Bi-Weekly "Metapolitics" Discussion in Fishtown (on Sunday)

*NOTE: I shifted this meetup from our usual time in Saturday afternoon to Sunday afternoon, since this is Thanksgiving weekend and I assume many people will be away. I'm hoping that some of our members are back in Philly by Sunday so they can attend.

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Following on our somewhat abstract & philosophical discussion of "expert consensus" at our last discussion, we'll now consider how the issue of deferring to expert consensus applies to the issue of the economics. First, we'll consider whether economics should be considered a true "science". If economics is not a "science", can we simply dismiss the views of economists and argue that anyone who urges us to educate ourselves on economics is making the "Courtier's Reply"? Second, we'll consider whether ideology or incentives may distort the views of economists. Third, we'll look at how polls of economists show us some issues where there's a relatively strong consensus, and we'll deduce from this what type of economy most mainstream economists take as their best model. Lastly, we'll raise the question of whether it could be logically & normatively justifiable to diverge from the economic consensus in some cases.

• NOTE: For those that weren't around for our earlier meetups, we discussed the way in which laypeople develop a simplified & distorted view of economics back in March. In case you're interested, here's the link to the discussion outline: https://www.meetup.com/Philadelphia-Political-Agnostics/events/229153724/

BIBLIOGRAPHY: As with previous discussions, I found a lot of articles that are pertinent to our discussion - way more than I would expect anyone else to read. I've created a bibliography in our Discussion tab, and when I cite information in this outline you'll see a number in parentheses that corresponds with teh number of the article listed in the bibliography: https://www.meetup.com/Philadelphia-Political-Agnostics/messages/boards/thread/50351559

I. Should We Consider Economics To Be A "Science"? If So, What Kind of Science Is It and What Does That Imply? (And What's The Difference Between Some Economists Arguing Economics Is "Not A Science" And Postmodernists Making This Argument?)

Economics is typically classified as a "social science" because it studies human beings, and social sciences are in turn typically referred to as "soft sciences" due to having less methodological rigor, exactitude & objectivity than natural sciences like physics, chemistry & biology. However, several natural sciences that deal with large complex systems like ecology & climate science are often also referred to as "soft sciences" or intermediate between the hard & soft sciences. Although some economists draw conclusions from laboratory experiments on consumer behavior, most macroeconomists rely on "natural experiments" where different social groups are exposed to different conditions naturally, but the process arguably resembles random assignment and statistical controls are used to try to isolate the variables (36).

Economics spans the divide between the predictive & descriptive sciences, pure & applied sciences, positive & normative sciences, and experimental & historical sciences, although it tends to be closer to the second type in each of those pairs (37, 38, 39, 40). Adam Ozimek points out that aspects of the economic discipline can also be considered akin to engineering, moral philosophy, and history (51). To the extent that economics studies complex systems that display emergent & chaotic properties, economics can be considered a "complexity science" (41), and since despite this complexity the stakes are often high & decisions urgent, economics can be considered a "post-normal science" (42).

It's also important to realize that the uncertainties within economics, and the rest of the social sciences, are somewhat constrained by the greater levels of certainty in the natural sciences that bear upon them. For example, the concept of "work" within economics is constrained by the laws of thermodynamics from physics, and the economic principle that "there is no such thing as a free lunch" (abbreviated as "TANSTAAFL") can be derived from the Second Law of Thermodynamics.

https://en.m.wikipedia.org/wiki/There_ain't_no_such_thing_as_a_free_lunch#Meanings

https://en.m.wikipedia.org/wiki/White's_law

Similarly, the laws of supply & demand are constrained by the scarcity of environmental resources studied by ecology and the sustenance needs of human beings studied by human biology. This forms the basis for classical economic principles like the "Iron Law of Demographics" and the "Iron Law of Wages". This relationship between economics and the natural sciences is the basis for interdisciplinary fields like "energy economics" and "ecological economics" (43).

https://en.m.wikipedia.org/wiki/Scarcity

https://en.m.wikipedia.org/wiki/Living_wage

https://en.m.wikipedia.org/wiki/An_Essay_on_the_Principle_of_Population

https://en.m.wikipedia.org/wiki/Iron_law_of_wages

I found many articles by economists & journalists that address the question of whether or not economics is a "science" and the question seemed mostly rhetorical. Some people who favor a more free market approach to economics with limited government intervention like the GMU economist Russ Roberts, business analyst Jim Manzi, and financial risk analyst Nicholas Nassim Taleb argue that economics is not a "science", but they don't think that economic issues cannot be dealt with rationally. They mostly seem to limit their critique to economists' inability to consistently make accurate predictions like foreseeing investment bubbles & market crashes and/or the government's inability to control or plan the economy.

