The Secret Consensus Among Economists

If you follow the economic policy debate in the popular press, you would be excused for missing one of our best-kept secrets: There’s remarkable agreement among economists on most policy questions.  Unfortunately, this consensus remains obscured by the two laws of punditry: First, for any issue, there’s always at least one idiot willing to claim the spotlight to argue for it; and second, that idiot may sound more respectable if he calls himself an economist. 

How then can the quiet consensus compete with these squawking heads?  A wonderful innovation run by Brian Barry and Anil Kashyap at the University of Chicago’s Booth School Initial on Global Markets provides one answer: Data.  Their “Economic Experts Panel” involves 40 of the leading economists across the US who have agreed to respond on the economic policy question du jour.  The panel involves a geographically and ideologically diverse array of leading economists working across different fields.  The main thing that unites them is that they are outstanding economists who care about public policy.  The most striking result is just how often even this very diverse group of economists agree, even when there’s stark disagreement in Washington. 

That observation is the starting point for my latest column with Betsey Stevenson

Let’s start with Obama’s stimulus. The standard Republican talking point is that it failed, meaning it didn’t reduce unemployment. Yet in a survey of leading economists conducted by the University of Chicago’s Booth School of Business, 92 percent agreed that the stimulus succeeded in reducing the jobless rate. On the harder question of whether the benefit exceeded the cost, more than half thought it did, one in three was uncertain, and fewer than one in six disagreed.

Or consider the widely despised bank bailouts. Populist politicians on both sides have taken to pounding the table against them (in many cases, only after voting for them). But while the public may not like them, there’s a striking consensus that they helped: The same survey found no economists willing to dispute the idea that the bailouts lowered unemployment…

How about the oft-cited Republican claim that tax cuts will boost the economy so much that they will pay for themselves? It’s an idea born as a sketch on a restaurant napkin by conservative economist Art Laffer. Perhaps when the top tax rate was 91 percent, the idea was plausible. Today, it’s a fantasy. The Booth poll couldn’t find a single economist who believed that cutting taxes today will lead to higher government revenue – even if we lower only the top tax rate

The point here isn’t that the panel of economists have all the answers.

Rather, they agree on the best reading of murky evidence. The folks running the survey understand this uncertainty, and have asked the economists to rate their confidence in their answers on a scale of 1 to 10. Strikingly, the consensus looks even stronger when the responses are weighted according to confidence.

I’ve never seen the disjunction between the political debate about economics and the consensus of economists be as large as it is today.  And I think this is incredibly damaging.  Instead of having a serious discussion about how best to end the current economic slump, Congress is gridlocked, as one of the major parties is blocking every effort to improve the economy, using arguments which are so far outside the mainstream that it is hard to find a single economist to agree with them.  The result is that Congress is doing nothing in the face of the tremendous suffering wrought by high unemployment.  And it’s also doing nothing in the face of a longer-run budget problem.  Indeed, fear that continued inaction will lead the US to walk off the “fiscal cliff,” may already be dragging the economy down. 

The optimist in me thinks that the new Economic Experts Panel may be a (small) part of the solution.  My hope is that journalists will come to see this as a useful resource—a way of checking whether political debates reflect serious disagreement, or something more cynical.  And hopefully this will lead us to focus on the more serious debates, rather than convenient and disingenuous talking points. 

You can read our full column, here.

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  1. Daniel says:

    Hidden due to low comment rating. Click here to see.

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    • Enter your name... says:

      You don’t seem to understand the post here.

      The economists were asked, did the bank bailout lower the unemployment rate? (That is, did the bank bailout make the supply for jobs more nearly match the demand for jobs?)

      The economists said yes. The word “consensus” here means only that the overwhelming majority of experts about supply-and-demand questions agreed with each other on the answer to the question.

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      • brent says:

        Hidden due to low comment rating. Click here to see.

