I still remember when I was an undergraduate and Bill Dickens taught me how to pronounce "Mankiw." (That's MAN-KYOO to you.) I never would have believed that one day he'd be turning my name into an adjective:
The public tends to be upset whenever prices rise. When gasoline prices rise, oil companies are accused of price gouging. When textbook prices rise, Ralph Nader investigates publishers. There is no question that the cost of state-of-the-art healthcare has been increasing, mainly because of technological progress. Egged on by some pundits, the public is inclined to think that some villain must be responsible for the increasing cost and that the government can fix the problem. On this and many other issues, I am a Caplanian: voters need to be better educated, lest we stumble into poorly motivated populist policies.
Each panelist had a long list of detailed criticisms. But their main common criticisms, as far as I could tell, were:
1. Maybe politicians don't pay attention to public opinion. Some critics emphasized that policies are better than public opinion would support; others simply questioned whether there was solid evidence that politicians respond to public opinion.
2. Politicians defer to experts - including economists - when they formulate policy.
I didn't have much time to respond, but here's what I wish I said:
1. The idea that politicians don't respond to public opinion is as implausible as the idea that businesses don't respond to consumer demand. There is a mid-sized empirical literature on this in political science. But I'm more convinced simply by (a) My uniform observation that politicians desperately try to find and adopt popular positions, and (b) The regularity with which that the median respondent on fairly-worded surveys supports the status quo.
I freely admitted in my book - and tried to account for the fact - that policies are better than you would expect given public opinion. But this hardly shows that policy is not highly responsive to public opinion. The plausible model is not that Policy and Public Opinion are unrelated, but that:
Policy = f(Public Opinion) + Bonus
2. Sure, politicians defer to experts on issues where the public is agnostic. But how often do politicians listen to experts when the public thinks it rejects the expert consensus? Every economist I've talked to who has actually advised politicians relays the same story: If you tell politicians to do unpopular things, they usually either smile and ignore you, or politely suggest that you shut up.
If you don't believe me, why not ask Mankiw, who learned the truth through bitter experience? You could say that testimony from another Caplanian doesn't count. But that's hardly fair. If you'd walked in Mankiw's shoes, wouldn't you be a Caplanian too?
Roberts: ...Any regrets from your time in Washington you'd like to mention?
Mankiw: I don't have regrets. I had a great time there. The only time I found myself in hot water in the press was when I was defending free trade in a way certain members of Congress didn't like.
Roberts: I remember that.
Mankiw: They jumped on top of me, but I actually don't regret defending free trade because I feel as passionately about that as I do about any policy issue.
Roberts: Did you get any internal political heat in that fight?
Mankiw: None. Obviously, it's not the job of an economic advisor to make headlines and I deeply regret that. But no one inside in the administration said, "Why are you defending free trade, we don't believe in that here." This is very much an administration of free traders.