Economists and financial experts who don't think economic models have much predictive power also tend to advocate a rational way to deal with uncertainty - i.e. by enabling a more decentralized economy without "too big to fail" financial institutions which will be more "robust" in the event of a crisis (50, 55, 58, 59, 73). This is similar to the position advocated by the philosopher of science Karl Popper in his classic work, "The Poverty of Historicism," in which he pointed out that sciences like meteorology & seismology often cannot predict hurricanes or earthquakes very far out, so we must fall back on engineering methods that allow us to construct buildings capable of withstanding the shocks these unpredictable events deliver. The engineering aspect of economics can be thought of as analogous to this - i.e. instead of trying to predict financial crises, we design financial systems that can withstand them (45).

More radical critiques of economics can be found among academics who embrace postmodernism and cultural relativism. They will often argue that there is no objective reality and that all "sciences" are just different "ways of knowing" or "discursive formations" that supply the scientific community with more social prestige than "non-scientific" endeavors like the arts & humanities, politics, religion and magic (44). Often, the postmodern critique of the sciences is from a left-wing political perspective that is vaguely Marxist, and the postmodernists argue the natural sciences are not only not real or objective but are also complicit in things like pollution, global warming, and the military-industrial complex. Many postmodernists blame the discipline of economics as well for excusing things like capitalist exploitation and income inequality, and when they claim that "economics is not a science" they are attempting to delegitimize the entire field and clear the path for "ways of knowing" that might enable a more egalitarian distribution of labor & resources (49).

Adam Ozimik, an economist at Moody's Analytics, explains how the status of economics as a "science" should effect our level of skepticism if we're consistent: "[If] you’re going to hold economics research to an extremely high burden of proof, then you should be prepared to subject all of your beliefs to such standards. What this will leave you with is mostly weak beliefs about the world for a lot of stuff that matters to you, whether it be about medicine, history, biology, psychology, criminal justice, climate science, or economics. Maybe widespread weak beliefs are a better approximation of the truth, I don’t know, but I do know very few people do or are willing to reason like that consistently. Maybe they should. But even here the vast majority of humanity has more belief changing to do than economists" (51).

After describing how economics is a mix of theorizing & empiricism that advances slowly & fitfully, Ozimik concludes: "The point here is that in the long-run economic paradigms and methodologies are judged by their ability to explain the real world. Even if individual contributions within the field may contain what looks like un-scientific analysis, the field proceeds as a science. Yes, it is a big field, and it isn’t hard to point to parts of sub-fields that are lacking in empiricism. But to wave you’re hand at economics in general and say it’s unscientific is to diminish a lot of important and useful work by researchers who’ve spent more time thinking hard about causality and empiricism than almost anyone who would make such a criticism" (51).

II. How Skeptical Should We Be of Economists' Ideology & Motives?

I found quite a few articles that claim economists are politically biased or at least unconsciously incorporate their ideology & worldview into their research & policy proposals. Although some like Mark Thoma claim that the underlying assumptions of economics like the importance of competition & markets displays a conservative bias (14), others like Tyler Cowen, Pascuel Emmanuel-Glory & Matt Yglesias claim that economists' focus on government intervention and the development of human capital displays a more liberal bias (12, 13, 15).

As far as empirical studies, Dan Klein's study of economists' political party affiliation shows that there's about a 3:1 ration of Democrats to Republicans (30). However, many of these Democrats appear to be fiscally conservative, and another large-scale study found a 60:40 ration of liberals to conservatives (16).

Three researchers (Zubin Jelveh, Bruce Kogot & Suresh Naidu) recently did a large-scale research project to determine whether economists’ political leanings influenced their research results. First of all, they did find that an economist’s research area is correlated with his or her political leanings - for example, macroeconomists and financial economists are more right-leaning on average while labor economists tend to be left-leaning. Economists at business schools, no matter their specialty, lean conservative. However, they did not find an indication that the ideology of economic journal editors influenced the ideology of the papers appearing in their journals. Lastly, they checked to see if economists' political leanings influenced the way they reported numerical research results from fields that have direct impacts on public policy, e.g. government spending, minimum wage, tax rates, income mobility. The answer was yes, but several other commentators on their research like Kevin Drum & Noah Smith noted that the political bias was slight and there was a lot of variance in the results which indicates "real-world error bars are pretty big" and "political ideology, as far as we can tell, just doesn't explain much of the variance" (16, 17, 18).

