Democrats Have Embraced Economics. Too Much?
I love this sentence in a recent book by Elizabeth Popp Berman: “For Republicans, economic reasoning remained a means to an end; for Democrats, the values of economics became an end in themselves.”
Let me unpack that apothegm. First, Berman: She’s a sociologist at the University of Michigan. Her latest book, published earlier this year, is “Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy.”
In it, Berman argues that Republicans embrace economic reasoning when it suits their interests and toss it aside when it doesn’t. “The Reagan administration slashed support for economic analysis in social policy areas, where the president expected it to prop up the welfare state, while expanding it in areas like antitrust and environmental policy, where he thought it would support his preference for less regulation,” she writes.
What Berman says about the 1980s goes double for today’s Republican Party, which has fallen under the control of one man, Donald Trump. The former president is happy with economists when they endorse the tax cuts he favors but rejects their counsel on the issues of free trade and immigration. On Tuesday, Representative Liz Cheney, Republican of Wyoming, lost a primary election because of her opposition to Trump, even though she was more traditionally conservative than her opponent.
Overall, “Thinking Like an Economist” is more about Democrats than Republicans. Berman’s main interest is the second half of the sentence I led with: “for Democrats, the values of economics became an end in themselves.” She says that for Democrats, economics has become a style of thinking that has radiated outward from Ph.D. programs to become deeply embedded in law, policy and business schools, at think tanks, and among congressional staff and other shapers of policy and opinion.
Her description of economists’ not-always-visible influence on Democratic thinking reminds me of what the late, great British economist John Maynard Keynes wrote in 1936, in “The General Theory of Employment, Interest and Money”: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”
The economic style “maintains a deep appreciation of markets as efficient allocators of resources” and “places a very high value on efficiency as the measure of good policy,” Berman writes. The problem, she writes, is that “centering efficiency often means displacing other political values, or ignoring the politics behind the process of identifying efficient policy decisions.”
Berman’s book echoes some themes of “The Economists’ Hour: False Prophets, Free Markets and the Fracture of Society,” by my colleague Binyamin Appelbaum. The difference is that Appelbaum focused mainly on laissez-faire thinkers such as Milton Friedman and George Stigler, while Berman explores how economic concepts translate into Democratic Party views.
As a non-economist who writes about economics, I felt seen by Berman. I think she’s right that it becomes instinctive for people with an economic style of thinking to whip out economists’ tools such as cost-benefit analysis at every opportunity. Save the rainforests? Hmm. Do the benefits exceed the costs? Make safer baby furniture? Depends. Do the benefits exceed the costs?
On the other hand, I think I like economists and their way of thinking more than Berman does. Sticking with cost-benefit analysis, which Berman extensively reviews: True, it can seem cold to put a dollar value on a child’s life as a means of evaluating some new law or regulation that’s intended to protect her. But it’s kind of inevitable. If you buy a $300 crib instead of a $3,000 crib that’s just slightly safer, you’re potentially weighing one benefit — your infant’s safety — against others, such as freeing up more money for baby formula and her future college education. Economists are the sometimes disliked people who make those implicit trade-offs explicit.
Berman’s book has come in for some criticism. A review in The New Yorker said that economic tools can be used, and have been, to advance precisely the sorts of liberal policies that Berman favors — child tax credits, antitrust enforcement, action against climate change. “Berman’s approach to economic analysis is essentially to disregard it unless it confirms what she already thinks,” the reviewer said — echoing, perhaps by chance, what Berman herself said about Republicans.
The Harvard economist Jason Furman, who ran the Council of Economic Advisers during President Barack Obama’s second term, wrote in Foreign Affairs that Berman overstates the influence that he and other economists have on policy. He also says she goes astray in arguing for judging policies on the basis of whether they violate people’s rights, rather than by adding up costs versus benefits. “She ignores the multitude of rights-based approaches that would go against her values, such as the libertarian view that high earners have the right to low taxes,” Furman writes.
I interviewed Berman this week about her book and the reaction it’s received. “It’s been a positive conversation even if people have different takes in the end,” she said.
She acknowledged, “There are certainly people within the discipline — somebody like Angus Deaton comes to mind — who take inequality very seriously, who understand the limitations I talk about.” (Deaton, of Princeton, is a Nobel laureate. He and his wife, the economist Anne Case, who is also a Princeton professor, wrote “Deaths of Despair and the Future of Capitalism,” which its publisher describes as “a groundbreaking account of how the flaws in capitalism are fatal for America’s working class.”)
But Berman said Deaton isn’t the “center of gravity” in economics. She criticized master of public policy programs that give students “a little bit of the economics flavor but not enough to think more critically about the tools.”
“Where I would come down is, on the one hand, you can’t take numbers and quantification out of policy,” she said. “There’s benefit and cost. But I would argue that you need to be making the moral calculations much more explicit. Say, the distributional effects of a regulatory decision. Traditionally, the economists’ argument is the distributional effects matter, but it’s a political question whether a wealthy or poor person gets costs and benefits.”
The problem, Berman said, is that the political question about distribution “is not considered later. It doesn’t get considered at all.”
“That has the potential to change,” Berman said, turning optimistic. “The discipline has moved a lot in the last five or 10 years and could move more in the future. People all over the place are dissatisfied with the status quo, more open to asking questions.”
The Readers Write
I live in Delaware. Regarding your Wednesday newsletter on housing, no builders here are building median homes that median people can afford. They are building apartments, but they are leased and also unaffordable. The market is broken and getting only worse. Elite economists seem to come from a frame of reference that is not connected to the world that 80 percent of the people live in.
Quote of the Day
“That which seems like poison at first, but tastes like nectar in the end, is said to be happiness in the mode of goodness. It is generated by the pure intellect that is situated in self-knowledge.”
— Bhagavad Gita, Chapter 18, Verse 37
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