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    • Lynn Weathersby says:

      Actually……..”jobs” aren’t a factor of production (nor are they a consumer good). The word I believe you are looking for is labor. Labor is supplied by employees. Labor is demanded by employers. Daniel, you should be more precise in the langauge you use. You’ll convince more people that your argument has merit. Secondly, you should research countries that have true laissez faire economies and move there.

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  2. Joe says:

    Dateline – 2007

    Breaking news – A special group of super smarty pants economists met today and agreed that the economy is in great shape and running on all cylinders. “There is virtual consensus among this incredibly smart group of people that the global economic future continues to looks bright. Our intelligence and economic understanding has ushered in a new era of economic prosperity. Due primarily to the policies we’ve outlined, and we all agree, the global economic outlook is better than ever. Since we’re so incredibly smart, and did I mention that we all agree?, anyone who disagrees with our policy suggestions is a short-sighted ignorant backwards cretin.”

    …and we all know how that turned out.

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  3. 164 says:

    The point seems to be that academic economists all tend to agree with left of center policies for the economy. A survey of private sector economists engaged in making money in the real world would, I suspect, show a different consensus.

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    • dumpus says:

      when you factor in the whole incentive scheme of a private sector economist advocating public policy that he can profiteer from, what remains?

      back in the 80′s and 90′s, there were two distinct camps of economists – those who believed that derivatives markets should have been centrally regulated (largely the economists in academia), and those who believed that it shouldn’t be regulated (largely the ones in govt and industry). those who believed that it shouldn’t be regulated just so happened to be in a position of influence – either in government or in the private sector – and they profited immensely, to the detriment of pretty much every living soul on the planet not living in a mud or grass hut.

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    • SGordon says:

      You might note that nowherein the article does it state that the group of economists in question were “academic economists” – for all you know, every single one of them could have come from private sector gigs.

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    • Shawn12 says:

      Actually, you’re wrong to suspect that. The National Association for Business Economics
      did a survey of 236 economists, mostly from the private sector, and found the majority agreeing with those in the survey above: http://www.csmonitor.com/USA/Politics/2012/0924/Economists-surprising-election-year-request-Raise-taxes-please

      Most economists agree more with Obama’s philosophy of trying to fix the economy and the debt problem than the philosophy espoused by Romney and the Republicans. As a longtime, but former, Republican I can see how the party has moved so far to the right that they now view the moderates as the far left and have abandonded economic sense along the way.

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    • Nate says:

      Private sector economists, at least the great majority of them, are working in positions where they’re responsible for making money FOR THEIR EMPLOYERS (and themselves).

      They are not tasked with analyzing what’s best for society at large, which is what one should do if you’re making policy that affects everyone.

      Unless academic economists are surveyed on a question that inherently affects their own bottom line (e.g. “is a college or grad school education a good investment?”), they should be considered vastly more objective sources than corporate economists.

      (Note: you’re using the term “private sector economists” as if most of those 40 academics don’t work in the private sector … most of those universities are in fact private universities. Your right-wing bias is showing).

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  4. Eric M. Jones. says:

    Justin,

    Thanks. Pretty good stuff.

    But I become apoplectic when I see “consensus”.

    “On the harder question of whether the benefit exceeded the cost, more than half thought it did, one in three was uncertain, and fewer than one in six disagreed…” And one was looking at his watch and wondering when the meeting would adjourn….

    This astonishes me that people who consider themselves “professionals” don’t know what the hell is going on, and get paid for it. Am I being unkind?

    In what is called “Science”, nobody asks for a vote like this.

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    • Enter your name... says:

      “In what is called “Science”, nobody asks for a vote like this.”

      Sure they do. They call it “mainstream academic consensus” for basic science and it’s an outright vote for regulated practical applications. Every single FDA advisory committee recommendation is a plain old vote on whether or not a drug or device is safe and effective enough for it to be marketed.

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  5. caleb b says:

    Well, here’s a question….out of these 40 economists, how many are liberal or republican?

    ….40/40 barbers think I need a haircut.

