Who can we really believe?

In a great interview, Dani Rodrik asks why

You get trade theorists who have built their entire careers on “anomalous” results who are at the same time the greatest defenders of free trade. …the minds of analytically sophisticated [economists] turn into mush when they are forced to take seriously the policy implications of their own models.

This is something that we all encounter constantly: people who ‘should know better’ advocating a policy that seems poorly designed. Why might it happen? It is common to resort to explanations that involve mendacity and duplicity, but they are as unsatisfying as they are implausible. It is highly unlikely that everybody we disagree with lies, while we ourselves are paragons of virtue and transparency. In fact, Rodrik identifies the most convincing explanation later in his essay: “There are powerful forces having to do with the sociology of the profession and the socialization process that tend to push economists to think alike.” Exactly, and none of us are immune to it.

Psychologists have demonstrated that logic tends to be used only as a post-hoc rationalisation of our intuitive response to ideas. When economists respond to a new policy idea they will tend to draw on their toolbox of ideas to defend whatever intuitive response they have to it. Those intuitions are greatly influenced by our social identity, which develops to align the intuitions of social groups. As Rodrik points out, the prevailing view of economists at the time that free trade and unfettered markets are a good thing was far more influential than the, more ambiguous, implications of current research. Of course, economists had a vast stock of reasons why governments might fail and could mount a very convincing justification for their free market intuitions. It takes other experts with different intuitions to cut through that fog as they justify their own beliefs.

What does this mean for the way we listen to experts and interpret their opinions? As Tyler Cowen says, “Evaluate literatures not individual papers.” Individuals are incredibly unreliable for the reasons outlined above. The aggregated view of a range of people with different intuitions is much likelier to represent the truth. No individual is an oracle and following the teachings of a few people is likely to lead us astray. That is why economists tend to be sceptical of ‘surgical policy interventions’ and far more trusting of markets than most people. Of course, in saying that I’m probably exhibiting my groupish bias in favour of market solutions!

  • I wrote a giant comment, pointing out that there is a bias towards intervention as well – and trying to understand the causes of both can help us to understand where inside a recommendation it has a ideological basis.

    Disqus deleted it, because it doesn’t like me. So I’ll write it again in the future 😛

    • I think what I was trying to say is that you can’t trust any one person or group. So there should be a huge bias against trusting anyone built in to policy. For example, I think central banks who rely on only their own forecast team and internal experience are setting themselves up for failure.