Max Sawicky on the Dilemmas of Economists in High Government Office

Max Sawicky writes about the dilemmas of economists in government. These dilemmas were soft in the Clinton administration. (Here's where I state that the "200,000 net jobs projected from NAFTA" number was mine: we took an estimate of overall economic efficiency gains from tariff reductions and an employment elasticity with respect to the real wage from the Labor Department, and estimated that in the long run stable-inflation employment would grow by 0.14 percent as a result of the deal. I think it was the right answer to the question asked in 1993; I don't think that was the right question to be asking.) These dilemmas have been much harder in the Reagan and Bush administrations, where Dick Cheney especially has let few opportunities to claim that tax cuts increase revenues pass him by.

Here is Max:

MaxSpeak, You Listen!: J'ACCUSE: Professor N. Gregory Mankiw takes umbrage at the implication from some "bigshot at the left-wing thinktank Economic Policy Institute" (that would be labor market genius Jared Bernstein) that he is "a hypocrite." But Jared did not use that word, and his remark was not personal...

Here's Jared Bernstein:

Predicting with a Handicap: Why are Economists’ Predictions So Often Wrong? | TPMCafe: Economists sometimes serve vested interests, and will change their views accordingly. The best example is also one of the best economists, Greg Mankiw. This textbook-writing Harvard prof was Bush’s chief economist for awhile, and during his confirmation hearing and subsequent tenure at the White House, he constantly defended Bushonomics, including supply-side beliefs that he once argued were the musings of “cranks and charlatans." Now, Mankiw may well have felt he could do the nation more good if he were working from the inside, trying to nudge the administration’s economic policy in a better direction (if so, he failed)...

Let me call this one for Jared: Mankiw was indeed correct in thinking that he personally could do more good for the country and the world working inside than if he were to march up to Dick Cheney, tell him "you have to stop saying that tax cuts raise revenues," and so get fired. But the Bush administration did frequently argue that tax cuts raised revenue. And there is the much harder question: is it worth the sacrifice of the economics profession's outside credibility and the further confusion of the public that is entailed when good economists defend bad policies on the outside that they are working to change on the inside?

I don't know the answer to that.

Max Sawicky continues:

[Jared Bernstein's point] went to whether NGM altered his respectable views on supply-side economics out of political considerations when he took the helm of the President's Council of Economic Advisers. Unfortunately [Mankiw] does not make the case he wants. (Nor by the way does Jared provide conclusive evidence in the original post, which is mostly about other things.) Jared does, however, point to Mankiw's testimony at his confirmation hearing. Mankiw's defense is that he has always taken explicit issue with the most notorious of the supply-side tenets -- that across-the-board reductions in tax rates would raise revenue.... In his book, NGM is forthright that the giant revenue response from a tax cut is hokum. In his testimony, he is less emphatic, or as he puts it, "skeptical" of such claims. Moreover, he asserted that the Bush Administration did not adhere to the "extreme" view, which is flat wrong, as Senator Paul Sarbanes made explicit in the hearing....

We should not be surprised when academics in political positions use and invoke their professional expertise to defend their bosses in public. This could happen in any administration. When you take a political appointment, you can't protest when you are accused of having been political. Political service can be an honorable pastime. The bigger source of embarrassment here is the disjunct between Mankiw the academic ace and Bush the economic nitwit, between the standards of professional work in academia and the intellectual corruption of really-existing Bush economic policy...

And here's Brendan Nyhan:

Brendan Nyhan: McCain and Mankiw on supply-side economics: Harvard's Greg Mankiw, who bad-mouths McCain on his blog:

The interviewer, however, did not ask [McCain]... "If you think tax cuts increase revenue, why advocate spending restraint? Can't we pay for new spending programs with more tax cuts?" I doubt that, in fact, Senator McCain believes we are on the wrong side of the Laffer curve. But unfortunately, fealty to the most extreme supply-side views is de rigeur in some segments of the Republican party.

But what Mankiw doesn't mention is President Bush and Vice President Cheney's expressed "fealty to the most extreme supply-side views," which Mankiw conspicuously failed to change.... [D]uring his Senate confirmation hearing, Mankiw was asked about claims that tax cuts were self-financing, and he disavowed them, saying "I remain skeptical of those claims." However, he also stated that he thought the administration had not made such claims, which was -- and is -- false:

[T]he most extreme advocates of tax cuts, I think, sometimes paint an excessively rosy picture out of what they can get out of them. I don't think this administration has done that....

Now that he is no longer part of the administration, will he admit that Bush and Cheney have repeatedly suggested that tax cuts increase revenue? Shouldn't Mankiw have asked his question #2 to President Bush? What's good for the goose is good for the gander and all that...

