Evidence and Economic Policy: Henry Blodget says that the economic debate is over; the austerians have lost and whatshisname has won. And it’s definitely true that in sheer intellectual terms, this is looking like an epic rout. The main economic studies that supposedly justified the austerian position have imploded; inflation has stayed low; the bond vigilantes have failed to make an appearance; the actual economic effects of austerity have tracked almost exactly what Keynesians predicted.
But will any of this make a difference? The story of the past three years, after all, is not that Alesina and Ardagna used a bad measure of fiscal policy, or that Reinhart and Rogoff mishandled their data. It is that important people’s will to believe trumped the already ample evidence that austerity would be a terrible mistake; A-A and R-R were just riders on the wave.
The cynic in me therefore says that after a brief period of regrouping, the VSPs will be right back at it — they’ll find new studies to put on pedestals, new economists to tell them what they want to hear, and those who got it right will continue to be considered unsound and unserious.
But maybe I’m wrong; maybe truth will prevail. Here’s hoping
On "the VSPs will be right back at it," Robert Samuelson to the rescue:
Although the newly discovered errors in Reinhart and Rogoff’s 2010 paper (“Growth in a Time of Debt”) are embarrassing, they do not alter one of its main conclusions: High debt and low economic growth often go together.
And anyway, the important story isn’t about the sins of the economists; it’s about our warped economic discourse, in which important people seize on academic work that fits their preconceptions.
Dani Rodrik thinks we should police ourselves:
Experts, knowledge and advocacy: This is so absolutely brilliant and important:
“One thing that experts know, and that non-experts do not, is that they know less than non-experts think they do.”
It comes from Kaushik Basu, currently chief economist at the World Bank and one of the world’s most thoughtful expert-economists.
Economists would be so much more honest (with themselves and the world) if they acted accordingly – letting their audience know that their results and prescriptions come with a large margin of uncertainty. Public intellectuals would do so much less damage if they did likewise. And if experts are not aware of the limits of their knowledge – well, they do not deserve to be called experts or intellectuals.
The real point, though, is that the other side – journalists, politicians, the general public -- always has a tendency to attribute greater authority and precision to what the experts say than the experts should really feel comfortable with. That is what calls for compensating action on the part of the experts.
So if you are an expert hang this gem from Basu prominently on your wall. And next time you talk to a journalist, advise a politician, or take to the stage in a public event, repeat it to yourself beforehand a few times.
This is asking a lot. My experience is that researchers really, really believe their own results so a call to temper enthusiasm will not work. They don't think they are overselling. So the cautions will have to come from people other than the authors of the work. That could help, but Krugman's point is, I think, more relevant. People have an interest in selling certain pieces of research that promote their political goals. For example, Reinhart and Rogoff played very well with those who wanted a smaller government and they helped to sell these results. Even if Reinhart and Rogoff had been quite humble about their findings, the correlations they found still would have likely been seized upon by those with an interest in using them to make progress toward ideological goals. Not sure how to solve this problem, but asking whether somebody has an interest in promoting a particular piece of research is a place to start.