Economists are slippery bunch. In public fights over policy, many folks claim economic theory proves that markets are paragons of efficiency and that the government should mostly butt out – and economists often aid and abet this line of attack. Exhibit A: the efforts under President Clinton to loosen banking regulations, which made the 2008 financial meltdown a hell of a lot more likely. But when you confront economists about the failures of their profession, aside from a handful like Paul Krugman or Dean Baker most of them will say, that’s a very simplistic view of economics. What about all the behavioral economists whose books get rave reviews? Or economists who talk about how institutions really work? Or the folks who have disapproved the Efficient Market Hypothesis in Finance? That’s all true, and yet somehow that much more complex view of the economy never filters back to the big public debates.
So I was happy when I found this quote from international development economist Dani Rodrik that nicely sums up the verbal dance done by many economists.
Let a journalist call an economics professor for his view on whether free trade with country X or Y is a good idea. We can be fairly certain that the economist, like the vast majority of the profession, will be enthusiastic in his support of free trade.Now let the reporter go undercover as a student in the professor’s advanced graduate seminar on international trade theory. Let him pose the same question: Is free trade good? I doubt that the answer will come as quickly and be as succinct this time around. In fact, the professor is likely to be stymied by the question. “What do you mean by ‘good?’” he will ask. “And good for whom?”
The professor would then launch into a long and tortured exegesis that will ultimately culminate in a heavily hedged statement: “So if the long list of conditions I have just described are satisfied, and assuming we can tax the beneficiaries to compensate the losers, freer trade has the potential to increase everyone’s well-being.” If he were in an expansive mood, the professor might add that the effect of free trade on an economy’s growth rate is not clear, either, and depends on an altogether different set of requirements.
A direct, unqualified assertion about the benefits of free trade has now been transformed into a statement adorned by all kinds of ifs and buts. Oddly, the knowledge that the professor willingly imparts with great pride to his advanced students is deemed to be inappropriate (or dangerous) for the general public.
Ditto for the other place many folks encounter economics: intro economics courses.
In our zeal to display the profession’s crown jewels in untarnished form – market efficiency, the invisible hand, comparative advantage – we skip over the real-world complications and nuances, well recognized as they are in the discipline. It is as if introductory physics courses assumed a world without gravity, because everything becomes so much simpler that way.
Part of the reason why economists play this game is because it’s a hell of a lot harder to come up with a coherent framework if you take all of the non-market cheerleading facets of economic theory seriously – especially if you’re not comfortable doing economics without lots & lots of math.
But it’s also part of a larger ideological play. I don’t mean that somewhere there is a small cabal of high priest economists plotting world economic theory domination as they stroke the cat sitting on their lap. But if you’re going to push for a myth about how the economy works that is so obviously not true, you do need some way to accommodate that reality. And treating reality as if it’s too dangerous for lesser mortals is a damn good way to do it.
A few months ago, I read a smart research brief