Why it makes sense to put stock in good economics

Very few people trust economists enough to listen carefully to what they have to say. Right before the Brexit vote, our colleagues in the UK desperately tried to warn the public that Brexit would be costly, but they felt they were not getting through. They were right. No one was paying much attention. Early in 2017, YouGov conducted a poll in the UK in which they asked “Of the following, whose opinions do you trust the most when they talk about their field of expertise?” Nurses came first. 84% of people polled trust them…

This trust deficit is mirrored by the fact that the professional consensus of economists (when it exists) is often systematically different from the views of ordinary citizens. This is not because economists are always more in favor of laissez-faire outcomes than the rest of the world. A prior study compared how economists and a thousand regular Americans answer the same 20 questions. They found that economists were (much) more in favor of raising federal taxes (97.4% of the economists were in favor, compared to 66% of regular Americans). They also had much more faith in the policies pursued by the government after the 2008 crisis (bank bailouts, the stimulus, etc.) than the public at large. On the other hand, 67% of the regular Americans but only 39% of professional economists agreed with the idea that CEOs of large companies were overpaid. The key finding is that overall, the average academic economist thinks very differently from the average American. Across all twenty questions, there is a gaping chasm of
35 percentage points between how many economists agree with a particular statement, and how many average Americans do.

We don’t for a moment believe that when economists and the public have different views, the economists are always right. We, the economists, are often too wrapped up in our models and our methods, and sometimes forget where science ends and ideology begins. We answer policy questions based on assumptions that have become second nature to us because they are the building blocks of our models, but that does not mean they are always correct. But we also have useful expertise that no one else has. The (modest) goal of this book is to share some of this expertise and re-open a dialogue about the most urgent and divisive topics of our times.

For that we need to understand what undermines trust in economists. A part of the answer is that there is plenty of bad economics around. Those who represent the “economists” in the public discourse are not usually the same people who are part of the IGM Booth panel. The self-proclaimed economists on TV and in the press—Chief Economist of Bank X or Firm Y—are, with important exceptions, primarily spokespersons for their firm’s economic interests, who often feel free to ignore the weight of the evidence. Moreover, they have a relatively predictable slant towards market optimism at all costs, which is what the public associates with economists in general.

Unfortunately, in terms of how they look (suit and tie) or the way they sound (lots of jargon) the talking heads are hard to tell apart from academic economists. The most important difference is perhaps in their willingness to pronounce and predict, which unfortunately makes them all the more authoritative. But they actually do a pretty poor job of predicting, in part because predictions are often well-nigh impossible, which is why most academic economists stay away from futurology. One of the jobs of the International Monetary Fund is to forecast the rate of growth of the world economy in the near future. Without a whole lot of success, one might add, despite its team of many very well-trained economists. We suspect that this kind of thing contributes substantially to the general skepticism about economics.

Another big factor that contributes to the trust gap is that academic economists hardly ever take the time to explain the often complex reasoning behind their more nuanced conclusions. How did they parse through the many possible alternative interpretations of the evidence? What were the dots, often from different domains, that they had to connect to reach the most plausible answer? How plausible is it? The media culture of today does not naturally allow a space for subtle or long-winded explanations. Both of us have had to wrangle with TV anchors to tell our full story (often only for it to be edited out in what gets shown); we recognize why academic economists are often unwilling to take on responsibility of speaking out. It takes a lot of effort to be heard properly, and there is always the risk of sounding half-baked or having one’s careful words manipulated to mean something quite different.

There are, of course, those who do speak out, but they tend to be with important exceptions -- those with the strongest opinions and the least patience for engaging with the best work in modern economics. Some, too beholden to some orthodoxy to pay attention to any fact that what does not square with it, repeat old ideas like a mantra if even though they have long been disproved. Others are there to pour scorn on mainstream economics, which it may sometimes deserve; but that often means that they are unlikely to speak for today’s best economic research.

Our sense is that the best economics is frequently the least strident. The world is a sufficiently complicated and uncertain place that the most valuable thing economists have to share is often not their conclusion but the path they took to reach the conclusion: the facts they know, the way they interpreted those facts, the deductive steps they took, the remaining sources of their uncertainty…

Besides, there is plenty of good economics around. Good economics starts with some facts that are troubling, makes some guesses based on what we already know about human behavior and theories that have been elsewhere shown to work, uses data to test those guesses, refines (or radically alters) its line of attack based on the new set of facts and, eventually, with some luck, gets to a solution.

Excerpted with permission from their book, Good Economics for Hard Times, chapter titled MEGA: Make Economics Great Again, published by Juggernaut