Do Economists Care?

Art Carden:

Heavy traffic is a problem every economist in the world knows how to solve: price road access, and charge high prices during rush hour. With technologies like E-ZPass and mobile apps, it’s easier than ever. That we don’t pick this low-hanging fruit is a pretty serious indictment of public policy. If we can’t address what is literally a principles-level textbook example of a negative spillover with a fairly easy fix, what hope do we have for effective public policy on other margins? (more)

Yes! If economists actually cared about influencing real policy, they would:

  1. Identify a few strong candidate policies that are a) widely endorsed by economists, b) based on relatively simple clean analysis, c) not much adopted in the wider world, and d) should bring big gains.
  2. Try to engage other intellectuals in detail on one or a few of these, seeking to either gain their endorsement, or to understand better the barriers that block them. If possible, do this as a group, and using all our status levers to make them respond in detail. If we succeed in persuading intellectuals, then join with them to try to persuade policy-makers, again either succeeding or better understanding barriers.
  3. Once we better understand barriers, focus our economic research on doing what it takes to overcome them.

By not doing this, we basically say that while we think we know how to make a better world, we don’t much care if that happens; our priorities are elsewhere.

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  • ScottH3

    Or… you could be saying that you don’t really believe that you know how to make the world better.

  • Jonathan Weissman

    In the example of pricing road usage according to traffic, understanding barriers seems like a huge step. Road usage is naturally priced higher during high traffic, though not in money, but in the fact that driving in traffic is more stressful and takes longer. Yet people mostly don’t respond to the natural incentive to shift their driving time to when there is less traffic. Understanding underlying causes like a standard workday that causes lots of people to drive to work at the same time seems important to finding a solution that will actually work instead of making people pay lots of money and still suffer in traffic.

    • http://michaelkeenan.blogspot.com michaelkeenan

      Increasing road capacity nearly invariably increases traffic (as explained, e.g., here: http://www.wired.com/2014/06/wuwt-traffic-induced-demand/). So, I think people mostly do respond to the natural incentive to avoid traffic. (And anecdotally: I miss many events that I’d otherwise like to go to because I’d have to drive across the SF Bay Bridge during peak times.)

    • Navin_Kumar

      It’s not true that time pricing (the current system) and money pricing have the same effect. Take carpooling, for example. Right now, if you carpool, you don’t really save money (other than on gas.) If you carpool under a pricing system, you’d save on gas AND toll. Thus, more people would carpool.

      Of course it’s possible that demand for rush hour commuting is inelastic to price, but I doubt it.

      If you’re worried about poor people getting taxed even further, just fold the bill in with a sales tax cut. Congestion pricing seems like a better way to raise money for roads than sales taxes on people who might not own cars.

  • Sieben

    But what about the poor who need to drive during rush hour?

    /topic

  • http://www.separatinghyperplanes.com Matthew Martin

    Economists haven’t done this for roads because their argument is not convincing to anyone.

    First, rush hour is when everyone’s heading home. A high-paid CEO’s time at home with his kids is not worth more than a janitor’s time at home with his kids, and everyone but economists understand this. Tolls exacerbate inequality and are socially welfare-reducing, regardless of efficiency concerns.

    Second, the efficiency of tolls are doubtful. Transaction costs are high even with EZ passes–enormous queues will form every single day, both slowing down total transit time and increasing by a huge margin the amount of surface area we’d need to pave. Moreover, for almost all commuters, the slow rush hour traffic is still quite a bit faster than any possible alternative. Think about that: we can get a lot more people home to see their kids a lot faster if we don’t implement a toll.

    What this final point means is that the efficient level of congestion needn’t be zero. Everyone has some amount they’d be willing to pay to avoid congestion, but there’s no guarantee that there’s enough people willing to accept this toll as compensation for their longer alternative commutes to actually eliminate the congestion. Moreover, since tolls are not bilateral voluntary trades between drivers, this means that we have a central planner, with no information about any of these private costs and benefits, determining the actual toll. There’s absolutely no reason to expect that the central planner’s chosen toll will be more efficient than $0.

