Monday, November 28, 2005

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Bush needs economists

Daniel Altman had a piece in yesterday's New York Times on the dearth of economists willing to work for the Bush administration:

The chairmanship of the Council of Economic Advisers will soon be vacant, and two spots on the Federal Reserve Board that were recently filled by academic economists already are. There is no assistant secretary of the Treasury for tax policy, and the director's chair at the Congressional Budget Office, currently occupied by Douglas J. Holtz-Eakin, will soon be empty, too.

The White House and Congress need as many as five academic economists of high caliber, and it's not obvious where they will come from. The Republican Party may be facing something of a shallow bench.

"Bush's reputation in at least the academic community is about as low as you can imagine," said William A. Niskanen, who was a member of the council during President Ronald Reagan's first term and is now chairman of the Cato Institute, a libertarian research group. "A lot of people would not be willing to give up a good tenured position for a position in the White House."

Niskanen goes on to take quite a few shots at the administration. However, the most interesting observation came in these paragraphs:
"It has been true, typically speaking, that Republican administrations have found it harder to find senior, more prominent academic economists for the C.E.A. members and chairman than have Democratic administrations," said Michael L. Mussa, a senior fellow at the Institute for International Economics, a nonpartisan research group in Washington, who was a member of the council during President Reagan's second term.

Mr. Mussa explained that the problem was partly one of specializations. "In the economics profession, on the microeconomic and regulatory side, there you find a substantial number of Republicans," he said, "but macroeconomists tend to lean a bit more to the Democratic side, on average."

I'd be curious to hear from economists whether this last assertion is factually correct.

What would be even more interesting is whether the political affiliation precedes the academic specialization or vice versa. One would expect macroeconomists, for example, to be more skeptical of markets -- in their bailiwick, unemployment is a persistent phenomenon, suggesting that markets do not always clear. Microeconomists, on the other hand, are more intimately familiar with the perverse effects of government intervention in markets.

So, does the political ideology redetermine the subfield, or does the subfield alter one's ideology?

posted by Dan on 11.28.05 at 10:06 AM


It might be simpler than that, Dan. Working for this President is probably not all that much fun for any economist. I don't think it's really a question of ideology. It's just that at the end of the day an economist's work is always going to be expected to conform to the (very short-term) political requirements of the White House, and that the economist can expect to come under political attack if it doesn't.

This doesn't explain vacancies at the Fed, or at CBO, though the Congressional leadership is so wholly subservient to the White House on economic questions that it might in the latter case. Now that a new Fed chairman is in place filling I would think filling vacancies there would happen in due course. But as far as the regular executive branch is concerned, a really good academic economist is going to want a government post if it holds some promise of allowing him to accomplish something. During the Reagan administration, it did. During this administration, not so much.

posted by: Zathras on 11.28.05 at 10:06 AM [permalink]

I would think that the Democrats, since they are more Keynesian than Republicans, are more willing to work in government. For a conservative/libertarian economist to work for the government might be against their principles, especially to work in an administration with pseudo-conservative policies.

posted by: CapitalistMofo on 11.28.05 at 10:06 AM [permalink]

More interesting to me: are economists in a field populated with folks who "tend to lean a bit more to the Democratic side, on average" so unwilling to work for Republicans? Or are Republicans unwilling to hire them?

Mussa seems to be suggesting the former, which seems the less likely to me.

posted by: brent on 11.28.05 at 10:06 AM [permalink]

Ah, macroeconomics... What made studying it so interesting at first, and became a turn-off later was the fact that it does not take a 'full professor' to prove that a given macroeconomic policy will achive a desired result. All you do is take a set of assumptions, and then 'rigorously' apply the logic of your argument. Classical economists, Keynesians, Marxists, neo-classicals/monetartists--they are all right.... if their assumptions about the way of the markets (i.e., human behavior) are right.

I think (hope) that the Fed jobs are filled on nonpartisan basis. However, I agree with the author of the article that President's Council of Econ Advisors positions are more like president's spokespeople rather than policy advisors.

posted by: Ivan B Zhabin on 11.28.05 at 10:06 AM [permalink]

I think he may be right that macroeconomists are more likely to lean to the left, but I've also heard, from people who would know, that the CEA is mainly populated by democrats anyway.

