A Harvard Econ Prof Comes to Bury, Not Praise, His Profession
And more from this week...
EPPC’s Brad Littlejohn is running an excellent fundraiser for victims of Hurricane Helene, using the proceeds to purchase supplies that he will deliver to Asheville, North Carolina on Sunday. Please consider making a donation here.
Tim Walz and JD Vance had a fascinating discussion about economists on Tuesday, which I aggressively excerpt here:
Vance: A lot of economists “have PhDs, but they don't have common sense and they don't have wisdom.”
Walz: “You made a question about experts,” but “if you're going to be President, you don't have all the answers… My pro tip of the day is this, if you need heart surgery, listen to the people at the Mayo Clinic.”
Vance: “Governor, you say trust the experts, but those same experts for 40 years said that if we shipped our manufacturing base off to China, we'd get cheaper goods. They lied about that. They said if we shipped our industrial base off to other countries, to Mexico and elsewhere, it would make the middle class stronger. They were wrong about that. They were wrong about the idea that if we made America less self-reliant, less productive in our own Nation, that it would somehow make us better off. And they were wrong about it.”
Walz: “Look, I'm a union guy on this. I'm not a guy who wanted to ship things overseas… Much of what the senator said right there, I'm in agreement with him on this. I watched it happen, too.”
Will no one defend the experts? Jason Furman will… kind of.
Your ONE THING TO READ this week is Furman’s lecture, delivered last Friday at the Peterson Institute for International Economics: “In Defense of the Dismal Science.”
Furman is an exemplary representative for his profession—widely and deservedly respected across the political spectrum, formerly the chair of President Obama’s Council of Economic Advisers, and now a professor responsible for teaching introductory economics to nearly half the students who pass through Harvard College. Unlike some other economists featured here at Understanding America, he is, in my experience, an honest and open-minded practitioner eager to engage disagreements in good faith.
This honesty serves him well in the critique that he levels at economists and policy analysts on both Left and Right who rely upon caricatures of “Econ 101” or fall victim to respective vices: The Left, he notes, has a habit of replacing tradeoffs with just-so stories in which the pursuit of non-economic objectives like fighting climate change are sold as somehow good for growth and jobs too. The Right, meanwhile, tends toward absolutist views that prevent reasoned evaluation of tradeoffs because some policies (say, tax cuts) are supposedly always a good idea, while others (say, regulations) are always catastrophic job killers. These are excellent points, indeed the sort one might read here at Understanding America.
But who does that leave to defend? Furman ends the lecture not with concrete examples of economics done well, but rather with what he calls a “better alternative,” which is… “more economics” and “getting more comfortable with admitting and talking about tradeoffs.” This is, ironically, a meta example of the classic economist’s folly: “assume a can opener.” What would make economics better? If economists thought differently about different data. But that’s no Defense of the Dismal Science, it’s a politely framed assault on a failing profession, combined with a wish for a more defensible one.
I was also struck by this observation, in the midst of Furman’s case for more robust analytical tools to aid policymakers: “Sixty years ago revenue estimates, distribution tables and cost-benefit analysis played no role in the policy process. Now they are all commonplace.” That’s true as a descriptive matter, but it raises the rather fascinating question of whether the quality and sophistication of detailed economic analysis has any correlation with the quality of policymaking. Plentiful budget estimates appear not to have improved the quality of the federal tax code or sanity of the federal budget. Endless cost-benefit analyses have accompanied an explosion of regulation with questionable return on investment at best. Economists uniformly bet their reputations on the wisdom of embracing free trade with China, lost the bet, and now insist more loudly than ever that they and they alone properly understand trade policy.
Whatever economics could be, as practiced it has become a corrosive force in both politics and governance. Rather than more economics, perhaps what we need is more political economy, which recognizes economic thinking as one input to a political decision-making process in which economists are entitled to the exact same one-vote-per-person input as everyone else. I join Furman in wishing for a profession that understands its limits and operates honestly within them. But I see, and Furman gives, little reason for optimism.
BONUS LINK: The Chicago Policy Review notes that two-thirds of economics PhDs have at least one parent with a graduate degree, which is kind of wild.
BONUS BONUS LINK: As this edition of Understanding America went to press, the latest episode of the Ezra Klein Show posted, with Ezra interviewing Furman. I haven’t had a chance to listen, but I’m sure it’s interesting!
Brief public service announcement: the Vanderbilt Policy Accelerator, led by Compass Advisor Ganesh Sitaraman, is looking for new directors, policy analysts, and fellows as it expands. If interested, apply here.
THIS WEEK AT AMERICAN COMPASS
The Compass Point is from yours truly, explaining the important and concerning parallels between trade deficits and budget deficits: All Who Squander Are Lost
While the ecstatic squanderers of Squanderville may seem cartoonishly short-sighted, they are well represented amongst economists and other commentators who see the trade deficit as at least unconcerning and in some cases downright beneficial. Scott Winship, a sociologist at the American Enterprise Institute, provides a good illustration. He observed recently: “Our ‘terrible’ trade deficits let us fund a public retirement system that would require more fertility, higher taxes, or higher interest rates in its [sic] absence.”
Also on The Commons
Conservatives Must Resist Musk-ification: American Compass’s Chris Griswold explores the risks for American industry and workers in elevating efficiency above all else.
Different Ways of Getting the Wrong Answer on Poverty: Patrick Brown of the Ethics & Public Policy Center searches for a conservative middle way on tackling poverty.
The End of Job Growth: Aaron Renn connects declining fertility to labor market woes.
