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Tuesday, December 11, 2018

Have Economists Become Something More Dangerous — Policy Wonks?

Economists have a responsibility to argue for the best policies they believe in, not the best compromise they think lawmakers can pass.

The annual convention of economists and other social sciences is always difficult to get a handle on. It is large and unwieldy, with hundreds of panels and forums. I was in Chicago for this year’s pageant, and despite its many different moving parts, one thing rarely changes. Economists’ conclusions remain almost completely predictable. That’s true at least of the mainstream economists, who the redoubtable libertarian rebel Deirdre McCloskey insists we call something other than mainstream, such as “standard.” In sum, markets usually work, they say, but sometimes a little sand gets thrown into the gears. Since the financial crisis, perhaps there has been a little more sand than usual. Solution: clean it up.

Yet something out of the ordinary occurred this year. Economists agreed to a code of ethics, requiring them to make public who finances their research and with what fee-paying institutions they are associated. This reform was neither a result of guilt or newfound conscience. George DeMartino, an economist from Denver, has been loudly and admirably arguing for ethics standards and that a stronger code be adopted. McCloskey, according to a news report, argued outright that economists have become too much like lawyers, defending their clients’ positions no matter what. But the movie Inside Job, which caught economists like Glenn Hubbard and Fred Mishkin embarrassingly off-guard on camera, is what forced the profession into action.

But I came away with another concern. What are economists, anyway? Are they paid and/or consulted with for their unvarnished economic expertise, or do they tailor their views to carry weight in the political and lobbying arena with little regard for genuine economic evidence? The politicians and press who seek their advice prefer the latter, of course.

I went to a session called “The Political Economy of U.S. Debt and Deficits.” It included Alan Blinder, former vice chairman of the Federal Reserve, and three former heads of the Congressional Budget Office: Alice Rivlin, Douglas Holtz-Eakin, and Rudolph Penner. The latter two are Republicans; Blinder and Rivlin Democrats.

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