Matthew Martin agrees with Drum & Smith and also points out that the overall trend the researchers found seems to have been heavily influenced by a few outliers. Martin also points out that "the influence of ideology appears to be a bit larger at the extremes. In the middle of the x-axis, there might be a slight correlation but it is miniscule compared to the variation in estimates. But the far right and far left have relatively small ranges, and the far right seems to get slightly higher results on average than the far left. It appears to me--without having any raw data to verify--that these flanks are what's driving most of the slope of the regression line. Weirdly though, both of these flanks are very much lower-end estimates compared to the range of results in the ideological center" (19).

III. What Does the Current "Economic Consensus" Say on Various Issues? What Type of Economy Do Most Mainstream Economists Take As The Best Model?

GREG MANKIW & BRYAN CAPLAN'S POLLS:

Harvard economist Greg Mankiw's introductory textbook Principles of Economics has a list of positions where the American economics profession enjoys a fairly strong consensus (the % is the number of economists who agree):

A ceiling on rents reduces the quantity and quality of housing available. (93%) Tariffs and import quotas usually reduce general economic welfare. (93%) Flexible and floating exchange rates offer an effective international monetary arrangement. (90%) Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%) The United States should not restrict employers from outsourcing work to foreign countries. (90%) The United States should eliminate agricultural subsidies. (85%) Local and state governments should eliminate subsidies to professional sports franchises. (85%) If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%) The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%) Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%) A large federal budget deficit has an adverse effect on the economy. (83%) A minimum wage increases unemployment among young and unskilled workers. (79%) The government should restructure the welfare system along the lines of a “negative income tax.” (79%) Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%) http://gregmankiw.blogspot.com/2006/11/consensus-of-economists.html

Mankiw also mentions that Robert Whaples surveyed PhD members of the American Economic Association and it matches a lot of the above points and found widespread agreement on 3 more proposals:

77.2% agree that "the best way to deal with Social Security's long-term funding gap is to increase the normal retirement age." 67.1% agree that "parents should be given educational vouchers which can be used at government-run or privately-run schools." 65.0% agree that "the U.S. should increase energy taxes." - One issue that failed to generate consensus in this survey was the minimum wage: 37.7% want it increased, while 46.8% want it eliminated.

http://gregmankiw.blogspot.com/2009/02/news-flash-economists-agree.html

GMU economists Bryan Caplan & Gary Klein had an interesting discussion a few years ago over a research project that Klein conducted where 299 economists were asked about government action on 17 policy issues, and they only showed consensus on 4 of them (international trade, prostitution, immigration & abortion) all favoring less government intervention. The other 13 issues show no clear consensus, though on 5 of them there's a trend not quite strong enough to be called "consensus" - for 2 issues (illegal drugs & gambling) it leans away from more government intervention, but for 3 others (discrimination, the EPA & public school funding) it leans in favor of more government intervention. Overall, Klein's research shows more ideological diversity among economists than other academic fields, but as he points out, "once can imagine something worse than a lack of consensus" - i.e. consensus on the wrong policies.

http://econlog.econlib.org/archives/2013/02/an_amazing_cons.html

http://econlog.econlib.org/assets_c/2013/02/klein1.html

SUMMARY OF THE UNIVERSITY OF CHICAGO'S IGM EXPERTS PANEL:

In 2011, Brian Barry & Anil Kashtyap at the University of Chicago created an economic experts panel titled the "Initiative on Global Markets" (IGM) that have been regularly polling 40 of the leading economic experts in the US on a variety of current issues in economics. You can find their poll results here:

http://www.igmchicago.org/igm-economic-experts-panel

Overall, you can see the expert consensus appears to center around a mixed economy with both free market and social welfare elements, and some government interventions are widely thought to be beneficial (e.g. a carbon tax). It's interesting to note their humility on several major issues (e.g. $15/hr minimum wage, Greece's 2015 bailout referendum), even as non-experts proclaim certainty on these same issues. Essentially, the IGM Experts Panel's rulings closely reflect the wider state of mainstream economics in the early 21st century - i.e. a mixture of "Neo-Keynesian economics" that developed in the 1950s-1970s and the free market principles from "neoclassical economics" (a.k.a. "neoliberalism") that were implemented as a cure for stagflation in the 1980s & 1990s. This mixture is known as the "neoclassical synthesis": https://en.wikipedia.org/wiki/Neoclassical_synthesis