Comments

[John Emerson]

"Is it worth the sacrifice of the economics profession's outside credibility and the further confusion of the public that is entailed when good economists defend bad policies on the outside that they are working to change on the inside?"

Many of us think of economists as composite creatures who actually do have valuable knowledge but bend it in the direction of their right-wing political prejudices -- rather like Scalia, who has a beautifully-worked-out legal philosophy which he ignored entirely during the most important case of his career so far (Bush-Gore 2000).

It's quite possible that Makiw thinks that fraudulent supply-side economics is a small price to pay for anti-labor, low-tax, anti-social-spending policies. How many economists agree with him?

[anne]

Heck, Greg Mankiw is nice as plums but I have all sorts of complaints, serious complaints. The latest complaint is the easy acceptance of resale price maintenance agreements being competitively healthy as the Supremem Court majority would now have it after decades of knowing otherwise.

When Mankiw explains to me how nice getting a free plum for the sake of allowing price fixing is, I am not amused even if a Supreme Court that caters to corporate interests is amused.

[anne]

Think that allowing resale price maintenance agreements will raise the prices paid for products we buy by hundreds of dollars a year for an average income buyer. Think that a prime cause of price reductions for decades, a limit on anti-competitive agreements for decades, is suddenly gone because we have a Supreme Court majority that wishes to cater to each and every supposed business interest. Think that Greg Mankiw's rationale for an absence of competition is comically bizarre, but for me that is what conservatism is all about.

[anne]

There we have selected economists telling us of the loveliness of shopping for less because of trade and suddenly we will be shopping for more not less. We have a Supreme Court majority of conservatives however who are wildly radical. Tossing aside precedents that have improved American lives for decades, with arguments that are not even decent comedy. Imagine the conservative market market market driven crowd pleased as can be when markets are, well, made less competitive.

[anne]

Surely there is a special irony here in conservatives showing what they really really think of competition. Tedy Roosevelt knew, we have forgotten. Imagine that we have an anti-trust law that has increased price competition for decades which even a Republican Congress would not have challenged, but the new use of the Supreme Court to limit rights rather than expand them rules against competition and allows for resale price maintenance agreements where none should have been for decades. So conservatism in court economics.

I am not amused by conservative economists just now.

[Bernard Yomtov]

"And there is the much harder question: is it worth the sacrifice of the economics profession's outside credibility and the further confusion of the public that is entailed when good economists defend bad policies on the outside that they are working to change on the inside?"

This does not strike me as a hard question at all. The answer is: No.

Among many other reasons, the economist defending bad policies is damaging the credibility not only of himself, or "the profession," but of other actual people. What right has Mankiw, for example, to do this? I would say his prominence imposes on him a particularly strong duty to avoid defending bad policies.

I don't think you are seeing this one clearly, Brad.

[John Emerson]

My point was that Mankiw confirmed my low opinion of the profession. If economists quit doing that kind of stuff I'd respect them. As it is, I think of them primarily as shrewd and unscrupulous adversaries who often use their scientific powers for evil purposes.

[Robert Waldmann]

I think I am going to defend Greg Mankiw on this one. "Skeptical" is a pretty strong word to use when offending the base in a confirmation hearing. It is also clear that the "Bush" administration does not take the most extreme claim of supply side economics seriously. Recall Cheney told O'Neil "Reagan showed that deficits don't matter" when arguing for further tax cuts. In the internal debate, the fact that tax cuts reduce revenue was accepted. Mankiw's testimony was not quite accurate, but can, I think be interpreted as meaning "In the Bush administration all know that Laffer curve hokum is hokum. Their appeals to it are just politicians being politicians. I'm sure you've used dishonest rhetoric yourself Sen Sarbanes."

On the reputation of he economics profession, I have to say I agree with Emerson. I think it is a good thing to convince people to be suspicious of economists, because so many are intellectually dishonest (mainly by treating results from simple old models which are known to be based on implausible assumptions as established facts).

On the 200,000, was that net new jobs due to increased real wages and increased labor supply or net new jobs due to increased demand at counterfactual no NAFTA wages ? I'd go for the second as to what people have in mind when they ask the wrong question (also I would tend to suspect that labor demand is more elastic than labor supply not that I would choose my model in order to get a big number. I am ... OK so I would, but at least I admit it).

[ken]

This is another example of trying to save conservatism from its practice by conservatives. Why do you bother?

Manikew was not acting like a hypocrite when he wrote one thing and did another, he was acting like one would expect a conservative to act. And surprise, guess what? - Manikew is a conservative.

