What Is Econ Advice?

Saturday I said:

I see two rather different ways to think about what economists do when we recommend policies:

  1. Morals – We enter into a larger conversation about what actions are right. … While for our ancestors such discussion was often a prelude to concrete group action, today we more often argue about morals without such ways to coordinate in mind. …
  2. Deals – … Conflicts … can be resolved at least in part via deals, both implicit and explicit. Finding and making such deals can be aided by neutral outside advisors, … Economists have a reputation for developing analytical tools useful for making suggestions about parts of deals. …

Academics who lean toward a sci/tech style tend to favor a deals view, while those who lean toward a humanities style tend to favor a morals view.

Bryan Caplan responded:

Fact #1: Robin has spent decades proposing unconventional policy deals. His track record is an abysmal failure. … Zero Hansonian deals have been embraced by any normal person. His proposals appeal almost exclusively to fans of economics, libertarianism, futurism, and science fiction. … Most human beings are far too conventional and stubborn to even consider Robin’s suggestions. And instead of trying to overcome this hurdle, Robin habitually raises the hurdle by criticizing conventional attitudes. …

Fact #2: People often have a very good reason to ignore deals: They have better ways to get what they want. Such as: persuasion, moralizing, trickery, and bullying.
Fact #3: The effectiveness of deal-making varies widely by person. …
Fact #4: The effectiveness of deal-making varies widely by situation.

I’m happy to admit that deal-making isn’t the only way we get what we want, and that its effectiveness varies by person and situation. Though I do think we make a lot of implicit deals. For example, asking “I’m in a hurry; would you mind if I cut in line” is offering supplication, and an owing of return favors, in trade for a favor.

I’m also happy to admit that much of what I do intellectually isn’t very directly targeted at promoting specific deals. Though neither is it very directly targeted at labeling specific acts as moral or immoral. To the extend that I do either of these things, I do them indirectly, which makes my acts harder to categorize. My work in prediction markets, however, has led to some voluntary mutually-beneficial changes in corporate practices, and I hope for lots more.

Imagine that economists were surveyed and had to choose how they’d best like to describe economic policy recommendations, as:

  1. Morals – Arguing for the morality of actions,
  2. Deals – Helping groups find and make deals, or
  3. Showing Off – Academics do hard things in order to be certified by other academics as impressive, so that students, patrons, and readers can gain status by affiliating with them. Economic policy analysis is such a hard thing.

I’d bet that at least 25% would choose option #2, and even more among those whose style leans sci/tech. And #2 seems to me a better public face for economists to present to the world – economists will prosper more overall if they say this is what they are doing.

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  • fburnaby

    Robin, your last few posts have raised an old issue that continually confuses me. I’m perplexed about economists wanting to say that what they’re doing is *normative*. This immediately sets off my “is not science” detector, since science is usually conceived as being a completely descriptive discipline. This seems like a good norm for science, since I frequently find advocacy groups tending toward using arguments as soldiers as opposed to “truth-seeking”.

    Past work I’ve done has been in biomedecine, ecology and missile defense — all areas where many normative claims are grounded (health promotion, environmentalists, hawks and politicos). But there’s always claimed to be a divide between the (descriptive) research in these areas, and their later (normative) applications. Why is econ different?

    • fburnaby, this is actually what my econ textbook said. That economics is positive science, and as soon as people make normative statements they stop speaking as scientists and start being policy advisers.

      Now do I trust Robin or my textbook? Tough question!

      • fburnaby

        Interesting. My textbook made both claims in the introduction – econ is normative; econ is a science.

  • Mark M

    Robin –

    As long as this post starts with a critique of you, I thought I’d jump in and offer a piece of what I hope is constructive criticism.

    From my very informal observation of your posts over the last several months I believe I’ve seen a common theme. When considering the larger economic picture and how to improve it, you tend to ignore that the macro version is an accumulation of the micro. You explain why we as a nation or world would want to go a certain direction, but what’s missing is an incentive for people to head down that path. If I understand the terminology right, I would put it this way: practical solutions will have “near” incentives that support “far” goals, so there is an alignment between near and far.

    Am I wrong?

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  • Policy is generally directed to achieve particular objectives, like targets for inflation, unemployment, or economic growth. Sometimes other objectives, like military spending or nationalization are important.