Why does that sounds familiar?

Matt asks me to elaborate on an email exchange we had about the incentives that face economists. In particular, how could we explain smart macroeconomists parroting the value-laden, overtly political rhetoric of Krugman or Mankiw during the current crisis. Sure, Mankiw and Krugman have a stellar publication record and can afford to rest on their laurels, but that’s not the case for most. So why don’t they take this opportunity to show their chops and give us some macro insight into what’s going on?

Robin Hanson loves to discuss status seeking and social incentives. He provides us with two possible explanations:

  • Ignorance: Macroeconomists got where they are by working hard at exams and telling people what they wanted to hear. That doesn’t make them experts on the financial crisis, but it does make them people who will be turned to for an opinion. If they don’t have an opinion of their own and aren’t familiar with the theory they’ll turn to what more senior members of their profession have said. Cue saying what they’ve read on Krugman/Mankiw’s blog. I like this one because a lot of economists are so specialised, or so cloistered in academia, that they’re not really all that knowledgeable about what’s going on in the economy or theoretical developments since their grad school days.
  • Status seeking: They have an opinion but they know laypeople won’t understand the brilliance of it so it’s not worth telling the press about. Instead they associate themselves with the opinion of a brilliant member of their profession by repeating it. By publicly affiliating themselves with the opinions of highly regarded economists they gain status in the eyes of others. Of course, the affiliation isn’t a very close one unless the brilliant one acknowledges you, so this explanation isn’t especially strong.

So what other potential explanations are there for the cacophony of similar value judgements we’ve heard from economists?

21 replies
  1. agnitio
    agnitio says:

    I think many economists are embarassed to admit their ignorance when they don’t specialise in macro. If you ever tell anyone you are an economist these days the first thing they ask you about is the credit crisis.

    I’m quite happy to admit my ignorance on the topic rather than make a fool of myself giving someone else’s opinion. Plus I can boost the blog’s traffic by telling people to come read Matt’s posts since he knows what he is talking about:)

  2. Matt Nolan
    Matt Nolan says:

    “by telling people to come read Matt’s posts since he knows what he is talking about”

    Ummmm, but I don’t know what I’m talking about – that’s one of the problems 😉 .

    Don’t tell me I’ve accidentally given you too much confidence in my ability to describe the economy. Dang it, I must have fallen into the same trap as these other economists 😛

  3. rauparaha
    rauparaha says:

    @agnitio
    I do exactly the same: I say I know nothing about it and then regurgitate what Matt said and tell them to go read the blog if they want to know what’s REALLY going on in the economy 🙂

  4. Matt Nolan
    Matt Nolan says:

    Guys – I feel sorry for the people you are sending for advice.

    I suggest you tell them to visit the blog regularly, so to increase our traffic. But not to expect “authoritative (economic) analysis” to steal a phrase.

  5. Matt Nolan
    Matt Nolan says:

    It depends – judging from the quality of comments we get I feel that the readers already have strong economic understanding and simply wish to come here to challenge and test their own analysis 🙂

    I am not saying that we are bad analysts, after all I love your guys micro stuff, I am just saying that we don’t provide an “authoritative source” 😛

  6. goonix
    goonix says:

    agnitio :
    I think many economists are embarassed to admit their ignorance when they don’t specialise in macro. If you ever tell anyone you are an economist these days the first thing they ask you about is the credit crisis.
    I’m quite happy to admit my ignorance on the topic rather than make a fool of myself giving someone else’s opinion. Plus I can boost the blog’s traffic by telling people to come read Matt’s posts since he knows what he is talking about:)

    My approach is a standard economist answer: on the one hand blah blah, on the other hand blah blah. 😀

  7. Tom Mathews
    Tom Mathews says:

    Perhaps economists feel that compromises are inherent in the political process, so by proposing plans that are caricatures of what they actually support are the best way to get something passed that closely approximates their actual ideal plan.

  8. Matt Nolan
    Matt Nolan says:

    @Tom Mathews

    Hi Tom,

    Although that is definitely true, there is a belief that the focus of the discipline was not on what was “ex-ante” socially optimal. There are incentives in the discipline that push macroeconomists away from focusing on what some people view as the fundamental role of macroeconomics.

    Rauparaha is saying what some of incentives may be methinks

  9. rauparaha
    rauparaha says:

    @Tom Mathews
    Thanks for bringing this comment thread back on topic, Tom. That may well be the case: I suppose that by appealing to partisan politics they are more likely to get support for their proposal from politicians. Still, if there are compromises in the system I would have thought you’d want your plan to start out uncompromised.

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