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. MIckey says:

    I wish n>40

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  2. V says:

    Is it surprising that people with similar training at similar schools and of a similar age cohort and demographic mix would agree on policy? Now, they may or may not be right but the idea that a consensus on the topic is some sort of defining factor is one of the reasons economics is more akin to sociology than chemistry (despite the advanced mathematics).

    A much more convincing argument would be to show in regards to:
    1. Stimulus: How standard economic theory explains away the 1946 and 1921 recessions and not just the 1930s (where the evidence is much more mixed in any case than standard Keynesian narratives); the evidence against the liquidity trap; episodes where austerity seems to have worked (1982, 1998, etc); how countries where stimulus is economically suicidal (Greece with a primary budget deficit and a creditor run, etc) are compellingly different than the US with a huge debt ratio (no, printing more money a la Yglesias is not exactly attractive to most people)…

    2. Bank bailouts: People argue with the consensus here because the explanations of how banks that aren’t really responsible for most of the commercial lending in the US matter to commercial health seem so self-serving. The presence of deposit insurance makes bank runs appear much less worrisome to ordinary people so why do governments treat the runs like its 1932 (pre-FDIC)? Bondholder and shareholder haircuts are usually implemented but not in this case–why not? If banks are so central to the economy, nationalization would seem to be on the table in order to avoid socialization of losses and privatization of profits.

    Economic policy-makers need to engage these arguments in public forums to preserve any sort of legitimacy and putting forth cartoon version of Keynesianism and crony capitalism isn’t exactly confidence inspiring. Many of these questions are also not necessarily amenable to an economist defining a right or wrong answer (i.e., they are value judgments like government is likely to run the banks worse than the private sector, etc.) so once again, putting forth a consensus as an argument is weak.

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  3. Dave says:

    I think it’s interesting to note the stark contrast between the comments here and the comments on the original article published on bloomberg.com.

    Well-loved. Like or Dislike: Thumb up 18 Thumb down 0
  4. Jerome Solanum says:

    “92 percent agreed that the stimulus succeeded in reducing the jobless rate”

    Well, if 92% of economists say so, then it must be true, regardless of what any actual evidence may say to the contrary!

    I for one welcome our new economist overlords.

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  5. Andrew B says:

    This debate is not even close. Please watch the movie Inside Job and see how the “smart” economists, including the heads of the departments at Harvard and Columbia, are either wrong or just bought off by the powers that be. They were given fair questions and could not answer them even reasonably well regarding the current recession and its causes. So why do we think the learned economists, getting nice financial benefits from various powers, are either honest or know the answer?
    And I am a one percenter, and believe in science and global warming.

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  6. Tom Altman says:

    As is all-too-typical of public policy discussions, there is demonstrable cherry-picking or misrepresentation in comments from both sides here.

    (1) The IGM (Initiative on Global Markets) Economic Experts Panel is _not_ a partisan group. “Our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States.” Among other characteristics, the panel includes “past Democratic and Republican members of the President’s Council of Economics.”

    The group’s findings are, indeed, interesting. There are a few issues on which there is no consensus — for example, whether randomizing airport security screenings, rather than subjecting everyone to the same process, would make it harder for terrorists to evade those procedures. But, as Justin Wolfers notes, it is interesting how often there is significant consensus among that diverse group.

    (2) Justin Wolfers has clearly cherry-picked the examples he cites from the Economic Experts Panel. As someone already pointed out, his own comments, including the claim that “one of the major parities is blocking every effort to improve the economy” tip us that he prefers the left-wing conclusions.

    If I were selecting interesting examples of the group’s consensus, I’d point out their strong agreement on such things as:

    - Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment. (Weighted responses 96% agree, 0% disagree.)

    - Using more congestion charges in crowded transportation networks and using the proceeds to lower other taxes would make citizens on average better off. (Weighted responses 98% agree, 0% disagree.)

    - A tax on the carbon content of fuels would be a less expensive way to reduce carbon dioxide emissions than a collation of policies such as ‘corporate average fuel economy’ requirements for automobiles. (Weighted responses 95% agree, 2% disagree.)

    - Long-range fiscal sustainability in the U.S. will require cuts in currently promised Medicare and Medicaid benefits and/or tax increases that include higher taxes on households with incomes below $250,000. (Weighted responses 91% agree, 0% disagree.)

    - Cumulative budget shortfalls in the U.S. over the next 10 years can be reduced by half or more purely by increasing the federal marginal tax rate on ordinary income for those in the top bracket. (Weighted responses 3% agree, 84% disagree.)

    - Mandates that government purchases should be ‘buy American’ unless there are exceptional circumstances, such as in the American Recovery and Reinvestment Act of 2009, have a significant positive impact on U.S. manufacturing employment. (Weighted responses 10% agree, 67% disagree.)

    - If public school students had the option of taking the government money currently spent on their own education and turning that money into vouchers they could use toward covering the costs of any private or public school of their choice, most would be better off. (Weighted responses 54% agree, 6% disagree. Allowing there’s a large 40% uncertain group, that’s still a pretty strong finding.)

    So my favorite examples might focus more on issues favored by conservatives than by liberals.

    Bottom line: This _does_ appear to be a fair and distinguished group. And it does identify issues on which there is a real consensus among economists, helping at least a little to cut through the noisy ideological/political commentary around us. Don’t be misled by the spin Justin Wolfers chose to put on it with the examples he selected, the group’s underlying purpose and message is interesting. Freakonomics fans will likely enjoy following their work.

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    • triclops says:

      Thank you for the most helpful, intelligent, and illuminating response on this whole thread. Gonna go read some more about the IGM

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  7. reflected-sound-of-underground-spirits says:

    So you’re basically saying that you want to create a crowd-sourcing engine that gathers the combined wisdom of the leading economists.?

    BTW, “squawking heads” = nice turn of phrase

    Thumb up 3 Thumb down 0
  8. Skyler says:

    It’s not just about employment, it’s about total production. It’s not enough to just create or save jobs, if you’re paying people to dig ditches, you’re can’t pay them to serve the economy elsewhere.

    Just because economists agree that the stimulus and bank bailouts created or saved jobs, doesn’t mean squat. If people are organized in lines of production that are wasting resources, those jobs SHOULD be lost so they can be replaced. If we are going to prize destructive and wasteful jobs over actual production, we may as well not even bother with economics.

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