Noah Smith’s ‘Nerds vs. The Empire’ is a great feel good post for those who try to advance the cause of evidence based analysis. Nate Silver, the statistician who confidently predicted an Obama victory against Romney but who was lambasted by the Republican establishment before he was proved right, is an appropriate hero for the Nerds.
I can see my own complaints against those who want to take credit for the weakest UK recovery in perhaps centuries in the same manner. ‘The 2013 recovery vindicates 2010 austerity’ is perhaps the nearest you can get in macroeconomics to an Orwellian ‘war is peace’ type statement. The Nerds in this case are the large majority of academic economists who know it is nonsense and say so, and The Empire are the politicians, city economists and - tragically - the preeminent financial newspaper that pretend otherwise.
I think this picture is basically right. Yet there is a danger here. The recent post where I argued this case provoked a reaction among some that could be summed up thus: what arrogance you academic economists have! You cannot forecast, you allowed the financial crisis to happen, you are always arguing amongst yourselves, and you expect us to take you seriously?
Now I have argued that this reaction is missing the point. No one, and I mean no one, has tried to argue with me that the statement ‘the 2013 recovery vindicates 2010 austerity’ is actually justified. No one has disputed that the statement is not being repeated over and over again in the public debate. This means the public are being misled. Yet it remains the case that the way I originally put the argument in my posts allowed the discussion to focus not on those who try to create their own reality, but instead on the reputation of academic economics. It is clear enough why I did it this way, but in retrospect I may well have made a mistake in doing so.
Is immigration another area where there is a potential danger that those arguing for evidence based policy may appear elitist? There are some similarities between the public debate over austerity and that on immigration. With austerity there is a popular view that governments should ‘tighten their belts’ at the same time as households are having to. With immigration there is a popular view that immigrants must displace native workers from jobs and thereby raise unemployment and drive down wages. In both cases economic research casts doubt on these popular views. The evidence is that immigration, like trade, raises long run average income per head in an economy: perhaps at a cost for some groups, but perhaps not. There is even a direct link between the two issues: immigration into the UK clearly seems to improve the medium term fiscal position (and therefore decreases the need for austerity), yet popular discussion is all about the need to reduce ‘benefit tourism’.
There are also clear differences between the two issues. The wisdom or lack of it for austerity during a liquidity trap is essentially a narrow macroeconomic issue, and government debt is not at the top of voter concerns. The wisdom or otherwise of tough controls on immigration deals with issues that are not purely economic, and in the UK is at the top of voter concern.
What might link the two issues, nevertheless, is that there seems to be a divide between the views of most experts and the public at large. One of the most vocal critics of the liberal view on immigration, David Goodhart, has a short piece in Policy Network where he makes a more general claim. Entitled ‘Britain’s Growing Cultural Divide’, his argument is summarised thus:
“The gap that has opened up between the secular liberal graduate baby boomer worldview that dominates party, governmental and social institutions and the political and psychological intuitions of the ordinary citizen is the new cultural/class divide in Britain”
Here is part of what he has in mind.
“And the biggest value gap concerns the security and identity issues ‒ most of which boil down to the common sense notion that we value those close to us more than those who are distant. At the national level this takes the form of “fellow citizen favouritism”. This is not about race, it is about fairness. It is the belief that when the interests of a British citizen, of whatever colour or creed, conflict with the interests of a citizen of another country, the interests of the British citizen should normally come first. Too much of modern liberal politics ‒ whether the EU idea of non-discrimination or some aspects of human rights policy ‒ overrides this basic political intuition.”