    • Sieben

      Dude, EZ pass is just like a sticker you put on your window that gets scanned when you drive under a waypoint, usually when you’re driving 70mph in Houston.

      I agree that there are problems with rush hour pricing, but long queues isn’t necessarily one of them.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        If you want to help poor people spend more time with their families, exempt the poor from the toll.

        Then it’s no longer a simple proposal that all economists will agree on, is it?

    • http://michaelkeenan.blogspot.com michaelkeenan

      If you want to help poor people spend more time with their families, exempt the poor from the toll. With a toll only on the non-poor, the poor will pay less in gas and in time.

      (Economists will immediately notice that an equal cash transfer to the poor is likely to be strictly better than a toll exemption, so that people can spend it on whatever is the most pressing need in their life, which might not be tolls. But maybe the exemption would make tolls more politically feasible so that people like Matthew might support it.)

    • http://entitledtoanopinion.wordpress.com TGGP

      It sounds to me like you are completely unfamiliar with the experiences of places like Sweden & Singapore which have implemented congestion prices. There’s also a simple way to check if the price of a toll is too high: have one free and one tolled route. If people are fine with the congestion on the free route and don’t use the tolled road, the price is too high.

      • Jojo

        In Singapore there’s a $40,000 permit required to even own a car. Then high taxes on everything but income/passive income. Then ceiling-less congestion pricing. Sounds like paradise for the rich. Also sounds like punishment for the middle class.

      • http://entitledtoanopinion.wordpress.com TGGP

        The poor are less likely to own cars, so the more revenue that comes from car ownership, the more the rich are paying it would seem to me.

    • http://don.geddis.org/ Don Geddis

      You seem to be stating a lot of “facts” that are really just your made-up imagination, rather than based on data. For example: “slow rush hour traffic is still quite a bit faster than any possible alternative”. Traffic engineers know this is false, and that observation has led to metered on-ramps and carpool lanes. You’re drastically overestimating the number of people/second that are able to utilize a slow rush hour freeway lane. The throughput of people is actually much higher, if you have fewer cars on the road. You get more total people through the road faster. This really is a Tragedy of the Commons problem, and everybody really would be better off if road access were more controlled in some way.

    • Lord

      Yes. Written arrogantly as many economists do, that they have identified a ‘problem’ to which they have just the ‘solution’ rather than asking themselves why it hasn’t already been done. It is that the solutions create other problems and that when the problem actually becomes significant enough to address, it will be. It is looking at this as a problem isolated from all other considerations and making it more important than any other consideration, or even considering it a problem in the first place, ignoring that the problem disappears the same day and that other solutions already exist, and that the costs of solving it still likely exceed the benefits in most cases. This isn’t and won’t always be the case everywhere, and he is entitled to propose, just as we are to dispose.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        Economists, according to Elster, are good at predicting the effects of marginal changes; but they’re clueless about institutional changes.

      • oldoddjobs

        Unlike politicians, who are masters of institutional change?

        “Well, we’ve changed it. After all, no-one else has the authority to do that. Guess we did a pretty good job! Who the hell is going to criticise? Certainly not economists, who are clueless about big important stuff like institutional change!”

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        No, not for Elster, who doesn’t think anyone is anywhere close to predicting the effects of institutional changes.

    • Dave Lindbergh

      “A high-paid CEO’s time at home with his kids is not worth more than a janitor’s time at home with his kids”.

      And the proposal is to charge them both the same toll.

      Your argument leads to a world where prices for _everything_ depend on who is doing the buying.

    • oldoddjobs

      You seem to know a great deal about what would happen with tolling. Why an electronic tag being scanned causes traffic jams you never explain.

      There already is a central planning toll, and we don’t know if it is efficient. Looks inefficient.

      Why don’t we experiment? Is it because the central planners are as wise as you, or is it because they really have no interest in improving traffic flow on roads?

  • Navin_Kumar

    I’m surprised that *Robin Hanson* didn’t point out the obvious reason that economists don’t push for this kind of stuff – activism doesn’t boost status. Public intellectual spats do. And you can’t have a spat over you agree on.