[bakho]

Not only does Mankiw fail to lend credibility to supply-side theory by keeping quiet during his time working for Bush, he undermines his current credibility with anyone but hardline Republicans. Bush is all about personal loyalty to the decider. There never was room for honest debate in his administration. Just read Paul O'Neill or Diulio before they silenced him.

[save_the_rustbelt]

The blue collar workers who have been raped by NAFTA don't think it is such a soft dilemma.

All of the lost manufacturing jobs were to be replaced by "high value service jobs," said the Clinton administration.

Fries with that?

[save_the_rustbelt]

The blue collar workers who have been raped by NAFTA don't think it is such a soft dilemma.

All of the lost manufacturing jobs were to be replaced by "high value service jobs," said the Clinton administration.

Fries with that?

[save_the_rustbelt]

The blue collar workers who have been raped by NAFTA don't think it is such a soft dilemma.

All of the lost manufacturing jobs were to be replaced by "high value service jobs," said the Clinton administration.

Fries with that?

[save_the_rustbelt]

The blue collar workers who have been raped by NAFTA don't think it is such a soft dilemma.

All of the lost manufacturing jobs were to be replaced by "high value service jobs," said the Clinton administration.

Fries with that?

[DILBERT DOGBERT]

STR
I can almost feel the heat of your anger coming thru the intertubes.

[Jared Bernstein]

Thanks Brad and Max for your thoughtful comments about this.

I'm with the others above who don't think this is nearly such a tough question ("is it worth the sacrifice of the economics profession's outside credibility...").

It seems clear to me that when a top guy like Mankiw publically endorses Bushonomics it does more harm than good. That is, it hurts economists' ability to help make good things happen more than it improves Bush economic policy.

I could be wrong--all I can offer as evidence is that a) Bushonomics still stinks, and b) there is an ever deepening skepticism about economists ability to solve problems (I'm more sure about a than b, but I think b's right too).

[bakho]

In another era "Bushonomics" would have been called blatant corruption. Bushonomics is not a policy for the "greater good". It is a policy to empty the US Treasury into the pockets of wealthy political patrons.

Corruption has never required either economists or economics, but both can be conveniently used for political props.

[derrida derider]

Yep, Mankiw's position was and is indefensible. Brad, in the past you were quite clear-eyed about what retaining a senior job with the Bushies said about ones personal morality - what's changed?

Mankiw has destroyed his own reputation by lending his authority to propositions he knew to be cold-blooded flat lies (and they are lies, Robert Waldmann, not just "dishonest rhetoric") that cause real damage to peoples' lives.

[elliottg]

Greg Mankiw is a Harvard economist. Those are points one and two in his favor as far as Brad is concerned. It reminds me of Bush's defense of Palmiero.

[anne]

Ken

"This is another example of trying to save conservatism from its practice by conservatives. Why do you bother?"

Precisely; what we have is a definitive conservative Administration and conservatives have delighted in support of the Administration while only wishing now they could be more loved for being conservatives.

[me]

"Not only does Mankiw fail to lend credibility to supply-side theory by keeping quiet during his time working for Bush, he undermines his current credibility with anyone but hardline Republicans."

Bravo,

And thanks to Jared.

[Demosthenes]

The problem, as always, is that claiming that "you're making change happen on the inside" raises a question:

Is it the system that's changing, or the speaker?

Hint: it's rarely the system.

[Hal]

And there is the much harder question: is it worth the sacrifice of the economics profession's outside credibility and the further confusion of the public that is entailed when good economists defend bad policies on the outside that they are working to change on the inside?

I don't know the answer to that.
88888888888888888888888888888888

The answer in fact is easy. If you are super ambitious and want to cut a figure in Washington and want to say in your CV that you served in some prestigious position of course it is worth it. Some people might even kill for it. LOL.

[piotr]

A stupid question: when someone claims to (a) be economist, and (b) a particular tax law change will increase/decrease the revenue, what is the usual basis of the statement?

Some "historical elasticity coefficients" and a short formula, or, gasp, a computer model?

Belief in computer models is an anatema to the wingnuts (and some other nuts, like Alexander Cockburn), at least in the context of climate change.

[dissent]

"Bushonomics is not a policy for the "greater good". It is a policy to empty the US Treasury into the pockets of wealthy political patrons."

This is also called, "Pimping the country to your rich friends."

[anne]

Good grief; Greg Mankiw only helped along his career or prestige by taking a critical Administration post. Same for Glenn Hubbard. These folks become forever for the media the public conservative representatives of their field. These folks are definitive conservatives, and have helped along the Administration and Republican Congress in every way and the price is only more respect and attention paid them and lots of commissions whenever wished.

