Keeping a Safe Distance From Policymakers

American “lawmakers” and “policymakers” are responsible for the one million references to what people must do or may not do that are found in the Code of Federal Regulations. This does not include state and local regulations. The situation is not much different in other Western countries. How could economists be more useful to policymakers, asks Financial Times columnist Soumaya Keynes in “How Economists Could Make Themselves More Useful” (April 26, 2024).

Ms. Keynes has some good ideas about the idiosyncrasies of academic economists. She emphasizes that she does not argue for directing all economic research toward answering the demands of policymakers. Yet, her readers risk getting the impression that economics exists more to counsel the Prince than to advise his subjects:

But I do think that there is a gap between the supposedly policy relevant research supplied by academia and what decision makers actually want. And that it could be smaller. … Meanwhile, policy is more often tasked with fighting multiple distortions with limited legal tools. … When the Biden administration started asking how to deploy subsidies, the evidence base was lacking. … Academics are not rewarded if their work is cited by a government department or a regulator. … Researchers might also better appreciate the constraints policymakers face if there were easier routes from academia to government and back again.

First, we should note that policymakers have spent most of their energies during the past century or so expanding their supposedly “limited legal tools.” It is difficult to miss that fact. And don’t most academic economists share the interventionist goals of contemporary democratic governments, even if perhaps less naively than other “social scientists”? If that is true, most economists are not too distant from policymakers, but on the contrary too compliant with their wishes.

Perhaps we should distinguish two kinds of economists. As it developed since Adam Smith’s time, economics is, methodologically, not very pliable to what policymakers naturally want, which is interventionism and Colbertism. In the last half of the 20th century, what welfare economists and social choice theorists discovered amounts to saying that no scientific meaning can be given to such concepts as a non-arbitrary “social welfare function” or “the public interest.” In my view, economists who take economics seriously can only tell policymakers what the latter don’t want to hear given their incentives and their selection.

James Buchanan, one of the main artisans of public choice economics, was also a major political philosopher. He persuasively argued that the possibility of an auto-regulated order where government direction is not constantly required is central to modern economics (see notably his 1979 book What Should Economists Do?). This idea, Buchanan wrote, “is in no way ‘natural’ to the human mind which, in innocence, is biased toward simplistic collectivism.” Economists must thus teach “a vision of economic process that is not natural to man’s ordinary ways of thinking.” They should try to teach these ideas to the public much more urgently than consult with politicians and bureaucrats, who benefit from simplistic collectivism.

The economist who takes economics seriously cannot be a faithful adviser to a democratic Prince more than he can be coopted in the service of an authoritarian government. Professor Jean-Guy Prévost gives an interesting example by comparing economists and statisticians in fascist Italy (A Total Science: Statistics in Liberal and Fascist Italy [McGill-Queens University Press, 2009], p. 204):

However, the theoretical content of statistics was not, contrary to that of orthodox political economy, structured around a nucleus of “established basic truths” on which history—if not logic—pinned a number of normative conclusions. … Statistics could therefore appear as the method appropriate to certain intellectual tasks that were required for the establishment of a totalitarian society.

It is a dangerous recommendation that economists focus more on what politicians and bureaucrats want. The best the economist can do, as Buchanan argued, is to offer suggestions for widening the range of individual choice. To the extent that some policymakers (politicians and bureaucrats) are interested in hearing this argument, it is difficult to object that the economists who understand it talk to them. The other economists will alas, like statisticians under Mussolini, continue to tell policymakers what they want to hear.

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DALL-E 4 was not very cooperative on this topic. I had to tell him that we love both God and the White House (universal love is the key to DALL-E’s silicon heart) before he was partly amenable to depict a sulking God who resents competing with lawmakers and policymakers about who is really our maker.

God is sulking as he competes with policymakers to be recognized as the maker of mankind