  • http://thri.ca/ Thrica

    I hate to accuse Art of theorizing in an institutional vacuum, but the argument against tolls is the apparatus cost. Given current institutions in the US, there is a 100% chance that widely implemented tolls would be used to track peoples’ motion everywhere they went.

    Heck, toll roads are used hardly anywhere at the moment, and they’re already used that way. http://www.forbes.com/sites/kashmirhill/2013/09/12/e-zpasses-get-read-all-over-new-york-not-just-at-toll-booths/

  • http://juridicalcoherence.blogspot.com/ Stephen Diamond

    Intended or not, there’s an amusingly ironical play at work with “care.” Economists aren’t usually thought uncaring about policy, but they are often labeled “uncaring” in the more common sense of the term—and this post could be characterized, in that sense, as “uncaring.” Tolls are a highly regressive tax, whose real effect would be to make it impossible for the masses to own and drive cars.

    [Proponents will respond that more efficient mechanisms are available to effect any desired economic redistribution. The problem, of course, is when you include proposals to counteract the regressive effects, you no longer have the basis for an economic consensus on a concrete proposal.]

  • Joshua Brulé

    Hmm… What other proposals (with a simple, clean analysis) do economists near-universally support?

    I don’t have enough status or capital to pull this off, but “Institute for Promoting Policies that a Supermajority of Working Economists Agree are an Excellent Idea” would make for a nice think tank. (Okay, the name needs work.)

    I’d definitely subscribe to their newsletter…

    • oldoddjobs

      Think Caplan covers a few of those in his democracy book. Free trade is supported by a super-majority of economists, but then again, add up and implement economists’ pet exceptions to free trade and you end up with pure central planning.

  • Peter David Jones

    Economists have an answer. I can think of others: extend roads, pool cars, and stagger working hours. They all have advantages and disadvantages. (Forcing traffic off major roads, and onto minor, probably residential roads has externalities, such as increased accidents, that are more noticeable to politicians than economists,)
    I don’t think economists need to hand-wring about not promoting “the” answer when it is not “the” answer .

  • Owen Cotton-Barratt

    One hypothesis: the idea of not charging for road access (or of subsiding petrol, as some countries do) is driven at least significantly by wanting to signal that you treat everyone equally, and the rich aren’t better.

    Somehow just giving money to the poor (that you’ve raised with your new charge or by removing the subsidy) might be more efficient economically, but is less effective as a signal.

  • IMASBA

    Do economists actually have enough influence on such social issues as public transportation working hours (forcing more public transportation and less rigid working hours is what road toll is really about, otherwise it would just burden the working poor and not improve actual road congestion). Don’t politicians and influential pundits/lobbyists choose to follow advice from economists they already agreed with (and you can always find an economist who disagrees with the rest, on road toll any libertarian economist would fit the bill)?

    Also, as Stephen Diamond said below: once you expand the program just a tiny bit, for example by giving the profits back to the working poor or even just writing a statement of what the goal(s) of reduced road congestion would be (less pollution, more spare time, longer working hours with same amount of spare time, more freedom for cars on the road, etc…) you run into ideological differences between the seemingly united economists.

  • efalken

    For status seeking economists, if you prioritized advocating a tribal majority opinion to the greater population it would signal one’s comparative advantage is not ‘deep thought’ as exemplified by models. There’s not a big big payoff here, after all, just before the bill is signed the chief advocate will be pushed off the stage so they can showcase some octogenarian who scientifically ‘proved’ this was optimal back in 1957. Any argument most everyone can understand will be considered not as profound or serious by the general public, and science is the current ultimate source of truth in public debate, as decided by the priests in the academy.

    • http://overcomingbias.com RobinHanson

      Yes, people most involved in this would not be showing off their technical skills. Which is why whether economists do this is a test of the priority they place on showing technical skills vs. helping the world.

  • Daublin

    Poorer people need a working economy just as much as wealthier people do. You can’t just say, such and such is used predominatly by poorer people, and therefore sensible economic policies would be out of place.