If you want to see how the mainstream media has covered the poll results of the IGM Experts Panel, see Charles Wheelan's article at US News and Patrick Brennan's article at National Review - they offer a succinct summary of many of the IGM Experts points of strong consensus:

http://www.usnews.com/opinion/blogs/charles-wheelan/2014/03/10/ben-bernanke-bitcoin-and-other-points-of-economic-consensus

http://www.nationalreview.com/corner/389242/poll-economists-unanimously-think-uber-good-thing-consumers-patrick-brennan

IV. In What Cases Could It Be Justifiable To Diverge From The Economic Consensus?

It's important to note that most, if not all, economic issues have both an objective & positive (descriptive) aspect that - given perfect information & no bias - we should all agree upon, as well as a subjective & normative (prescriptive) aspect that will vary based on one's moral beliefs. This means that an economist's position on issues is often partly a function of his or her values, and isn't necessarily "wrong" in a scientific sense if the public accepts the expert analysis of a situation but espouses different values from the experts and thus choose a different policy.

NORMATIVE & POSITIVE BELIEFS IN THE CONSENSUS:

As you can see from the IGM Experts Panel's responses to the "Taxing Capital and Labor" questions from October 2012, 75% of them agreed with this statement: "Although they do not always agree about the precise likely effects of different tax policies, another reason why economists often give disparate advice on tax policy is because they hold differing views about choices between raising average prosperity and redistributing income."

http://www.igmchicago.org/igm-economic-experts-panel/page/10

As Pete Klenow put it in his comments, there's more agreement about positive claims and less agreement about normative claims, and several other IGM experts note that this is mostly a debate over income heterogeneity - i.e. "efficiency vs equity trade-off". This is another way of saying that we face the question over whether to maximize economic productivity in the hopes that a "rising tides raises all ships" eventually, or to maximize economic equality by redistributing wealth to the poor who have higher utility for it:

http://www.economicshelp.org/blog/2473/economics/efficiency-vs-equity/

SPOTTING THE "CORRECT CONTRARIANS":

Last time in our discussion of expert consensus, we saw that Scott Alexander surmised that "correct contrarians" are often people with enough expertise to understand a field who nevertheless acquired that expertise outside of the field itself, and they are often working with some anomalous results in their field that are (for now) mostly ignored by the mainstream. Scott also suggested "correct contrarians" may possess superior rationality skills comparable to the top geopolitical forecasters in Phil Tetlock's "Good Judgement Project" that allowed them to spot trends the mainstream experts missed.

If we followed Scott's advice, we'd probably consider economists & financial analysts with interdisciplinary backgrounds who are part of various schools of "heterodox economics" to be potentially "correct contrarians", whereas postmodernist academics without any quantitative training, demagogic politicians, and business gurus selling get-rich-quick schemes are all probably "cranks" that can be safely dismissed. I found 5 examples of people that might be considered as "correct contrarians" given the above criteria - two are progressives (Dan Rodrik & Garth Brazelton), two are libertarians (Bryan Caplan & Ryan Bourne), and one is what I'd call a centrist contrarian (Jagit Chadha).

TWO PROGRESSIVE CRITIQUES OF THE ECONOMIC CONSENSUS:

• Harvard economist Dani Rodrik argues that "when a consensus forms around the universal applicability of a specific model, the critical assumptions of which are likely to be violated in many settings," this can lead to both errors of omission and errors of commission. Rodrik specifically takes issues with 2 issues in Greg Mankiw's list - free trade is good & rent control is bad:

"The proposition that trade restrictions reduce economic welfare is certainly not generally valid, and it is violated when certain conditions – such as externalities or increasing returns to scale – are present. Moreover, it requires that economists make value judgments on distributional effects, which are better left to the electorate itself.

Likewise, the proposition that rent controls reduce the supply of housing is violated under conditions of imperfect competition. And the proposition that floating exchange rates are an effective system relies on assumptions about the workings of the monetary and financial system that have proved problematic; I suspect a poll today would find significantly less support for it." (25)

• Financial analyst Garth A. Brazelton takes issue with Greg Mankiw's argument that polls of economists that shows a strong consensus on several major issues should guide our understanding (26). He has 3 major objections:

1. It's easy, though misleading, to cite sentence-long themes framed in a specific way and obtain consensus - it's much harder to dig into the details and find the same level of agreement. For example, the statement "If the federal budget is to be balanced, it should be done over the business cycle rather than yearly" might get 85% support among polled economists, but one wonders whether, if the question were asked "how" or via "what mechanism" etc., the agreement would be drastically reduced.