And, on the American Compass Podcast this week, American Compass’s Mark DiPlacido joins me to discuss his new report, “Disfavored Nation,” which provides the roadmap for rescinding China’s Permanent Normal Trade Relations (PNTR) status.
WHAT ELSE SHOULD YOU BE READING?
Re: Who Wore It Better?... Compass Advisor Jonathan Berry (at the Wall Street Journal) and I (at the Financial Times) both draw lessons from the Teamsters declining to endorse in the presidential election after polls of their members found a strong preference for Donald Trump.
Re: Living Rent Free… the Wall Street Journal warns America’s Young Men Are Falling Even Further Behind
The Journal goes deep on one of America’s most serious problems, the declining fortunes of young men who increasingly struggle to build their own lives. I couldn’t help pulling up short at this line near the start: “Presented with a more-equal playing field, young women are seizing the opportunities in front of them, while young men are floundering.” When just about any other group in America is struggling, academics queue around the corner to develop theories of inequality that must explain it. But when young men are struggling, apparently they just can’t handle all the equality:
Until the past decade or so, “there was an assumption that men just needed to show up for their life and they’ll get a job and have a family and be provided for, because they’re men,” says University of Maryland masculinity researcher Kevin M. Roy.
“Get a job and be provided for” has got to be one of the self-evidently stupidest formulations ever printed. Improving the fortunes of young men is going to take time, but firing the “masculinity researchers” would probably be a good place to start.
Re: The Social Network… at the Institute for Family Studies, Leonard Sax asks Toxic Phones—or a Toxic Culture?
Sax has (a new edition of) an important book out this week, The Collapse of Parenting, that looks beyond smartphones to the other changes in America that are harming kids—the “transfer of authority from parents to children,” a “culture of disrespect [that] breaks bonds across generations,” and “the growing fear of being normal.” Read the post here, then go read the book.
Bonus link: The Atlantic laments that even at elite colleges, students no longer know how to read entire books, but for all its efforts to blame some outside force for this development, it seems clear by the end that the real issue is “a shift in values rather than in skill sets. Students can still read books… they’re just choosing not to,” which rather makes Sax’s point.
Bonus bonus link: And what about the parents? In case you missed it in Understanding America a couple of weeks ago, I give an answer in Mommy, Where Do Parents Come From? “To the extent that parenting has become stressful because parents are doing it in an unsustainable way that lacks benefits, the solution is not childcare subsidies and mental health services, it is to stop parenting in that way.”
Re: Shifting Gears… Thomas Kochan says to Vote Yes to Let Workers in the Rideshare Sector Unionize
Kochan is, in my humble opinion, the nation’s most thoughtful researcher and leading authority on what workers want and how alternative forms of labor organizing could improve their options and fortunes. Here he highlights a fascinating initiative that will be on the ballot in Massachusetts next month, creating sectoral bargaining rights for rideshare drivers.
Read Kochan’s piece and then also the bizarre counterpoint from R Street’s Robert Melvin, arguing that drivers should enjoy the “freedom” of the rules negotiated in a settlement agreement reached between the state attorney general and the rideshare companies, rather than “allow the labor union to set the terms and conditions.” But… any terms and conditions negotiated by the union are submitted to all drivers (with more than 100 rides the prior quarter) for a vote, and adopted only with majority support. If an agreement between the AG and companies gives drivers more freedom and flexibility than one in which the drivers have a direct say, Melvin doesn’t explain how. Elsewhere, he argues that drivers “also see setting their own terms as a benefit,” which sounds nice, if such a world existed, which of course it doesn’t, because obviously no drivers “set their own terms” with Uber.
Be sure to read to the end, where Melvin calls for “versatile solutions that increase gig workers’ autonomy” and warns “pursuing anything else could risk undoing the public safety gains of reduced drunken driving.” R Street used to do interesting work on innovative labor reforms. This is not up to their standard.
Bonus link: For more on sectoral bargaining, and other places it could be tried (“an ideal configuration might be a conservative governor or mayor partnering with an industry lamenting ‘labor shortages’ or a ‘skills gap’ and a union that has never made in-roads organizing there before”) see my recent essay for EIG’s excellent American Worker Project.
Enjoy the weekend!
Kudos for the can opener joke. Humor often illuminates. I have some about actuaries. Old Soviet jokes seem more and more to the point.
Seriously though we do need experts in their place. Vance is the smartest politician around and makes the error of thinking others are like him. Likewise, I did not join other conservatives in celebrating the demise of the Chevron doctrine. We have replaced bureaucratic tyranny with tyranny by ignorant, capricious and even more unaccountable judges.
By far the greatest scandal in the history of the economics profession, at least in my opinion, occurred in the East Room of the White House thirty years ago on the eve of the NAFTA vote in Congress. That was when the dean of American economists, Paul Samuelson, flanked by six of his Nobel prize winning colleagues, stepped up to the microphone to say that “protection had never resulted in a net increase in the number of high-paying jobs.”
This from the man who fifty years earlier in a celebrated paper, "Protection and Real Wages," had created a sensation by proving that a tariff on labor-intensive goods made in a low wage country could prop up the wages of workers in a high-wage economy.
A couple of years later Samuelson admitted in a Newsweek column that "of course" American workers were now in wage competition with workers in China and that henceforth, according to his famous "factor-price equalization theorem," wage rates in the two countries could be expected to converge.
In other words, at the crucial moment when it counted Samuelson deliberately misled the Clinton administration and the public at large on a most important policy issue affecting the future wellbeing of American working people. That none of his Nobel prize winning colleagues chose to clarify the situation tells you all you need to know.