    A good example of that is grocery stores. Market-based big-box grocery stores have been a huge boon to poorer people. They don’t do it because they *like* poor people. They do it because they want to make more money, and the way to do that in a market is to offer high-quality products at attractive prices. We could do with more institutions that work like grocery stores.

    Getting back to roads, making roads be a snarled up mess is hardly doing a favor to poorer people.

  • brendan_r

    I disagree w/ Robin because, a) corner case and b) fully general counterargument and c) ineeeeequality!!

  • James Oswald

    On many policies which economists agree, their consensus goes against popular thinking or butts against some vested interest, and economists simply aren’t influential enough to overcome those obstacles.

  • charlie

    Why is the fact that economists do not have a comparative advantage in political lobbying proof that they don’t “care.”

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      I think the (plausible) assumption is that they would have comparative advantage were they able to coordinate around simple, concrete policies within their realm of recognized expertise.

      [Economists, after all, are very high status: an occupation doesn’t control the centers of financial power and not have great status. Robin’s moaning about the status of economists can be misleading. Robin just happens to be more oriented to academic status (except maybe about billionaires).]

      • charlie

        The point is that if they are simple, concrete policies, then economists don’t have comparative advantage at popularizing them, or lobbying for them, because any old popularizer or lobbyist can convey a simple, concrete policy better.

        Group A is good at making shoes. Group B is good at shipping shoes. Should we really infer that Group A doesn’t “care” about people owning shoes if we observe that Group A mainly makes them and Group B mainly distributes them?

      • Curt Adams

        I don’t think economists are particularly high status. Economists who can cough up justifications for what people running large corporations want to do or have done can get money and media exposure for it, but it feels like a well-paid lackey situation to me. Economists don’t seem to be able to get CEOs and politicians to do things they didn’t already want to do; they’re just rolled out to provide excuses.

        There’s a small number of economics Nobelists who become pundits and have some status as media figures – Sen, Krugman, and Stiglitz spring to mind. But frankly they don’t seem to get listened to by the movers and shakers either.

      • oldoddjobs

        1) Name these economists who lie for payment by corporations.

        2 )What is it that people running large corporations “want to do”?

      • Curt Adams

        The economists don’t “lie”, as a rule; they probably believe what they’re saying.

        The corp leaders are generally pushing for less regulation, lower taxes for the rich, lower wages for workers via higher unemployment and less unionization, increased oligopoly power, and reduced legal remedies for those harmed by corporate actions.

      • charlie

        Agree with Curt. Celebrity pundits are high-status, and some economists happen to be celebrity pundits.

        The modal NYC hedge fund manager or i-banker reads 0 economics journal articles per year, and knows what appeared in AER or Econometrica last year as well as he knows what appeared in the New England Journal of Medicine. In 0 meetings per year does he suggest that the firm should take a certain trading position because an academic economist recently said so. The modal Tennessee legislator can name 0 economists on the faculty of Vanderbilt. The idea that any decisionmaker is being bullied into submission by the high “status” of economists’ expertise seems farfetched.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        I was thinking along the lines of Bernanke, Yellen, Summers, etc.–the Federal Reserve, WTO, and World Bank levels. Of course, they’re atypical of economists, but their enormous power should bring status to the whole profession.

        Does it? It strikes me that the status of economists is hampered by the choice of their profession’s name. Having to “economize” is not a high-status signal.

      • oldoddjobs

        When you do it, it’s sincere truth-seeking. When economists do it, it’s unconscious lying/coughing up justifications.

        Shock! Horror! Employers want to lower costs! The BASTARDS.

        When you choose to lower costs, it’s right-on. When anyone else (especially if they’re richer than you!) does it, it’s evil.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        I suppose we all have our egocentric biases, but doesn’t seem just a wee bit more likely that economists will tend to be part of coalitions including financial and corporate power-holders than of ones consisting of, say, unemployed workers?

      • oldoddjobs

        So what about the economists who advocate getting rid of minimum wage laws to increase employment?

        Are they lying? Shilling for their corporate masters? Unconsciously defending the powerful?

        When they advocate free trade to make everyone better off? Again, that’s just lip service on behalf of the coalition?

      • IMASBA

        “So what about the economists who advocate getting rid of minimum wage laws to increase employment?”

