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. mannyv says:

    Why not pick 50 economists that work in the financial sector and see what they say? The financial guys have to put their money where their mouths are, so have an incentive to be accurate.

    In a similar vein, are private weather forecasters better than the government ones? Again, the private weather services presumably have more incentive to be correct, as companies routinely use them for hedging, etc.

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  2. Clint says:

    This is just the usual political partisanship masquerading as economic analysis.

    Even if it were true that there were consensus among economists, you couldn’t prove it by surveying a grand total of 40 of them. Oh wait, but they are the “leading” economists. Right. No subjectivity or bias there.

    How does one square their opinion on the stimulus, for example, with the fact that 80% of economists surveyed by the NABE a couple years ago said that the stimulus didn’t work? That doesn’t sound like consensus.

    But the statement that really takes the cake is: “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.”

    Obviously this is completely false. One of the major parties is NOT blocking every effort to improve the economy. Politicians do not sit around thinking about how to keep the economy from improving. They simply hold different ideas about how to impove the economy than their counterparts on the other side. And I’d really like to hear what arguments are being made that almost no economist agrees with. There are economists of every persuasion under the sun, and you can find one to argue just about anything. There are even economists right now arguing for INCREASES in federal spending, debt and regulatory burdens, if one can imagine that.

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  3. Cyrus says:

    The “x factor” is something pundits and economists don’t usually track: freedom.

    It has a tremendous impact on the future economics of the USA.

    Have you heard about “The Libre Initative?”

    http://opensourceamerica.typepad.com/1/2012/08/the-libre-initiative.html

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  4. Scott says:

    I think what frustrates me about this article is when I look at the actual website… there were plenty of topics that are dear to lefties that could have been shown to be disagreeable to economists but the only ones highlighted were the ones disagreeable to republicans.

    Here are a few from the same site that I think most Liberals disagree with.
    95% say trade with China makes the country better because we can buy cheaper stuff from there.
    95% support NAFTA and say that made us better off too.

    Or how about 81% saying a leading factor in the rise in inequality is due to a difference in ability for certain workers.

    There were plenty of caveats on the site for all those points but the same is true for every one of those poll questions (which might explain why polls and policy are so different).

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  5. Steve O says:

    “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.”

    While I certainly agree that there are “right answers” on things like whether the bailout increased jobs or even if had a net positive effect, it has been well established that confidence is not predictive of accuracy (see the “illusion of validity” bias). Mr. Wolfers, surely you’ve read Thinking, and Slow? Let’s not take shortcuts. (For the curious, here’s some of the original research on the matter: http://www.sciencemag.org/content/185/4157/1124 or just google “confidence predictive validity” on Google Scholar.)

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  6. MattD says:

    Does the panel agree that a 100% tax rate would be generate the most revenue to the Federal Treasury?

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  7. fred says:

    Most economists would agree that the free market gives better results than a managed economy. And, yet, they’ll turn around and say that they can manage the economy with stimulus, bailouts, etc. Markets are the best allocator of resources. The only thing we need to do is get the government out of the way and let the markets work.

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    • Bill Rabara says:

      This is a comical, yet unfortunately, common oversimplification that lures people into deeply conservative mindsets. ‘Get the government out of the way’ is idiotic. Many ‘markets’ allocate resources very well but doesn’t mean they do not need regulation and intervention from governments. The management of the economy exists out of necessity. Conservatives have a hard time dealing with the fact conditions change. They live in some dellusional conception of old america being greand and ideal and what worked then will work now. Evolution is a fact. (including that of social dynamics). Also of course the efficient allolcation of resources is fine and dandy, but at what expense? Don’t be afraid of education, conservatives. We humans have learned a hell of a lot over the course of our existences about many things including economics and human behavior.

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  8. Clark Fincher says:

    This is a good example of what is needed; availability of a consensus of expert opinion on complicated or controversial matters. If both sides could agree to defer to the consensus, where one exists and is strong, then we could make a bit of progress. Trouble is, the consensus of experts is too often devastating to the case of one side and they are not willing to consider it as relevant. Too bad. Thanks for an interesting bit of info.

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    • Bill Rabara says:

      The problem is that political science deals with ‘messy’ data, mostly ever-changing forces (except for maybe that to business entitiies try to increase wealth), and the absence of testible predictions. It is like a quasi-science/philosophy amalgam. In science, determining causation is notoriously difficult but attainable because the the constants of nature and testability of findings allows for replication and possible falsification of hypothesis. Of course thare are so many perceived and actual biases from ‘economists’ with vested interests in advancing a particular cause or supporting a particular conclusion. It seems eliminating this potential roadblock is a formidable obstacle because we are participants in an economy that is interwoven through the fabric of our lives.

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