Bryan Caplan  

IGM, Economic Consensus, and Partisan Bias

Brink Lindsey's New eBook... Gary Gorton's forthcoming book...
Justin Wolfers staunchly defends a view I've long been pushing: economists agree to a shocking extent. 
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.
To convince his readers, Wolfers points to the IGM:
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.
How good is the IGM evidence, though?  Wolfers says that the panel is "ideologically diverse."  When I asked Kashyap, however, he said that there's no public data on panel members' political views.  If you casually peruse the list, its members seem to lean heavily Democratic.  Dan Klein's systematic empirics say that the economics profession has Democrat to Republican ratio of 3:1.  None of this would be a problem if becoming an economist caused people to join the Democratic party.  In my experience, though, most economists picked their party long before they started studying economics.

Can I come up with any better evidence than Wolfers does?  False modesty aside, I think I already have.  When I analyzed the Survey of Americans and Economists on the Economy, I showed that a strong expert consensus remains after statistically controlling for party and ideology.  Whether economists are Democratic or Republican, liberal or conservative, they converge on a remarkable set of contrarian views.

Does this mean we should take the IGM results are face value after all?  Maybe, but I'm worried.  Wolfers' main examples strike me as partisan even within the economics profession.  Take the stimulus:
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.
My complaint: These results are basically what you'd expect from a non-expert panel with two Democrats for every Republican.  What's the value-added of the IGM's economic expertise on this question?  Hard to see.

Partisan bias seems particularly troubling when the IGM deals with policies that have recently been in the news.  When economists analyze events decades in the past, it's relatively easy to put politics aside and coolly apply abstract economics to concrete cases.  When they analyze events they recently lived through, however, objectivity is harder to achieve.  This is especially true when they're personally close to the administrations that adopted the policies they're now asked to judge.

I'm glad the IGM exists.  I certainly don't mean to impugn anyone's integrity.  Yet we have to face facts: the IGM panelists aren't just intellectually exceptional; they're also politically exceptional.  To cope with this problem, the IGM ought to at least explicitly disclose its panelists' political allegiances - perhaps reweighting them to match the allegiances of the broader public.  Better yet, the IGM should be more forward-looking.  If you really want to tap economists' expertise, don't ask them for their opinions on policies we recently adopted.  Focus on policies politicians are likely to start debating in five or ten years.  That wouldn't entirely negate the effects of political bias on economists' judgments, but it's nevertheless a prudent prophylactic against groupthink, status quo bias, and availability cascades - three judgmental pathologies that afflict laymen and expert alike.

COMMENTS (10 to date)
Econocat writes:

Robin Hanson's idea of betting markets is far superior. It's a shame it hasn't been wholly embraced.

maurile writes:

What's the value-added of expert opinion over non-expert opinion? Presumably, experts should be better informed and less prone to analytic error than non-experts, and their conclusions should accordingly be more reliable.

Jim Rose writes:

These answers on fiscal stimulus are not surprising. Most macroeconomists are New Keynesians.

Leading macroeconomists were more guarded in the 1990s when they talked of coarse-tuning for fiscal and monetry policy.

Do any of the 41 surveyed say that a fiscal expansion worked in the past, worked regularly in the past, and the lags on fiscal policy are manageable? name names?

Thatcher’s 1981 Budget increased taxes by £4 billion - an enormous sum back then.

By showing a determination to cut borrowing, the government made it easier to control monetary policy as interest rates could be reduced.

This convinced the markets, which were worried that high borrowing would lead to high inflation, because in the 1970s UK governments had financed budget deficits by printing money.

364 economists signed a letter to The Times stating that there was "no basis in economic theory or supporting evidence" for the policy the 1981 Budget was seeking to implement and that an alternative course must be pursued.

Signatory Maurice Peston has said that there would have been hundreds more queuing up to sign it if it had not been sent over Easter.

The 364 were wrong because they believed the Keynesian consensus of the time.

