzy. Here, almost anyone can play the game, and the "experts" have a bad history of being bought off.

Posted by jkubie | September 5, 2007 12:11 PM

Some of you guys are not fairly assessing the field of economics as a whole. As Ylesias and others have pointed out, hardcore libertarianism and supply-side economics are not the mainstream views within academic economics. Surveys show that more academic economists in the US are registered Democrats than are registered Republicans, for example.

Having said that, I think it is true that the average economist takes a more 'libertarian' view than the average layperson. Certainly, the economists who get the political appointments and the TV interviews tend to be of a 'right wing' bent. There is a basic economic reason for this: economists respond to incentives, just like anyone else. In the public policy realm, economics and politics cannot be divorced from one another. Politicians decide that they want to cut taxes for political reasons, and then they find economists who will support their plans in return for some form of financial or professional compensation. (These 'deals' may be explicit or implicit.) This is not unique to economics; it's no different from the climate scientists who may decry climate change in return for compensation from the political or business sectors. But it is more visible in economics because economics is so closely tied to politics and to public policy. Economists who oppose these things generally aren't provided with the same platforms from which to provide counterpoints.

I'd like to pick up on jkubie's point. I agree that economics should not properly be called a science (and I say that as a student of economics). But then, I don't think math is a science either. Rigorous scientific methodology is not available to the economist by the very nature of the discipline; economists cannot carry out controlled experiments in order to study most of the questions that they deal with.

But that doesn't mean that economic expertise is not valid or valuable. I don't know why jkubie decides that appeals to authority are a valid in a field like climatology but not in economics. He or she claims that "the line between experts and others is fuzzy" in economics, but I think the flawed understanding of economics, and of the neoclassical paradigm in particular, that is being expressed in these very blog comments suggests otherwise.

Some of you call (neoclassical) economics a 'theology' but seem unaware that most of the very problems you identify are addressed within the field itself. Most of the best known and ost respected economists spend their careers identifying those very problems ('market failures'). The rigid neoclassical framework gives sufficient conditions for a particular kind of optimal economic outcome. No economist seriously believes that those conditions are satisfied in reality or ever could be. Acknowledging this, the question becomes: what 'second best' policies should we pursue? That is both a matter of economic analysis and of personal values.

For values invariably enter into the picture. Values are the reason so many libertarian economists seem to oppose action on climate change; they see it mainly as an excuse for government regulation, which they believe is generally bad for various reasons. (Nevertheless, the single best policy that could actually reduce greenhouse gas emissions---a serious carbon tax---is supported by almost nobody but economists.) But this too is as true of other fields as it is for economics (i.e. Should we clone humans for research purposes? Should we use embrionic stem cells for research? Should we augment our bodies with technology to improve health outcomes? Should we engineer our kids to avoid genetic diseases?).

In economics, the relevant values questions are things like: What limits can justifiably be placed on free transactions between individuals? How much should we care about inequality for its own sake? How much should we focus on long-run increases in average living standards for all of society versus the economic security of individuals in the short term? These have no easy answers, but they are at the heart of many of the ideological and methodological disputes between economists and non-economists. With respect to the particular questions that economists decide to study, within the framework of values that they adopt, I would say with great certainty that economists understand economic forces and economic behaviour far better than non-economists do.

Economic behaviour is very difficult to study. Some of the ideas we've come up with are not that great, but they're the best we have so far. Does ideology come into play sometimes? Yes. But this is true in other fields, and it is true on both sides of the ideological divide within economics. (For every extreme libertarian economist, there's an ideologically anti-market economist. You've just never heard of the latter for political reasons.) If you have an axe to grind, it is not with the economists who develop the theory, but with the politicians who manipulate it.

Posted by Alexander Murray | September 5, 2007 1:11 PM

All economists whose conclusions oppose my favored policies have research that is plagued by serious methodological flaws, suspect data, unfounded assumptions, bad mathematical logic, and abuse of regression analysis. All economists whose conclusions support my favored policies have research that is flawlessly conducted, perfectly logical models that are seamlessly grounded in realistic assumptions, highly accurate data, and brilliant statistical analysis.

Posted by Julian Elson | September 5, 2007 2:00 PM

The GOP/Wall Street Journal insane devotion to tax cuts as an overall economic policy has a precise emerging parallel on the left: protectionism and attacks on free trade. There is no credible case to be made that we can protect large industries and millions of jobs without hurting our economy by decreasing our competitiveness. Look at what happened in continental Europe from the 1970s to recent years.

Posted by Chris | September 5, 2007 2:13 PM

All economists whose conclusions oppose my favored policies have research that is plagued by serious methodological flaws, suspect data, unfounded assumptions, bad mathematical logic, and abuse of regression analysis. All economists whose conclusions support my favored policies have research that is flawlessly conducted, perfectly logical models that are seamlessly grounded in realistic assumptions, highly accurate data, and brilliant statistical analysis.

Posted by Julian Elson | September 5, 2007 2:00 PM

*******************************************
Hehehe

Posted by Campesino | September 5, 2007 2:40 PM

Julian,

That's easy to say and it sure sounds good, but economists do have notoriously bad assumptions.

Often times they are like physicists (who they compare themselves to, and favorably!) that still work with frictionless pulleys. I.e., they are like freshman and sophomore physicists.

Posted by jerry | September 5, 2007 3:27 PM

Eh, even if mainstream economics has less than perfect descriptive value, it can still be useful perscriptively. As in, if you want to act "rationally" - which is to say make your actions more likely to achieve your goals - here's how to do it.

I, like a lot of people, used to consider sunk costs when deciding on a course of action. And then I came across an economist who told me that was stupid, and pointed me to models of why that was stupid, and you know what, he was right. So now I don't.

Posted by Senescent | September 5, 2007 6:44 PM

On the point of science, economists are not scientists, neither are climatologists or nutritionists for that matter. Science is objective. Pseudo-science is subjective. Values (better, worse, right, wrong) are subjective and should never be used in hard science. There is a great deal of debate within the scientific community about science-based management. That is, whether scientists should set policy on things like environmental regulations based solely on the available scientific data, or whether politicians are best equipped to incorporate socio-economic and political (non-scientific) consequences into the decision making process.

Posted by Just Karl | September 5, 2007 10:33 PM

On the point of science, economists are not scientists, neither are climatologists or nutritionists for that matter.

Just out of curiosity, how are you defining "climatologists"?

Are people who study the transmission of infrared photons through the atmosphere scientists, and are they climatologists?

Or are those researchers and theorists really physicists, and thus 'legit' scientists?

Or would the term 'climatologist' only apply to advisers who say that it would be bad if fossil-fuel produced CO2 could promote global energy level increases, leading to warming, which could harm human societies in various ways?

Posted by El Cid | September 6, 2007 11:32 AM

I'm defining climatologists as meterologists on a longer time scale.

If you study and report on the behavior of infrared photons tranmitted through various gasious mediums in tightly controlled replicated experiments, you are a physicist. If on the other hand, you simply observe sunlight and build a computer model that predicts future weather patterns based on limited unique observations and the assumption that the atmosphere is uniform, you are a hack weatherman.

Posted by Just Karl | September 6, 2007 5:52 PM