2. It's easy to get consensus if you only ask people who agree with you... The vast majority of economics departments and its institutions are run by and for mainstream economics, and when heterodox economists are so marginalized from the profession that they may not even be a part of mainstream professional institutions, you are bound to get the mainstream response. All you've really proven is that on some things there exists agreement among mainstream academic economists only. Additionally, if you only ask American economists, the skew is even greater because the United States has some of the least academic support for heterodox thought.

3. Perhaps the most important point is that agreement does not make you right. When groupthink is set as a priority above seeking the truth, that in and of itself suggests there is a fundamental problem within the economic profession.

TWO LIBERTARIAN CRITIQUES OF THE ECONOMIC CONSENSUS:

• GMU economist Bryan Caplan says he's not normally very concerned with partisan bias among economists because his own research has shown that "a strong expert consensus remains after statistically controlling for party and ideology." However, he takes issue with the IGM Expert Panel's conclusion that President Obama's stimulus reduced the unemployment rate. Caplan complains that "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?" (30)

Note that the Caplan's comment about the "value-added" aspect of the expert consensus coincides with a point we covered last time from Chris Hallquist's Less Wrong essay: "Expert opinion should be discounted when their opinions could be predicted solely from information not relevant to the truth of the claims." This means when a group of predominately liberal experts endorses a typically liberal position, it doesn't tell you much - they could be telling the truth or they could be allowing their bias to unfairly influence them. But if a group of liberal experts takes what would normally be considered a "conservative" position on an issue, it's more likely to be a case where the evidence overcame their bias. The same applies to a group of conservative experts who endorse a typically liberal position.

Bryan Caplan says "the IGM ought to at least explicitly disclose its panelists' political allegiances - perhaps reweighting them to match the allegiances of the broader public." This is similar to the idea of reweighting the expert consensus to match a hypothetical centrist economist that was mentioned in the study of partisan bias in economics by Zubin Jelveh, Bruce Kogot & Suresh Naidu (16).

Bryan Caplan also argues that partisan bias is more likely when economists are polled on current issues, and that it would be better to poll them on issues that politicians are likely to start debating in 5-10 years (30).

• Ryan Bourne is a researcher at the UK's Institute of Economic Affairs (IEA), a free market think tank, and he takes issue with the CFM Survey which is similar to IGM Experts Panel but headed by the London School of Economics and tends to take a more Keynesian view. Bourne says: "When considering whether to take a consensus seriously, we should assess the quality of the analysis, including the assumptions made, but also the credibility of the individuals involved – have they been right on the big macroeconomic calls in recent decades?"

Bourne says that the UK consensus is dominate by the Keynesians, and he blames them for a series of bad policies like the wage & price controls that caused the country's stagflation in the 1970s-80s, their opposition to the UK leaving the European "Exchange Rate Mechanism" in 1992 that nevertheless led to considerable improvement by the late 1990s, and their opposition to Conservative Party's austerity policies aimed at reducing the budget deficit (32).

ONE CENTRIST CONTRARIAN CRITIQUE OF THE ECONOMIC CONSENSUS:

• Jagjit Chadha, a British economist at University of Kent, is more of a "contrarian" rather than a progressive or libertarian, but he presented some interesting caveats for people contemplating the strong economic consensus against Brexit. His advice was less focused on Brexit itself and more on the general approach he wants people to take when looking at polls of experts.

First of all, Chadha cautions: "Experts may tend to offer advice that favours the status quo because there is little substantive evidence in favour of an altered state of nature. They may also herd around one opinion because they do not want to be seen as outliers with their professional colleagues or because they have not been able to develop a truly independent view. Either of these possibilities may lead to what economists call an informational cascade in which information that may be valuable is lost. Or all or some of the experts may also all be lying to us in order to gain some advantage later."

Chadha points out that some experts may try to skew the poll to get the public to heed their advice: "They may also have tailored their advice so as to maximise the probability that the advice will be used by amplifying the signal, thinking that it is better to exaggerate the impact on the up or downside so that people will understand the qualitative stance on ‘good’ or ‘bad’ more easily." He points out that this will cause the set of published views on either side to be more dispersed from the center, i.e. a polarized distribution in the experts poll.

Because of this, Chadha says "we as the public should, in the absence of an ability to referee or replicate the analysis produced, be most wary of the outliers or extremes on either side. [The best decision] is to agree with the remaining ‘trimmed’ consensus. Discard the extremes and place weight on the central view" (31). Note that this is similar to Matthew Martin's advice mentioned above - i.e. discard the opinions of economists who are outliers lest they distort the overall trend (19).