Why do European Economists write Letters while US Economists Endorse Candidates?

In February 2010, 20 economists including a number of academics of note signed a letter that endorsed the Conservative Party’s deficit reduction plan for the UK. Although 20 is a small number (I’m sure many more – like me – were asked to sign and did not), they made up in quality what they lacked in quantity. The New Statesman magazine recently had the bright idea of asking them “whether they regretted signing the letter and what they would do to stimulate growth”. It published the results yesterday.

Half of the signatories replied. The headline was that most have changed their mind. Actually the responses are more varied, but interesting given that they are mostly well known academics. For example Ken Rogoff simply says “I have always favoured investment in high-return infrastructure projects that significantly raise long-term growth” which you can interpret how you want. A few are brave enough to say they have changed their minds. Only Albert Marcet says that he has no regrets.

400 economists have signed up in favour of Romney for President. Of course we all know that everything is always done bigger and louder in the US, but I think Andrew Watt is right when he says that it is “unusual in Europe, at least in the countries I know, for academic economists to ally themselves party-politically in such a clear fashion”. I only know the UK well enough to judge, but in that case I think he is right, and the New Statesman responses illustrate this. They do not represent the comments of those who would support a party or ideological position come what may. The 42 French economists who wrote a letter endorsing Hollande’s recovery plan seem more in the UK tradition of supporting particular policies in their own words. In contrast the 400 seem to be signing up to something that could only have been written by a political machine.   

So if there is a difference between the US and at least some parts of Europe here, why is this? Andrew Watt wonders whether the more fluid nature of the civil service in the US has something to do with it. While that might explain the actions of those with a real chance of a top job, can it really explain what appears to be a much more widespread difference? Perhaps European economists just attach greater value to masking their political or ideological prejudices, but in a way that just moves the question sideways – why do they attach more value to this?

Yet perhaps I’m asking the wrong question here. Is the issue about US/European differences, or is it about what drives those who support the Republican Party in the US? The fact that parts of the Republican Party appear quite anti-science (evolution is just one theory), as well as anti-economics (tax cuts reduce the deficit), would surely have the effect of putting academics off publicly associating themselves with that party. I can see why that would make a Republican candidate particularly keen to be seen to have academic support, but not why so many seem happy to give their blanket support.

When I get asked to sign letters, there is always an internal debate between part of me that agrees with the cause and another that does not agree with everything that is written in the letter supporting that cause. Sometimes one side wins and I sign, and sometimes the other side wins and I don’t. Applying the same logic to the 400, the cause must be really important. Either the prospect of a Romney victory must be so appealing, or the threat of another Obama Presidency so awful, that those signing have been willing to put all their normal critical faculties and sensibilities to one side.  Or to go further, and write supporting documents in a way that either ignores what the evidence suggests or tries to suggest the evidence says what it does not, something that neither scientists nor engineers would do.

In a world still suffering greatly from the consequences of ineffective financial regulation, is the threat of marginally more effective regulation that dire? In an economy where tax rates on the rich have fallen and inequality has increased massively (whatever John Cochrane may want to believe), is the prospect of that not continuing so appalling? Is the prospect of just a bit less rather than a lot less government so terrifying that you are happy to sign up to obvious distortions like “Obama has offered no plan to reduce federal spending and stop the growth of the debt-to-GDP ratio”? It is this I find hard to understand.

Martin Wolf comments that it would be naive to think that economics could ever be as free from ideological or political influence as science or engineering, and I agree. However that does not mean that it is wrong to try and expose and reduce that influence. So it is therefore interesting if the influence of right wing politics and free market ideology is less powerful in some parts of Europe than it is in the US. Unfortunately I have little idea quite why that is and what it implies. 

Giving Economics a Bad Name

Greg Mankiw is known to every economist and economics student, if only because of his best selling textbook. John Taylor is known to every macroeconomist, if only because of the large number of bits of macro with his name on it (Taylor rule, Taylor contracts etc). Both are respected by other academics because of the quality and influence of their academic work.

With two others, they recently wrote this about the Obama administration’s attempts to stimulate the economy through fiscal policy after the recession: “The negative effect of the administration’s ‘stimulus’ policies has been documented in a number of empirical studies.” They then quote from two studies. The first looks at a minor aspect of the stimulus packages, the Cash for Clunkers attempt to bring forward car purchases. There are other studies of this programme which are more favourable. The second study is co-authored by John Taylor, and others have interpreted his findings differently.

No other studies are directly referred to. That might just be because the overwhelming majority suggest that the stimulus package worked. Dylan Matthews on Ezra Klein's blog documents them here. As I wrote in a recent post, the evidence is about as clear as it ever is in macro. Which is not too surprising, as it is what Mankiw’s textbook suggests, and it is what the New Keynesian theory both authors have contributed to suggests.

Now the quote comes from a paper prepared for the Romney presidential campaign. It is clearly political in tone and intent. As both academics are Republican supporters, it may therefore seem par for the course. But it should not be. The Romney campaign publicised this paper because it was written by academics – experts in their field. It allows those who oppose fiscal stimulus to continue to claim that the evidence is on their side – look, these distinguished academics say so.

It is one thing for economists to disagree about policy. It would also be fine to say I know the evidence is mixed, but I think some evidence is more reliable. It is not fine to imply that the evidence points in one direction when it points in the other. I say here imply, because the authors do not explicitly say that the majority of studies suggest stimulus is ineffective. If they chose their words carefully, then you have to ask whether ‘intending to mislead’ is any better than ‘misrepresenting the facts’. Was that the intent, or just an isolated unfortunate piece of bad phrasing? All I can say is read the paper and judge for yourself, or this post from Brad DeLong.

This is sad, because it tells us as much about economics as an academic discipline as it does about the individuals concerned. In the past I have imagined something similar happening in physics. It actually stretches the imagination to do so, but if it did, the academics concerned would immediately lose their academic reputation. The credibility of their work would be questioned.  Responding to evidence rather than ignoring it is what distinguishes real science from pseudo science, and doctors from snake oil salesmen.

What can economics as a discipline do about this sad state of affairs? The answer is pretty obvious, to economists in particular, and that is changing the incentives where we can. However we cannot do much about the incentives provided by politics and the media. I have been pretty pessimistic about this in the past, but in a future post I will try and be more positive and talk about one possible way forward.