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.


Daniel

I am tired of economists and politicians talking about economics using "consensus" as justification. Economics isn't about consensus. It's about supply, demand, and incentives. What is the supply of jobs? What is the demand for jobs? Is the government increasing the supply for or increasing the demand for jobs? What did the stimulus and bailing out of banks do to incentives? These are the questions economists should be answering. Whether or not the government should do those things is a philosophical question, not an economic one. Just because the government CAN influence the economy doesn't mean it SHOULD.

Enter your name...

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.

brent

Actually the economists said they think so, which means they are guessing. I doubt it was very hard to find 40 economists out of the existing population that agree with Mr. Wolfers, and to form a group to pretend "consensus".

Joe

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.

164

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.

dumpus

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.

Eric M. Jones.

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.

Enter your name...

"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.

caleb b

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

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

Michael Peters

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.

Colin

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

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

Colin

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.

Franklin

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.”

Enter your name...

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).

Franklin

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.

Dan

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.

Scott Templeman (@tallbonez)

Consensus is a poor substitute for evidence

Enter your name...

Consensus among the people who have the most evidence and are best suited to understand that evidence, however, is a reliable marker for what the evidence says.

Steve_0

This is literally the stupidest column containing the word "Economics" that I've ever read.
1. Consensus? Seriously?
2. Is there a single Austrian school economist on that panel?
3. How does this show anything besides the self-serving bias of the prevailing economic school of thought? In graduate school, I spoke with a friend who had an undergrad degree in economics. She said not once in four years did anyone mention Hayek or Bastiat. She'd never heard their names. So the vast majority of economists within the tiny sample size here agree on questions that are completely beside the point, and they're very confident in their own determinations. Call Aaron Sorkin. You two can have an "I grovel for self proclaimed experts" part.

who

Of course there's no Austrian economists on that panel. It's only academic economists (there are very few actual academics who are in the Austrian school) and it's only respected academic economists (the few academic Austrian economists are all cranks anyway). Unlike the Austrians, most of economics has made it past the 1800s.

J1

Article by Left Leaning Economists Cites Survey Proving Academics Dislike Republican Economic Policies. In other news, The Earth Orbits the Sun.

Can't you just stick with those studies proving liberals are smarter than conservatives?

Also, the 'mainstream" qualifier is an almost guaranteed BS warning. Leave it out next time.

Erin Kaplan

Thanks for posting this. As an academic economist, I have been thinking this for a long time. My department houses a diverse set of political ideologies, and yet when we all get together for a beer, the consensus of opinions on policy applications of economics is shocking.

I'd like to see the sample expanded to 400 academic economists. That would remove some of the speculation that the sample is cherry-picked to exemplify a certain point of view.

Dave

On the tax-lowering issue, I beg you to explain how it was under Harding, Kennedy, and Reagan that lowing tax *rates* increased government revenues if it doesn't fit the narrative today.

By the way, shouldn't a big part of the economic analysis address the fact that if Uncle Sam confiscated everyone's income above $200K, it still would not be enough to cover Obama's spending? The tax issue is a straw man!

Jason

Wow. One has to wonder if all economist's arms hurt from patting themselves on the back so much.

Speaking of consensus in economics, here's a link to an article that places the blame on the abysmal management policies and practices of American companies over the past 30 years squarely on the economists. My consensus is that I agree wholeheartedly with that perspective.

http://www.weblog.keepthejointrunning.com/?p=4791

You could extrapolate that if economists advising business management hasn't had the best results, what can we expect from them advising government?

The United States was founded on the concept of individual liberty, not on macroeconomic theories.

One reason that economists always seem so enamored over progressive thought is that they always think of people as "the masses" and not as individuals.

I also agree with the other posters that actual sciences do not base their findings and observations on voting and consensus.

This is easily one of the most politically biased posts I've seen on Freakonomics.

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jennfizz

Please stop with the "America was founded on individual liberty" crap. It's just not true. Yes, there is some respect for the individual found early American political discourse but it is more than balanced out by a clear and deep fear and distrust of individual liberty--such ideas are why we are a republic and not a democracy. It is why your senators were chosen by State Houses, why there were property qualifications to vote, why there is an electoral college, and why early corporations were required to get government charters in order to do business.

CS

Hmm. I think this reveals the writer's bias, 'nuff said:
" ... one of the major parties is blocking every effort to improve the economy ..."

Really? You mean there are good efforts to improve the economy emerging out of one of the parties? You have pretty good consensus on that too?

Firstly, economics being what it is, the consensus among economists is not the same thing as consensus among physicists, and even that has proved less than fully reliable. Secondly, until we understand more about the ideological balance in the Gang of 40, the consensus is not shown to be free of political bias.

Give it up, Wolfers. You can't persuade us ignoramuses, we revel in our philistinism.

Dan

What bias? Just because this article was written on "obama '12" stationary.

Nate

"Let’s start with Obama’s stimulus. The standard Republican talking point is that it failed, meaning it didn’t reduce unemployment."

I think when someone says "it failed," it's in reference to what "success" was projected to be by Obama's team themselves. I believe this is the graph that the Obama team trumpeted as what would happen with and without the stimulus. Clearly by their own standards they failed.

MIckey

I wish n>40

V

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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Dave

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.

Jerome Solanum

"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.