Sometimes, it is hard for an economist to be heard, especially by those who have strong political beliefs. And that is especially true when the economist has something important to say.
I was reminded of this recently when I saw a flyer for an event at the University of Minnesota next Wednesday on addressing climate change. In it, Dr. V.V. Chari, a distinguished economist at the U who is the founding director of its new Heller-Hurwicz Economics Institute, asserted, “Climate change is perhaps the seminal issue that will confront the world in the 21st century.” I couldn’t help thinking he had just made himself anathema to a large faction of the contemporary GOP.
I wouldn’t presume to guess for whom Professor Chari votes, but his work as an economist favors historical principles of the Republican party: a limited economic role for government, no attempts to micromanage the business cycle, as low a level of taxation as is responsible and market-based approaches when government action is needed to cope with some societal problem. He certainly is not a liberal on economic policy, whatever he may think on other issues.
Moreover, the advertised event includes lectures by two distinguished Minnesota alums on using financial markets to create incentives to minimize damage from pollution. That should be right up the alley of conservatives. But I think many will not get beyond the premise that climate change is occurring.
The left often is no less obstinate. Some Democrats still assume corporations are inherently evil in intent and practice and dismiss any economist who invokes “markets” or “free trade” as a hopeless reactionary. As someone who tries to foster a dialogue in the center, my e-mail folders contain much vituperation from both political wings. At one point or another, most economists will be shunned by the party3 toward which they feel the most affinity.
One might ask how that is any different from the population as a whole. Only the most diehard partisans agree with every party stance. Everyone else agrees with their party’s majority stance on some issues while disagreeing with others. That is the nature of party politics. Why should economists be any different?
They shouldn’t be. The point is rather that loyalists should be wary when their party’s position moves too far away from consensus positions among economists. Economists are not always right, but some of history’s most boneheaded policy moves went directly counter to prevailing economic wisdom. President Herbert Hoover signed the Smoot-Hawley tariff bill that widened and deepened the Great Depression despite the fact that 1,000 economists had signed a letter begging him to veto it.
Economists don’t agree on everything. Dr. Chari clearly opposes many policies liberal New York Times columnist and Nobel laureate Paul Krugman advocates. Some Nobelists including Minneapolis Fed adviser and former U professor Ed Prescott and Robert Lucas would agree with Chari; others, including Joe Stiglitz and Robert Solow, would support Krugman.
Chari, Lucas and Prescott all come from a wing within economics that stresses the importance of human rationality. They are opposed by Robert Shiller, one of the “behavioral economists” who examine implications of irrationality. Shiller has not received a Nobel but has credibility as one of the few economists who identified a housing bubble and foresaw the consequences of its collapse.
Yet, all of these distinguished economists, regardless of their differences on macro policy or politics right now, probably would agree with the premises of the two speakers at next week’s conference, that new financial instruments traded in financial markets can be a much better tool for managing some environmental problems than current policies. This is a consensus position within the discipline if not a unanimous one.
Yet again, using market instruments to ameliorate environmental damage is as anathema to some on the left as Chari’s identification of climate change as a real problem is to some on the right.
What should economists do when a political party or the general public spurns their advice? Walter Heller and Leonid Hurwicz, the Minnesota economists who serve as namesakes for the new institute, offer two examples.
Heller was not a deep theoretician but rather an applied economist gifted in explaining the then-new Keynesian theories to students, the general public and politicians. As the head of John Kennedy’s Council of Economic Advisors, he was on the cover of Time Magazine (March 3, 1961) within weeks of Kennedy’s inauguration. Widely seen as the architect of the booming 1960s economy, he remained one of the best-known economists in the nation for a decade.
Hurwicz was one of the most profound theoreticians of the past century, one whose insights still are wending their way toward practical application. Hurwicz had deep political beliefs but didn’t try to change current public opinion. He did not write op-ed pieces or appear on interview shows but rather taught graduate students and wrote dense scholarly papers. Yet, his work on “mechanism design” eventually will help shape public policymaking for the better.
Some economists are both good theoreticians and good communicators to lay audiences. Paul Samuelson and Milton Friedman, at opposite ends of the scale politically and within economics, were both wonderful columnists for decades. The Internet has allowed interested lay people to tap the insights of bright economists across political and disciplinary spectrums. But that is the subject of another column.
© 2011 Edward Lotterman
Chanarambie Consulting, Inc.