Quote 14: Milton Friedman on policy prescriptions
This was from Greg Mankiw’s blog:
The role of the economist in discussions of public policy seems to me to be to prescribe what should be done in light of what can be done, politics aside, and not to predict what is “politically feasible” and then to recommend it.
If you ever get annoyed with the fact that much of what economists say is politically infeasible this is the quote that explains how we feel. When giving policy we see ourselves as describing the process “removed” from the institution of government – in many ways economists have an idealistic view of government as a body that actually functions in the interest of society.
The fact that a policy isn’t “politically feasible” doesn’t stop it being optimal in the face of more natural constraints.
I’m on Friedman’s side here, except for a caveat (of course). Suppose A is first best. A’ is what would be implemented if economists stumped for A, and A” is what would be implemented if economists stumped for A”. If A>A”>A’, then push for second best. I’m thinking here of optimal tariff arguments in international trade. Give them a blackboard example that applies in 1% of cases, and the politicians will apply it in 80% of cases and claim that economists support it.
I worry that we do harm sometimes by focusing on the myriad ways markets can fail rather than the majority of things they get right.
“I worry that we do harm sometimes by focusing on the myriad ways markets can fail rather than the majority of things they get right.”
I suppose this is an incentive issue with the discipline – we are rewarded based on finding “interesting outcomes” rather than strictly practical things.