[jerry]

Sad that economists that like to pretend they are physicists act more like advertising agents and work like cargo cultists.

Proof via Feynman:

"In the South Seas there is a cargo cult of people. During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now. So they've arranged to imitate things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas--he's the controller--and they wait for the airplanes to land. They're doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn't work. No airplanes land. So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they're missing something essential, because the planes don't land.

Now it behooves me, of course, to tell you what they're missing. But it would be just about as difficult to explain to the South Sea Islanders how they have to arrange things so that they get some wealth in their system. It is not something simple like telling them how to improve the shapes of the earphones. But there is one feature I notice that is generally missing in cargo cult science. That is the idea that we all hope you have learned in studying science in school--we never explicitly say what this is, but just hope that you catch on by all the examples of scientific investigation. It is interesting, therefore, to bring it out now and speak of it explicitly. It's a kind of scientific integrity, a principle of scientific thought that corresponds to a kind of utter honesty--a kind of leaning over backwards. For example, if you're doing an experiment, you should report everything that you think might make it invalid--not only what you think is right about it: other causes that could possibly explain your results; and things you thought of that you've eliminated by some other experiment, and how they worked--to make sure the other fellow can tell they have been eliminated.

Details that could throw doubt on your interpretation must be given, if you know them. You must do the best you can--if you know anything at all wrong, or possibly wrong--to explain it. If you make a theory, for example, and advertise it, or put it out, then you must also put down all the facts that disagree with it, as well as those that agree with it. There is also a more subtle problem. When you have put a lot of ideas together to make an elaborate theory, you want to make sure, when explaining what it fits, that those things it fits are not just the things that gave you the idea for the theory; but that the finished theory makes something else come out right, in addition.

In summary, the idea is to try to give all of the information to help others to judge the value of your contribution; not just the information that leads to judgment in one particular direction or another.

The easiest way to explain this idea is to contrast it, for example, with advertising. Last night I heard that Wesson oil doesn't soak through food. Well, that's true. It's not dishonest; but the thing I'm talking about is not just a matter of not being dishonest, it's a matter of scientific integrity, which is another level. The fact that should be added to that advertising statement is that no oils soak through food, if operated at a certain temperature. If operated at another temperature, they all will-- including Wesson oil. So it's the implication which has been conveyed, not the fact, which is true, and the difference is what we have to deal with.

We've learned from experience that the truth will come out. Other experimenters will repeat your experiment and find out whether you were wrong or right. Nature's phenomena will agree or they'll disagree with your theory. And, although you may gain some temporary fame and excitement, you will not gain a good reputation as a scientist if you haven't tried to be very careful in this kind of work. And it's this type of integrity, this kind of care not to fool yourself, that is missing to a large extent in much of the research in cargo cult science."

Richard Feynman

[bobbyp]

Brad,

The hypothesis rests critically on the assumption that Mankiw 'worked from the inside' to combat the absurdity of supply side economics.

But no evidence is provided. A sentinent person, looking over the wreckage that is the Bush administration, could reasonably infer that no such effort was even contemplated, much less mounted.

[anne]

Bobby P:

"The hypothesis rests critically on the assumption that Mankiw 'worked from the inside' to combat the absurdity of supply side economics."

Precisely; it never occurs to me that the idea of Greg Mankiw was to come to government as a rebel. The mere thought is comical. We have a conservative's conservative, which is why it is so simple a matter for Mankiw to re-define competition as less competition as the Supreme Court majority would have it after decades otherwise.

[anne]

Remind me, by the way, to apply to the White House tomorrow as resident rebel. I can sure set them folks straight. Yeah.

[Anthro]

It's a little OT, but it should perhaps be noted that Feynman was no anthropologist, totally failed to understand the actual cargo cults, and also failed to understand that he failed to understand.

[Really. I thought he understood them quite well.]

[jeff hoffman]

Def: "Skeptical"

The cognizenti: relatively harsh criticism of his bosses.
The unwashed masses: disagrees but not absolutely sure that they're wrong.
Fox news: he generally agrees with them; he's on their team.

I had a friend in college who very comically liked to analyze works of literature by analogy to scenes from the "The Godfather"; he'd probably place Professor Mankiw in the Robert Duvall role here. The consigliori; an otherwise excellent lawyer, who knew what he was getting into. You don't try to change the mob from the inside unless you're quite naive.

[jeff hoffman]

Or have an excessive amount of self-confidence/hubris, I guess. Or both.

[Julian Elson]

I think that the problem with lying is that you're lying. Issues like "what impact will this have on my future credibility?" seem rather secondary to me, and "what impact will this have on the credibility of my profession overall?" seem tertiary.