One thing to remember about economists is that they will tend to give both sides of things, probably to a fault (hence the Eisenhower quote, "give me a good one-handed economist"). I don't think democrats have any problem working for republicans or vice versa. So one of two things is going on here. either Bush is just to horible to work for and nobody wants to be anywhere near his policies, or the White House is unwilling to hire democrats. I'd guess it's the former given what I've heard.

posted by: Ian D-B on 11.28.05 at 10:06 AM [permalink]

I'm going for my Ph.D. in macroeconometrics and I'm a conservative. I always thought that macro people tended to be conservative and micro people liberal.
By the way, it was Truman that wanted a one-handed economist.

posted by: Patrick Cooper on 11.28.05 at 10:06 AM [permalink]

These days macroeconomists all do some form of RBC, so that may no longer hold (when the only respectable form of macro was keynesian, maybe not true). Plus, someone like Stiglitz is about as left as you can go and still be a neo-classical economist and he's a micro guy.

posted by: Isaac on 11.28.05 at 10:06 AM [permalink]

Political ideology is the subfield, at least here in this third world country called Italy. Last here during the lesson the professor of Political economy explained "The 35-hours French Law helped increase employment".

bye, aa.

posted by: aa on 11.28.05 at 10:06 AM [permalink]

My comment is "Edward C. Prescott"

posted by: Thomas Esmond Knox on 11.28.05 at 10:06 AM [permalink]

Historically, lots of people went into economics because they were concerned about unemployment. A lot of them ended up as leftish Keynesian macroeconomists, although plenty changed either their political views or their field.

But as implied above, the reaction against the postwar consensus began in macro with Friedman's work on expectations and the 70s vogue for monetarism, followed by rational expectations.

posted by: John Quiggin on 11.28.05 at 10:06 AM [permalink]


Caught Douglas Holtz-Eakin on C-Span over the weekend being interviewed by what's-his-name. Hope yoiu had a chance to see it (probably not) or spring for the video transcipt. He seemed like exactly the sort of guy I'd want to find heading the CBO. Apparently he's leaving to head to the CFR.

Don't know who's coming in, but if he's any indication of the kind of Economists that he's been appointing, then perhaps he can start having lunches with Karl.

posted by: Tommy G on 11.28.05 at 10:06 AM [permalink]

posted by: Tommy G on 11.28.05 at 10:06 AM [permalink]

Wow! Now that's a great feature. Now more having to remember that a=href nonsense. Makes having to loose that cool old font of yours worth the trouble.

Very nice, Mr. Drezner

posted by: Tommy G on 11.28.05 at 10:06 AM [permalink]

Hell, since it's that easy - here you go...


posted by: Tommy G on 11.28.05 at 10:06 AM [permalink]

"If you lined all the economists in the country up end to end, they would still point in all directions." -Harry S. Truman-

Maybe the Bush administration is practicing what many know to be true--nobody actually needs economists. Worth a thought, anyway.

posted by: Useless Grant on 11.28.05 at 10:06 AM [permalink]

Good points.

posted by: Matt J. Duffy on 11.28.05 at 10:06 AM [permalink]

I am a semi-retire business economists.

For 30 years I have watched government economic programs -- both republican and democrat -- that required you to accept that 2+2=5. Just politicans acting like CEO's, and exaggerating their achievements, no big deal.

But when the Bush crew took office they started proposing programs where it required you to believe that 2+2 = 55, not just 5. This administration uses the big lie more then any us administration in history.

How any economists that valued their professional repupation could have anything to do with this administration is beyond me.

posted by: spencer on 11.28.05 at 10:06 AM [permalink]

Of course, Paul Krugman is a "renowned" micro-economist -- and he's pretty far to the left of things. Is he the exception that proves the rule?

And, I don't know enough to generalize about the political leanings of economists by speciality, but my experience with lefties in general is that they lack the "math" gene (again, Krugman is an exception). And micro-economics features elaborate proofs and formulae (that maketh my eyes glaze over -- and I do have the math!)

For what it's worth.

posted by: Norman Rogers on 11.28.05 at 10:06 AM [permalink]

I think that your thesis is basically correct. To believe in conventional macro, you have to believe that markets don't work terribly well.