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    • Michael Peters says:

      That ratio of conservative to liberal is only as important as it compares to the industry average. You can’t compare it to the national average or to a 50/50 split since that would mean picking people farther down the list of experts in order to fill out some ratio you have in mind.

      If economic principles more align with liberal or conservative positions then you’d expect that more economists to be on one side or the other. It doesn’t show a sampling bias, but rather a refusal by one side or the other (outside of economists) to accept economic experts/principles.

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    • Marc says:

      Hidden due to low comment rating. Click here to see.

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  6. Colin says:

    In your column you wrote:

    On the harder question of whether the benefit exceeded the cost, more than half thought it did, one in three was uncertain, and fewer than one in six disagreed.

    No, that’s not true. Rather, 46% agreed that it did, with 41% either uncertain, in disagreement or having no opinion. You only get to the “more than half” bit by using the weighted responses, which you fail to note. Under the weighted system, the responses of people like David Cutler — who was an adviser to Barack Obama and scored his confidence a “10″ — distorts the overall findings. Austan Goolsbee is another example — a former Obama admininistration official who rated his confidence as a “9.”

    You also note that not a single economist disagrees with the notion that the bailouts lowered unemployment than what they otherwise would have been. Well, no kidding. But I think the more cogent argument against the bailouts that it was bad for the long-term health of the economy and that such moral hazard would have worrisome long term consequences. Shouldn’t we make decisions based on the long-term rather than just the immediate impact on unemployment?

    Lastly, this bit also stood out:

    Do you remember the Republican concern that Obama had somehow caused gas prices to rise, a development that Newt Gingrich promised to reverse? There’s simply no support among economists for this view. They unanimously agreed that “market factors,” rather than energy policy, have driven changes in gas prices.

    You could have used President Obama’s nonsensical blaming of speculators for the increase in energy prices to make the same point, but instead chose to focus on remarks by Newt Gingrich, who enjoys a far lower profile. It’s almost as if you were mainly interested in scoring partisan points in your column.

    “Raw politics” indeed.

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    • Justin Wolfers says:

      Check your math. 19 agree, 11 are uncertain, and 5 disagree. So clearly a majority of respondents (19/35) agreed, as I stated.

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      • Colin says:

        No Justin, you check your math. There were 41 economist queried. 19 agreed. 19 out of 41 is not more than half. And you didn’t say more than half of “respondents” in your column. This is what you said:

        “Yet in a survey of leading economists conducted by the University of Chicago’s Booth School of Business, 92 percent agreed that the stimulus succeeded in reducing the jobless rate. On the harder question of whether the benefit exceeded the cost, more than half thought it did, one in three was uncertain, and fewer than one in six disagreed.”

        So 41 were surveyed, and 19 agreed. This is not a majority, it’s not consensus, and your point about the GOP being at odds with established economic wisdom is far from proven.

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      • Tom says:

        Hidden due to low comment rating. Click here to see.

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      • Tom says:

        Actually, 19+11+5 IS equal to 35. And 19/35 IS a majority. Sorry for the brain fart – I’m embarrassed.

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    • James says:

      “Do you remember the Republican concern that Obama had somehow caused gas prices to rise…”

      Quite well. I also note that gas prices have decreased (about 50 cent/gal locally), and not one Republican has stepped up to give Obama credit :-)

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    • Colin says:

      Allow me to cop to one error: Austan Goolsbee’s response was a “9″ for the first question, but only a “5″ for the second question (which is actually quite interesting). However, let’s take a look at those who believe the stimulus was a net benefit and responded with an 8, 9 or 10 for their confidence:

      * Judith Chevalier: Donated $1500 to the Obama campaign in 2008
      * David Cutler: Wikipedia notes that he served in the Clinton administration and was senior health care advisor to Barack Obama.
      * Barry Eichengreen: Political affiliation unknown.
      * Maurice Obstfeld: Donated $250 to the Obama campaign in 2008.
      * Richard Thaler: Donated $10,000 to the “Obama Victory Fund” in 2008.
      * Cecilia Rouse: Served on President Obama’s Council of Economic Advisers.

