With the presidency of Donald Trump looming, what's the state of the field of economics, anyway?
Last week, Bloomberg's Noah Smith optimistically argued that outside of some "notable but small exceptions, econ is a remarkably united field." In The New York Times, Justin Wolfers painted a gloomier portrait of that same professional unity, held together by foreboding of the incoming Trump administration.
Things may be considerably more complicated under the surface.
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First off, there's the question of whether widespread harmony in an intellectual field is a good sign or a bad one. "If economists are more in agreement it doesn't mean they've got truth," Lawrence Mishel, the president of the left-leaning Economic Policy Institute, told The Week. "When economists agree, sometimes we should be suspicious."
Second, there's the question of how real the harmony even is. In another interview with The Week, Stan Veuger, a resident scholar at the right-leaning American Enterprise Institute, dismissed the idea of agreement in the field entirely. He pointed to massive and unresolved differences over macroeconomics and methodology, and more specific questions like the minimum wage, immigration, and more.
"I think there are way too many project evaluation papers," Veuger said, "I don't think there's enough openly normative work that happens." In other words, many economists focus on assessments of various small-ball projects and social programs, creating the veneer of agreement, rather than engaging with big value-laden questions of how society should be ordered or which costs are truly justified.
Bruce Bartlett, a former senior policy analyst in the Reagan White House and Treasury official in the George H.W. Bush administration, also told The Week that while divisions still exist, they mostly reflect professional competition, not major intellectual differences. "Economists don't talk about the stuff they agree with each other on," Bartlett said, because the disagreements are more dramatic and interesting. On top of that, "people are always looking to knock down some widely held view by some giant of the profession because that's how you make your own reputation."
One major divide Bartlett did highlight, though, is between economists in academia and the ones who work in the private sector, often for big financial firms. "There are huge divisions" between them, Bartlett explained. "Academics tend to look down on [business economists] as not being as rigorous in their analysis." In fact, if you read Wolfers' piece carefully, when he says economists are anxious about their lack of influence over the Trump administration, what he clearly means are academic economists. (And Smith himself was a professor of finance at Stony Brook University, as well as a contributor to The Week.)
Larry Kudlow, a conservative CNBC commentator and former Bear Stearns economist, may head up the Council of Economic Advisers. Stephen Moore, a long-time right-wing think-tanker and a partner with the firm Arduin, Laffer, & Moore Econometrics, is a Trump adviser. As Bartlett saw it, "extreme points of view are not necessarily rejected [among business economists] because they sometimes give you insights even if they end up being wrong."
So the "hand-wringing" over the profession's loss of influence "is mostly going on among a very small subset of elite economic theorists," Bartlett concluded.
All professions have internal groups that compete to be the experts who reporters and policymakers turn to, and thus to speak for the group as a whole. And the tribe of academic economists that held sway until Trump's upset victory are probably left-leaning on the whole. Nonetheless it was Mishel who was most ferocious in his criticism of their blind spots.
"The economics profession has been at best misleading, or for the most part lying, about the effect of trade on workers' wages and jobs for the past 25 years," Mishel said bluntly. Economics has always known that even if globalized trade makes the U.S. economy as a whole better off, lots of Americans will get lower incomes and fewer job prospects. (In this case, many of those Americans were the white workers without college degrees who supported Trump.) Mishel felt the economists with the megaphone made a political or moral, rather than analytical, decision that protectionism had to be avoided. So they told a fairy tale of free trade to voters and politicians.
Mishel said a similar mistake was made about inequality: Influential economists focused on technological change and the distribution of skills as the main drivers of soaring 1-percenter incomes. They ignored the disappearance of unions, the minimum wage, and full employment as more plausible explanations that better fit the data.
Interestingly, while all three men hail from very different backgrounds and ideological persuasions, they actually agreed quite a bit on this last point. Veuger didn't share Mishel's critique on the inequality front. But he and Bartlett agreed the economics profession hadn't dealt squarely with the relative costs and benefits of America's global trade deals.
The GOP's support for free trade (which is more accurately described as "managed trade") in particular was "extremely simplistic," according to Bartlett. Veuger added the profession never really critically analyzed the eurozone, despite the disaster it has become, and that economists made a tacit decision to never say anything negative about immigration as well. "People have managed to convince each other that there can never be a negative impact on wages, no matter how large the group of low-skill immigrants is that comes through the country," Veuger said.
Whether this is a crisis for the profession or not is another matter. Mishel felt economists were paying the price for their failures with the election of Trump. The others took a longer historical view, seeing shifts in fads and changes of the guard as inevitable cycles in any field, with corrections and reforms needed from time to time. The sober centrism of the ruling economists has calcified into conventional wisdom, and all three interviewees seemed to agree it was good this group was being taken down a peg. "There's a sense of entitlement that I think goes a little far sometimes," Veuger observed.
Of course, that doesn't mean anyone was happy with what's coming next. The business economists come with their own attendant vices, and even Veuger didn't sound super enthused about Trump's economic picks. Bartlett was even more blunt, calling Kudlow and Moore "utter crackpots."
So give it a few years, and sure as the sun will rise, the economics profession will be in for another course correction.