Over the years, I have come to trust macro less and markets more.

posted by: Arnold Kling on 11.28.05 at 10:06 AM [permalink]

Funny how some of my colleagues above use a sample with N=1 to reject or fail to reject the hypothesis that macroeconomists are interventionists and microeconomists are market-friendly. "Stiglitz!" - "Prescott!" - "Krugman!" - and the kicker: "Well I'm doing my Ph.D. in macroeconometrics, and I think that..."

You would think that of all those people, the econometrician would understand what having zero degrees of freedom means. One can interject with anecdotal evidence until one turns blue in the face, but without a random sample of the profession, one will not be able to get to the truth of the matter.

posted by: jup2 on 11.28.05 at 10:06 AM [permalink]

Robert Lucas of University of Chicago was once asked what he would do if he were the head of the CEA. "Resign" was his response. My impression is that Lucas' view of policy economics as undignified and even trivial has been extremely influential among the New Classical/RBC school which has been the successor to monetarism as the conservative brand of macro.

posted by: Dave on 11.28.05 at 10:06 AM [permalink]

Political leanings and specialization areas of economists might have had a stronger correlation back in the heyday of Keynsian economics, but I suspect it has broken down today. (Just like the Phillips curve?) It seems to me there are left and right leaning people in just about every subfield, but on the tools of analysis there is increasingly consensus. I think Krugman explained this by saying that "the geeks won."

Of course there are some real criticisms to be made of neo-classical microeconomics, but most economists accept this as the most profitable way forward. As a result you get macro models with "strong micro foundations". Oddly enough, it is behavioral micro people (e.g. Kahneman and Tversky) providing the most interesting challenge to the traditional view of economic agents as rational maximizers.

While there is more consensus on the postive aspects of economic theory, there is still a lot of diversity in the normative views about what it all means and what we should do. Anyway, that's my two cents.

posted by: cn on 11.28.05 at 10:06 AM [permalink]

I have thought about this issue a bit, having been approached about the position of chief economist at the Department of Labor earlier this year, an opportunity that I passed on to come to Michigan. After talking to me, DOL approached at least two other academic economists, both of whom also passed. I am told that the job is now filled by an insider.

My two main theories are:

1) The Bush administration, relative even to other republican administrations, is just not an intellectual place. The extent to which this is true varies by department, but certainly at DOL they are not very much interested in having people around who are not on message. Constrast this with the first Clinton administration, when Robert Reich was Secretary of Labor. During that time, two of the premier labor economists in the country - Larry Katz of Harvard and Alan Krueger of Princeton - held the chief economist job. Academic economists take government jobs either because they think it will be intellectually interesting or because they want to more directly influence the real world for a couple of years or both. At least at labor, neither reason is very relevant in this administration. I do want to be careful to qualify this point, because a lot of very good research is going on at the Dept. of Education at the Institute for Education Sciences. But my impression from friends in DC and others who have interacted with the administration is that the labor department is the norm rather than the education department.

2) My second theory is relative price changes. Economics salaries in academic have increased a lot in the last few years, especially at top departments. The salaries offered to economists by the government have not kept up with this. Economists will take some salary hit to for an interesting experience or the chance to influence policies they know and care about, but as the relative prices change, there will be less interest in government positions. In my case, the numbers that DOL talked about casually were about 60 percent of my Michigan offer (ignoring summer money and the like, which would make the ratio lower still). I am pretty sure that the ratio of Larry and Alan's DOL salaries to the academic salaries back in the 90s was, though certainly less than one, much higher than 0.6.

posted by: Jeff Smith on 11.28.05 at 10:06 AM [permalink]

I wonder whether the problem isn't on the other side of things - a lack of safe landing places after one has worked for Bush?

I don't recall the specifics but I read about a tenured professor from Columbia who went to work for the Bush administration. When she left she was not offered a position at Columbia and had to settle for a position at Hunter College. Well regarded of course, but not Columbia.

I wonder how many others have encountered something similar? And if so, isn't the clear message that 'work for Chimpy McBush Hitler and you'll pay for it!'?

posted by: Don on 11.28.05 at 10:06 AM [permalink]

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