        The devil is in the details which such proposals. If no other laws were changed at the same time it could for example mean that you can lose $700 of unemployment benefits or food stamps because you turned down a $400 job, in that case you wouldn’t exactly be helping the unemployed. If you increase the number of jobs by lowering/removing the minimum wage then those new jobs will pay less than minimum wage and you’re really close to having jobs that don’t pay enough to pay the rent of even the crappiest apartment.

        “When they advocate free trade to make everyone better off? Again, that’s just lip service on behalf of the coalition?”

        Free trade doesn’t make everyone better off. People in effectively “protected” employment positions would lose out and only in the long term would the population be better off on average (but they still have to eat in the meantime, so again you would have to change many other things at the same time). Of course you can view this as an acceptable cost, to help people in poor countries and future generations, but then you should be honest and admit that there is a cost, instead of falsely promising that everyone alive today would be better off.

        You can’t just take abstract concepts that deal with large averages and the long term and apply them to individuals in the short term.

      • oldoddjobs

        Yes, losing welfare payments makes taking a job less attractive. However, the costs/benefits of abolishing minimum wage laws is not under discussion just now – the motivations of economists is. You’re using the logic of economics yourself, derived from the work of professional economists. As soon as one no longer does economics professionally, one suddenly sees that minimum wage laws are actually a good thing?! Why? Because one is no longer obliged to cough up justifications for corporate masters? Or do they actually believe what they say? They SEEM to be just as sincere as you.

      • IMASBA

        It was Stephen Diamond who talked about corporate masters, not me. In any case I believe that many economists are not as aware as they should be about the difference between the average and the individual, but I also believe many other economists are aware but people misrepresent their advice to suit their own needs. After all, soundbites are a lot more popular than intricate policy recommendation reports.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        I said sponsors, not masters.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        I think it’s more that Economics appeals to economists’ corporate sponsors than that economists shill for the corporations. It really isn’t like employers needed economists to supply the argument that an enforced rise in wages increases unemployment. The argument was used by employers against unions before the advent of minimum-wage laws.

        Why does Economics appeal to capitalists? Because the rational-choice analysis underlying neoclassical economics denies–as applied to matters of institutions and broad policies–the centrality of coalitions. It can be more important that a policy decision is a victory for this or that coalition than that it has a certain direct effect on markets. It is in the interests of dominant coalitions to deny the coalitional character of their dominance.

        Are you really confident that abolishing the minimum wage would improve the welfare of unemployed workers or even decrease their numbers? I think it more likely that the victory of a coalition opposed to minimum wage will also favor austerity and their victory in one arena will the same in others. A right to a decent living when unemployed is a natural accompaniment of a right to a reasonable wage when employed.

        I don’t know what unemployed workers actually think about minimum wage today, but I’d bet their for it. Traditionally they have been. Unemployed and employed workers are common coalition partners.

    • http://overcomingbias.com RobinHanson

      My first proposal was to convince other intellectuals; that doesn’t take political lobbying.

  • Doug

    As much as it pains me to admit this, doctors actually do seem to follow this model. At least to a much greater degree than economists. On everything from the Heimlich maneuver to HPV vaccinations the medical establishment does seem to quickly uniformly push change when the evidence of a health intervention becomes overwhelmingly compelling.

    The problem is that doctors in general have a horrible understanding of statistical reasoning, and poor capacity to reason through evidence. So along with a lot of silver bullets, you get nonsense like recommending healthy people to limit salt intake or routine mammograms. But those rare times when the issue is so simple and straightforward that even an MD can understand it, the medical establishment does seem to work wonders in affecting change. In a way that one virtually never sees in economics departments.

  • Geoff Brown

    But traffic isn’t an example of a policy slam dunk. Much like free trade or net neutrality it would create winners and losers. It would punish people who have little and reward people who already have much.

    • oldoddjobs

      How about a system where you pay for degrees of congestion measured in journey time?

      Pay 10.00 to use the highway for a 1 hour journey from a to b. If journey takes over an hour, refund.