      As can be seen, five of the six economists who were very confident that the stimulus package was a net benefit are either fans of President Obama or have directly served him in some capacity. While there is nothing wrong with any of this, it’s hardly noteworthy that economists who support Democrats also favor Democratic policies.

      This is worth pointing out given your statement that “The folks running the survey understand this uncertainty, and have asked the economists to rate their confidence in their answers on a scale of 1 to 10. Strikingly, the consensus looks even stronger when the responses are weighted according to confidence. ”

      The confidence weighting means zilch.

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      • Will says:

        It could also be that the economists put their money where their brain is, supporting the candidate/party with the better economic policy. You can’t determine causation but you sure can accuse it in order to discredit results.

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      • Colin says:

        Will,

        No doubt the economists support the party that they think has better economic policy, but it really makes no difference which way the causation goes. That people who are already predisposed to favor increased government spending/Keynesian measures fervently believe in the efficacy of such measures when they are put in place — i.e. the confidence rating in evaluating the net benefit of the stimulus — tells us nothing. It’s as remarkable as a similar poll revealing that Republican/right-wing economists believing strongly that tax cuts are good for the economy.

        My point is not to accuse the economists of anything untoward, but simply to note that the data isn’t very revealing.

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    • Shawn12 says:

      I actually saw an oil speculator on Fox News talking about how oil speculators DO raise gas prices. He admitted this and also stated that admitting this goes against his self-interests since he works in the profession. There is plenty of evidence that has shown that the oil speculators do influence gas prices.

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  7. Franklin says:

    Left wing propaganda – sad to see it here @Freakonomics. You’d think that people here know Hayek and Bastiat

    I’ll leave you a quote from the former ““The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

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    • Enter your name... says:

      I think that the field of economics has advanced a little since the early 19th century, but Bastiat is really talking about forward-looking plans, not about figuring out what happened several years before. Economics is better at assessing what actually happened in the past (the subject of this post) than at predicting the future (the subject of Bastiat’s statement).

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      • Franklin says:

        You are making a distinction that has no actual difference. Assessing what happened in the past on an economic level IS predicting what will happen in the future. Either that or eliminate the field of economics entirely, we can just call them all historians.

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      • Enter your name... says:

        I don’t think so. “If you do X, I predict Y will happen” is a materially different activity than “I see you did X last year. When we totaled the data on what actually happened, here are the results:”

        You should use past data to inform your predictions, but predicting the future isn’t the same thing as measuring the past.

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      • Franklin says:

        …but your activity leads to the former: “I see you did X last year and the result of that is Y. So if you do X again this year Y will happen again”

        Asserting a causality between X and Y (which is what economics is all about – right? if not then it is completely pointless) is the same thing as a prediction that if we do X then Y will occur.

        Totaling the data without asserting any causality is not only not helpful, it is not what Wolfers was asserting in the article. He was clearly stating that a plurality of economists agree that liberal policies will cause a good economic result while virtually none (except some hacks that will say anything for a paycheck) think conservative policies will cause a good economic result. That makes this whole article a left wing hit job.

        My friend without a name: your point is meaningless in this argument

        I should also state that simply because economist was in a earlier century does not make him wrong. the principles that economics are based on are in essence based in human nature. And that is unchanging. Also Hayek is a much more recent economist (which you conveniently ignored).

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  8. Dan says:

    A University of Chicago poll – already makes me wonder, I mean we are talking about a policy pushed by a politician that called Chicago home.
    As I then look a little deeper into the polling data, and wait, was that Austan Goolsbee? You actually include in a poll a guy that was involved in the policy, and you think he’s going to tell you it was bad? Not only that but you include a couple of guys that works beside Christina Romer.

    You might as well just have polled every one that currenly lives in the white house. Did you write this in your Obama ’12 campaign office? Even these sad attempts at trying to make the current administration look like they have a clue about economics, is not going to make the 15% of real unemployed people think they are better off now.

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