The economic recovery that the 364 said would not happen began more soon after the letter appeared.

Patrick Minford suggests that the evidence that the Thatcher policies were necessary and could work was before their eyes. The alternatives of incomes policy and reflation had been tested and had failed. The supporting theory and evidence for the Thatcher approach had been circulating for some time, especially in North America.

modern memories of the 1970s stagflation are fading too and what that period did to the credibility of demand managment policies.


Jim Rose writes:

Is the idea that inflation is a monetary phenomenona widely agreed? It is now.

until the mid-1990s in Australia, saying that inflation is a monetary phenomenona was a sure-fire way of blowing a job interview.

I soon learned when to speak and when to nod in agreement and wait for better times.

see too Edward Nelson, 2005. "Monetary Policy Neglect and the Great Inflation in Canada, Australia, and New Zealand," International Journal of Central Banking:

• Nelson’s paper is on the Great Inflation in Canada, Australia, and New Zealand. Newspaper coverage and policymakers’ statements are used to analyze the views on the inflation process that led to the 1970s macroeconomic policies.

• He argues that to understand the course of policy in each country, it is crucial to use the monetary policy neglect hypothesis, which claims that the Great Inflation occurred because policymakers delegated inflation control to nonmonetary devices.

• This hypothesis helps explain why, unlike Canada, Australia and New Zealand continued to suffer high inflation in the mid- and late 1980s.

• These delayed disinflations in these countries reflected the continuing importance accorded to nonmonetary views of inflation.

Australia was the last to accept that inflation is a monetary phenomenona.

Gary Rogers writes:

What are the career prospects for an economist who disagrees with those who sign their paycheck? Isn't there always a bias toward those economists who validate the confiscation and spending of other peoples money?

Bill Nichols writes:

Seeking objectivity isn't merely hard, it is a fools errand. Currency only compounds the problem.

The dispassionate scientist, say Mr. Spock, is a figment of popular myth, every bit as much as the "Mad Scientist". The brightest and most creative of the group will be the most strongly partisan because they are intellectually capable of answering the challenges, finding holes in the opposing views, and argument in general. Indeed, the ability to push the boundary in a new direction is what will gain them recognition and esteem.

The subject was addressed in terms of Mertonian norms in a case study of NASA scientists with Ian Mitroff,

So if Wolfers, (or you) are going to convince me, you will have to try a little harder.

Michael Stack writes:

Asking whether the stimulus lowered the jobless rate is a bit of a silly question. Probably, but the real question (as Justin himself admits) is whether the benefits exceeded the costs.

I propose the "Help Michael Stack" program whereby 10% of all tax revenue is funneled toward me. We can then ask these same economists whether I have benefited from the program. I'm sure they'll all agree, Michael Stack is better off for the program.

John Fast writes:

I teach undergraduate Intro to Micro and Intro to Macro, and in both I explain that microeconomics is a real science like astronomy, where everyone who has studied it agrees on the truth; while macroeconomics is a pseudoscience like astrology, as evident from the fact that it's easy to find multiple Nobel prizewinners on each side of a controversial issue.

P.S.: To Whom It May Concern: I'm on the job market.

Jim Rose writes:

I am surprised that the Japanese fiscal stimulus, more than 10 of them, is not put forward as why the Lost decade was even more Lost.

when a fiscal stimulus did not work, the old 'well it would have been worse but for the interventions' line is used.

After reading the annual reports of the Fed, Milton Friedman noticed the following pattern:

In the years of prosperity, monetary policy is a potent weapon, the skilful handling of which deserves the credit for the favourable course of events; in years of adversity, other forces are the important sources of economic change, monetary policy had little leeway, and only the skilful handling of the exceedingly limited powers available prevented conditions from being even worse
Jim Rose writes:

1st para should be: I am surprised that the Japanese fiscal stimulus, more than 10 of them, is not put forward as why the Lost decade was NOT even more Lost.

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