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. Nosybear says:

    Problem is the squawking journalist reporting the results who doesn’t understand that the one squawking pundit on the opposite side of the debate from the consensus is a lone quack, particularly if the quack produces a shiny, informationally thin chart to “prove” their point. The real scientist, and it the case of economists I use the term very loosely, knows it’s impossible to “prove” much of anything, you can only disprove it. Every year journalism schools produce more journalism graduates than there are positions in journalism, a tribute to why you should never trust a journalist with a number. Or a “expert opinion.”

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  2. robert says:

    When I left University with an Economics degree in hand I figured that Keynesian Theory was an opportunity for economists to get out of the ivory towers of the university and into fat government jobs showing politicians how to fiddle. And fiddle they have.
    Just because a bunch of ‘economists’ agree – consensus – does not make them right.
    And so far they have been very wrong.
    And its not going to get any better just because someone has polled a bunch of them and got a ‘consensus’. They are still just as wrong.
    The best thing to do is get ready for the debacle coming up as the economists try to prove they are right in fiddling.

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  3. heatshield says:

    I looked up the composition of the “Economic Experts Panel”. Here is a very telling statement on the site: “The panel members are all senior faculty at the most elite research universities in the United States.” This tells me that they are clearly not ideologically diverse since the universities are probably the single-most intellectually homogenous institutions in the country. I would be more impressed with the findings of an “Expert Panel” if there was also strong representation from people with the most hands-on experience with an economy – business people, especially entrepreneurs.

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  4. Young Economist says:

    Nice post, except for the slight bias: why does Wolfers only mention the Republican talking points that are at odds with the “economist consensus?” There seem to be plenty of examples on the other end of the political spectrum. Heck, I actually thought of Paul Krugman and Brad DeLong when he first mentioned the “squawking heads!”

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  5. john werneken says:

    The divinity is in the details. First, any spending anywhere is likely to support employment. It does not follow that all employment or even employment in general is worth supporting. Downstream effects of policy could affect innovation, investment, infrastructure, education, and economic incentives, perhaps in ways that REDUCE the longer-term income and employment of the people as a whole. The odds are that ANY public policy will be less wise than any alternative private policy, if there is one, as the private policy IN GENERAL seeks net benefits whereas the public policy only claims to do so, there is no test or reality check in the future on the wisdom of past public policy, whereas a dumb business can go broke.

    Second, tax collection depends more on economic and population growth and the exemption or inclusion of various incomes in taxable income than it does on rates. That said, raising tax collections is only a good thing in a couple of cases: if what it will pay for provides broad and enduring benefit, which is doubtful for the majority of public spending in a democracy, or if the possibly better fiscal condition of the government leads to stable currency values. A large difference in marginal rates may penalize those with more money and choices more than it benefits those less money and with fewer choices, and may encourage the better off to preserve wealth rather than to invest to try to increase it.

    Also there is more to be said for possible benefits to decreasing taxes on wages and on incomes and increasing taxes on consumption, than there is for rate changes per se for any one type of tax.
    Finally, the public tends to be largely of one mind on many things without getting into any grasp of the details – in favor of peace, employment, the environment, security, debt relief, and growth all at once; I doubt ANY economist could identify an economic policy equally supportive or even a bit supportive of ALL of those values.

    So our leaders cloth arguments about what works (which economics should be able to discuss) and about who wins and who loses (not an economic subject; that is politics!) as if they were disagreements about HOW to achieve simultaneously a set of objectives which may not be compatible with each other.

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  6. Barbara says:

    “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. ”

    I do not believe the conservative view is that cutting taxes will bring more money into the government. The view is that cutting taxes will bring more money into the private sector. Republicans are against more growth of government and believe in building private business that produces products.

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  7. triclops41 says:

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

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  8. RichardP says:

    “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.”

    Should this line refer to Republicans in the House not blowing the roof off of our debt with more spending? Or, could this be said of the Senate which will not vote on a single plan for business and the economy coming out of the House? They didn’t survey ~every~ economist (who make a living being wrong most of the time) and we can’t see the mailing list. How is thin not a huge partisan waste of time?

    Just about anyone can show anything looking forward on paper, but please show me where a country has taxed and spent its way to prosperity… Greece?…

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