I’m in San Diego for the annual economics meetings, and am starting off this morning as a discussant of a paper by Roger Gordon and Gordon Dahl on the question of agreement versus disagreement among economists. (As far as I can tell, no public version of the paper is available yet).
Interestingly, Gordon and Dahl’s paper is empirical and quantitative. Their data come from the panel of economic experts put together by Chicago’s Booth School of Business. Each week since the fall of 2011, members of the panel have been asked whether they agree or disagree with a sample statement about economic affairs. These responses offer a quantitative measure of consensus or lack thereof on economic ideas; they can also be used to ask such questions as whether disagreements, when they occur, fall along a liberal/conservative divide.
And the picture Gordon and Dahl derive from this evidence is quite benign. On most issues, particularly where there is a lot of research, there is considerable consensus; and they can’t find evidence of ideological divides driving disagreement. Economics, they find, looks a lot like a normal field of scientific inquiry; to the extent that it seems otherwise, they suggest, it’s only because sometimes economists are working for politicians and are obliged to seem supportive.
This picture seems, of course, to be at odds with what I have written about the state of macroeconomics. Why are they telling such a different story? One possible answer is that I was all wrong. Another possible answer, however, is that macroeconomics – and in particular the study of recessions and policy responses thereto – is special, and that the Booth panel responses just don’t provide sufficient information on what is happening in that corner of the field.
Obviously I prefer the second answer, and in fact I’m quite sure I’m right. In the spirit of the paper, however, I should do my best to justify that belief quantitatively, with as little subjective interpretation as possible.
So here’s a stab at doing that.
The first question is, how well are economists specializing in business-cycle models represented on the panel? There are 42 economists on the panel, 6 from each of the top 7 schools. A simple if rough way to identify the business-cycle types is to ask how many of the panelists are also members of the NBER’s Economic Fluctuations and Growth (EFG) program; the answer is, 11. So we aren’t getting nearly as large a sample here as the overall size of the panel might suggest.
The next question is, how many of the statements the panel was asked to address focused on the core areas of dispute among macroeconomists? Here I can’t avoid making some subjective judgments. There were a number of statements focusing on macroeconomic issues, but many of those statements were clearly outside the range of dispute among professional economists. For example, while there may be significant political support for the gold standard, you won’t find that support echoed even by economists who are very hostile to active monetary policy.
By my count, in fact, there were only two statements that lay within the range of serious intra-academic dispute. One involved the effects of quantitative easing; the other, on which I’ll focus my attention, regarded the effects of the Recovery Act, and hence the question of fiscal stimulus. (Actually, this was a two-part, with the first statement involving the Act’s effectiveness, the second its desirability).
What did the panel have to say about fiscal stimulus? The answers actually suggested a lot of consensus: 80 percent of the panel agreed that the Recovery Act significantly boosted output and employment, with only 5 percent disagreeing. (By the way, that’s Caroline Hoxby and Eddie Lazear). There was a lot more uncertainty over whether the Act was a good idea, but among those who did have a view, the yeas outnumbered the nays almost three to one.
So, are impressions of a bitter ideological divide over fiscal policy just wrong? Or is the panel failing to reflect the realities of modern macroeconomics?
Again, let’s go to the NBER’s EFG program. Ideally, we should go through all the members and assess their views on stimulus. For now, I’ll take a quicker approach, and focus only on highly prominent members of the program, using an objective measure of prominence – namely, possession of a Nobel Prize.
There are, it turns out, five laureates among the EFG members, and three of them have expressed strong views on the effects of stimulus. The most moderate of these statements comes from Thomas Sargent, who denounced the president for, in his view, falsely implying that there was a consensus among economists of the kind the Booth experts panel data also seem to suggest:
In early 2009, I recall President Obama as having said that while there was ample disagreement among economists about the appropriate monetary policy and regulatory responses to the financial crisis, there was widespread agreement in favor of a big fiscal stimulus among the vast majority of informed economists. His advisers surely knew that was not an accurate description of the full range of professional opinion.
A stronger statement came from Edward Prescott, who simply dismissed the whole notion:
Stimulus is not part of the language of economics.
Finally, Robert Lucas made a personal attack on Christina Romer for advocating stimulus, calling it “shlock economics” and questioning her intellectual honesty. Her analysis, he asserted, was
a very naked rationalization for policies that were already, you know, decided on for other reasons.
Hmm. This doesn’t sound much like the consensus supposedly demonstrated by the Booth panel. And do you really want to say that the divide here has nothing to do with ideology? Really?
OK, here’s how I read the Gordon and Dahl results: what they show is that most of what economists do is indeed fairly objective and non-ideological; business-cycle macro, although it’s not at all like that, is a small enough part of the academic field that their data don’t pick it up.
Unfortunately, while business-cycle macro may not be a large part of what economists do, it’s a field that matters a lot – especially with the world still facing its worst economic crisis in three generations.
And business-cycle macro is also, I’d argue, more important to the field of economics in general than most economists themselves realize.
Long ago I stumbled on an analogy that still seems relevant to me: business-cycle macro is to economics in general in something like the way that nuclear bombs (and to some extent, to be fair, nuclear power) are to high-energy physics. I’m sure that very few physicists working on the mysteries of the universe trouble themselves at all thinking about how to make things go boom. Yet the reason the field continues to receive public funding is in large part precisely the fact that once upon a time physicists did, indeed, find a way to make things go boom, and you never know what they might come up with in the future.
Similarly, while the vast majority of economists may work on issues far removed from the question of what to do in a depression, an important part of our field’s prestige and the support it receives comes from the perception that economists do indeed have useful advice to offer in times of depression, and may come up with more useful advice in the future.
And if the perception spreads, instead, that business-cycle macro is just ideological posturing, that influential economists choose their doctrines to suit their political prejudices, and that the field not only fails to progress but sometimes actually retrogresses, this will be bad for the profession as well as the world.
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