Friday, June 27, 2008

Don't shoot the messengers

At this point, no one should be surprised by the fact that economics isn't John McCain's strong suit. The guy even said so himself. He supported the universally panned "gas-tax holiday", and he once strangely opined that interest rates should be set at 0%. So it shouldn't be that surprising that McCain has directly called out economics as a profession.

Speaking at Federal Hall near the New York Stock Exchange, McCain said: "You know the economists? They're the same ones that didn't predict the housing crisis we're in. They're the same ones that didn't predict the dot-com meltdown. They're the same ones that didn't predict the inflation that's staring us in the face today."

McCain must find it to be quite a burden, being right all the time. However, his reductionist view of economics glosses over a large amount of diversity in the field. And, as ThinkProgress has pointed out, many economists did predict the bursting housing bubble, including Nobel Laureate Joseph Stiglitz, Paul Krugman and Dean Baker. Maybe McCain should do a better job of listening.

Unfortunately, McCain isn't the only politician hating on economists. Several weeks ago Hilary Clinton's campaign manager took aim at the profession, when essentially the entire field criticized his candidate's own gas-tax holiday plan. Asked if she could name a single economist who thought it was a good idea, Ms. Clinton herself responded, "I don't want to put my lot in with economists".

So what's going on here? Justin Wolfers posed this question two weeks ago. What's strange is that you don't see this happening with other professions. No one gets mad at doctors who say smoking can lead to lung cancer (except maybe the cigarette industry) or at engineers who say a bridge is structurally unsound. But claiming, "four out of five economists agree" doesn't have the same cache that it does with dentists.

Why treat economists differently? One answer is that economic policy is playing a much more prominent role in this campaign, so there are many more opportunities for candidates to have their policy proposals questioned. Another possibility is that many economic phenomena are counter-intuitive, particularly those related to trade, technological change and taxes. Cutting gas taxes sounds like it would lower the price of gas; the complexities of tax incidence, however, are more subtle.

Personally, I blame the tension between politics and policy. Politicians get elected by promising the public more, not less. So while policymaking involves trade-offs, politics encourages our leaders to tell us we can have out cake and eat it too. The role of economists (or really, any group of experts) is to lay out the trade-offs associated with policy proposals, so votes can make a more informed choice. When economists oppose a plan, they're not pushing any specific agenda; they're just the messengers explaining what is and isn't possible.

This was certainly the case with the gas-tax holiday, when economists from across the political spectrum lined up against a plan that had little chance of succeeding. Polling suggests that the public believed the economists over the politicians, and that Hilary Clinton may have paid some political price for her support of the plan.

So maybe it's a good thing that politicians are mad at economists. It might mean that they're helping to reign in the bad ideas, at least a little.

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