Thursday, 30 May 2013

The problem with economists

In their latest VoxEU column, two economists from UC San Diego, Gordon Dahl and Roger Gordon, try to answer the question on why economists tend to be so divided on most important issues, or at least are perceived to be so divided.

It's not hard to realize this perception. Simply by going through the blogosphere daily you run into a variety of strongly conflicting opinions among popular economists/opinion-makers. Some claim this hurts the profession as it seems that economists can't even agree on the basic issues and are therefore not contributing to solving the problem. I would disagree; best ideas often arise precisely out of conflicting opinions. This is why one should regularly read things one doesn't agree with, if nothing to avoid confirmation bias.

However, despite an obvious divergence of ideas (particularly on the recovery), the real picture is slightly different that the prevailing perception.

Source: Dahl, Gordon (2013) "Views among economists:
Are economists really so divided?"
VoxEu
In the figure above the authors examine how much consensus on different issues exists (out of 80 questions asked, in over 50 almost everyone agrees), with respect to how well researched the topic is. In general we can see that the majority of economists tend to agree on almost all of the asked questions. However, the line of agreement decreases as the topic is less researched. Perhaps this is why there is so much disagreement in the current policy debate - it's just that situations like the current crisis are so rare, there has hardly been any robust research testing policy solutions in this type of environment. The Great Depression is one, but it was much more specific and rather different in initial policy responses; the Japanese lost decade is another, more closely related to current one, but it still hasn't been resolved. This, however, doesn't stop both sides of the debate calling upon real-world examples of how to move forward (currently Abe's Japan is popular among the interventionists, while Sweden is popular among the structural reform camp). 

Perhaps this is a good explanation of why the perception in the public is that economists can seldom agree over anything. Everyday people are bombarded through the media with all sorts of different "solutions", some of them plausible, others completely ridiculous. However the authors do tend to find an explanation of why this is so:
"...what incentives do journalists face when seeking out economists to quote for any given article? To maintain an appearance of neutrality and balance, the reporter must report both sides of any debate. If an expert is quoted defending one side of a debate, then it is important to find an expert articulating the other side of a debate.

Similarly, lobbying groups try to gain credibility by quoting experts who support their positions. Experts supporting one side of a debate may be scarce, but readers have no knowledge of the effort needed to find a spokesperson for any given position.
Economists themselves aren't all that innocent in this story either:
What incentives do economists face when they are asked their views on a particular question? A short answer would be: fame and fortune.

One source of fame comes from being quoted in the media. What can economists do to gain media attention? For one, the media is likely to be attracted to those who not only are articulate but who also have strongly held views, thereby exaggerating any differences in opinion...

In addition, though, the media often looks for spokespeople for different sides of a debate ... Those representing views that are scarce within the profession will be yet more valuable contacts, creating an incentive for economists to serve as advocates for unusual views within the profession in order to gain media attention.
There is an academic side to it all as well:
"A second source of fame comes from within the profession. Economists who are quoted in the media as supporting views inconsistent with the academic evidence clearly suffer harm to their reputation within the profession. From this perspective, espousing the consensus views within the profession is a much safer response when interviewed.

However, economists who successfully challenge the consensus and ultimately shift opinions in their direction gain substantial professional recognition [I'm thinking Scott Sumner]. Even if the challenge to the consensus ultimately proves to be unpersuasive, such challenges are an admired part of the scientific process. The payoffs from challenging the consensus can then well outweigh the risks to one’s reputation. This is more likely to be the case for younger economists who do not yet have an established reputation to lose. It is not surprising then that younger economists seek out their own issue on which to establish a reputation for changing the consensus views.

As with other individuals, economists can also be swayed by financial incentives. They might serve as a ‘hired gun’ for some political party ... private foundations, ... consulting opportunities, or job offers from partisan think tanks...
... 
Regardless of possible financial incentives, personal self-interest, or personal political affiliations, though, the stronger the academic evidence supporting some position the more costly it will be to cite opinions contrary to this evidence ... The main surprise from the surveys is not so much the strong consensus on issues that the profession has studied at length, but the lack of any clear ‘camps’ on issues where the academic evidence is thin."
But is this a characteristic only of the economic profession? By all means no! People have different opinions on almost any topic we can think of. The authors stress the example of global warming, but very similarly we can think of almost any issue in modern society; from gay marriage, marijuana legalization, drug wars, gun control, abortion, not to mention political ideologies, or even the role of some people in history (like Margaret Thatcher for example). In all of these issues you can find an equal amount of people who strongly support it as well as those who strongly oppose it. Economics is in focus nowadays because of the crisis, which is why the division among economists is highly exemplified. But all in all, there still exists a strong consensus among economists on a wide range of policy issues (like the benefits of trade for example, or immigration, or similar issues clouded by interest group actions and the corresponding political responses). The problem with the issues economists disagree about is that they tend to be the ones affecting peoples' lives the most. 

2 comments:

  1. My own opinion is that the largest disagreements among economists today spring more from ideology rather than the merits of the arguments themselves.

    Those thing only change slowly.

    ReplyDelete