Last October, Alan Blinder delivered the 2023 Daniel Patrick Moynihan Lecture on Social Science and Public Policy at the American Academy of Political and Social Science on the topic „Economics and Politics: On Reducing Inequality“ (October 2023). May 25th, For the text, visit the Peterson Institute for International Economics website: https://www.piie.com/commentary/speeches-papers/economics-and-politics-narrowing-gap; To watch the presentation and accompanying discussion on YouTube, go to . https://www.youtube.com/watch?v=jaF4Cjundy4). Here are some nuggets that caught my eye.
The extent to which many economists influence politics
May I start by dispelling some myths? Perhaps because economists frequently support or oppose policies, perhaps because the White House has a Council of Economic Advisers, perhaps because the powerful Federal Reserve (represented admirably here today) is the key to economic thinking. Many believe that economists have a great deal of influence over public policy because they are dominated by the public. The truth is, monetary policy aside, we are not. Almost half a century ago, future Nobel Prize winner George Stigler (1976, p. 351) wrote that „economists exert a subtle and almost undetectable influence on the societies in which they live.“ Ta. There is no doubt that Stigler exaggerated his claims. But he has a point. And things haven't changed much since then.
About the timeline of politicians
Politicians often have excruciatingly short horizons. It is often said that the next election is uncertain, but the truth is much worse. Political professionals who advise politicians often have no idea what the next poll will bring, and perhaps even the next tweet. Their original timeline, however long, only lasts until that night's news broadcast.
Advice for economists who want to participate in policy debates
Now let's look at the small number of economists who want to work in policy. He has two suggestions here…both of which are contrary to the essence.they are do not have What we teach in graduate school. …
I just highlighted it Political The time axis is too short For sound economic policy.But it's also true economist's The time axis is Too length For politics. Specifically, we economists typically focus on the „equilibrium“ or „steady state“ effects of policy changes.Example: What happens? Finally After changes in tax laws or trade agreements? Don't get me wrong. These questions are important and highly relevant to policy-making. We must not forget them. However, they are largely irrelevant in the world of politics because people do not live in a state of equilibrium. Rather, they spend most of their lives in the same place. transition Or something else. But economists often ignore „transition costs“ as an unimportant detail. You shouldn't. …
process of adjustment The transition to a better free trade balance could be long and painful, with job losses, reduced incomes for some people, and the destruction of local communities. Economists know all this, but they don't pay enough attention to it. Politicians, by contrast, live in a real world where transition costs are always present. They may not be in power long enough to benefit from steady state conditions. …
My second suggestion is that economists pay more attention to the following questions: fairness rather than doting almost exclusively efficiencyas we often do. In politics, fairness almost always trumps efficiency. And politicians understand that. … Consider, for example, the debate over the tax law, which is a perennially popular topic in Congress. Economists have a beautiful theory of optimal taxation built around maximum efficiency. But that theory is completely useless in parliamentary debates. zero. On the other hand, arguments about fairness dominate the discussion. And we are experiencing tax confusion. …
So my advice to economists who are interested in practical policymaking rather than theoretical policymaking. Don't forget about efficiency. That's important. We are right about that. But we may have to content ourselves with nibbling at the edges below the level of political headlines. detail complex policy packages fewEfficient. Call it the third or fourth best theory.