      • IMASBA

        That would be bad for the environment and you force the poorer workers to give up more of their spare time. What you want is to force politicians to put more money into public transportation (which would be exempt from the toll) and force employers to start thinking about less rigid working hours because most people on the road during rush hour really have to be somewhere and therefore won’t just stop going on the road if there was a toll.

      • oldoddjobs

        Public transportation? That’s your solution?! Come on over to Ireland, guy. Where 85% of what motorists pay at the pump goes to politicians to fund a permanently loss-making inefficient public transport “service”.

      • IMASBA

        Ireland barely has public transportation, so that’s a terrible example. Public transportation is profitable in places like Germany, Japan and the Netherlands and it could be in many American urban areas. It’s really much more efficient than cars in urban areas. Combined with more flexible working hours, meaning that some people will work from 10 to 6 for example you could really make transportation a lot more efficient. I don’t know if it means anything to you but I’m pretty sure Robin would agree with me on this (given his recent piece about automated urban transportation).

      • oldoddjobs

        “barely has public transportation”

        Compared to where? Obviously it has more public transport than most countries on the planet. (% of pop. using it, money spent, number of services run). Compared to Germany and Japan? I don’t have the figures at hand.

        btw, what do we mean by “public”? In Ireland there’s a subsidy because the bus/rail/light rail has always operated at a loss. If people had to pay the actual cost at the user end to cover it there would be outrage! Presumably the Germans keep costs low (wages, one suspects), unlike here (Ireland) where cost reductions are met with indignant protest. But mass transit systems do not have to be tax-funded.

        In what sense can public transportation be said to be more efficient? That is, “be” more efficient where/when/how/why etc? In all cities, with all populations, with all institutions, geography, legacies etc?

      • IMASBA

        Ireland doesn’t have a lot of public transportation compared to Europe and East-Asia, who, with their high population density and high level of development, set the standard for what can be achieved.

        There really isn’t any dispute that public transportation can achieve a much higher traffic troughput than cars (which often have only one person in them). Of course the layout of the urban area has to support public transportation, that’s a problem in some American cities. Places like London and New York couldn’t function without their subway networks.

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  • John_Maxwell_IV

    Don’t people already have a large incentive not to drive during rush hour? *mumble mumble revealed preferences mumble mumble*

    (This is probably incorrect but I’d love to be educated by having someone explain to me why.)

    • IMASBA

      Yes, but a road toll would greatly increase that incentive. Plus it’s an institutional thing, lots of people would want to start working at 10 am, because then they’re better rested, they can do more at night and it also makes the roads less congested if half the employee start working an hour later. A road toll could be the nudge that lawmakers and employers need to finally start thinking about more flexible working hours (the current system where everyone starts working at the same time and as early is possible is still based on medieval agricultural society).

    • Jon Gunnarsson

      The reason this is not correct is because of negative externalities, i.e. negative effects that your decision to drive has on other people. When you drive during rush hour, you naturally take into account the waiting-costs this imposes on you. But what you probably do not take into account is the increased waiting time for other drivers by there now being one more car on the road. The other drivers similarly fail to take into account the waiting-costs they impose on others. The result is an over-utilization of roads during peak hours.

  • good luck with that

    Suburbanites don’t care much about what intellectuals think. They do care about the possibility of actually having to pay for their easy and cheap driving habits.

    Would it be smart for intellectuals to challenge the road building industry, the automotive industry, and the tract-house building industry? You won’t win. But you know that. It’s more about looking cool talking about an urban issue, that really is smart and makes a lot of sense, rather than going any further knowing it would be dead in the water politically. “Taking away people’s cars” looks really bad. Talking about congestion pricing is about status signalling among urban dwellers. No one else cares.

  • Roger

    Let’s assume economists do arrive at a consensus on a topic. Once this occurs, the path to status within economics is to create a contrary view which is plausible. People wanting to hear this view will both pay for it and broadcast it. You will be on the cover of magazines, and possibly even invited to dinner by the current or future president.

    This is one of the major problems with the social sciences. The subject of the science can read what is written and respond to it with social incentives, unfortunately degrading the objectivity of the science in the process.

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