Baker, D. (2014) “Influencing the Debate from Outside the Mainstream: Keep it Simple“, Dean Baker’s comments at the 2014 Rethinking Economics NYC Forum, Forum titled “The Role of Economic Models in Public Policymaking”, 13 Σεπτεμβρίου.
If people working outside of the mainstream of the profession are going to have any impact on economic policy debates in the United States it is essential that they understand the forum in which the debate is taking place. This is not a contest of ideas where the best arguments and evidence win out. If we are talking about a debate within the economics profession, think of debating the morality of abortion with the pope in front of the College of Cardinals. That is pretty much what it is like to try to challenge any of the main precepts of economics within the economics profession.
The route for making progress is to get outside of the profession. For this it is necessary to appeal to people in policy positions, to reporters, to the general public, or to people who might follow economic debates, but don’t have extensive backgrounds in economics. And it is important to recognize what you are asking these people to do. You are asking these people to accept your claims over the claims of the most prominent economists in the profession.
This means that you better keep what you have to say simple. It is unlikely that many people are going to take the time to consider a complex argument even if it doesn’t require a PhD in economics to understand. To my mind the gold standard is a chart with two bars, where bar A is bigger than bar B. To make this point, I will briefly recount some of the economic debates in which I have been involved where the truth, justice, and non-mainstream economists won out over the forces of accepted wisdom coming from the elites of the profession.
The first, and perhaps best, example is the debate over the famous Reinhart-Rogoff 90 percent debt cliff that was kicked off by a paper by Thomas Herndon, Michael Ash, and Robert Pollin (HAP) which showed that cliff story depended on an Excel spreadsheet error. When the error was corrected the sharp falloff in growth that Reinhart and Rogoff had found at debt-to-GDP ratios above 90 percent disappeared. Instead they found a negative relationship between debt-to-GDP ratios and growth at all levels, with the sharpest trade-off actually occurring at debt-to-GDP ratios around 25 percent.
These revised results were radically at odds with the conclusions from the uncorrected paper which had been widely cited in policy debates in the United States and elsewhere. The fact that an Excel spreadsheet error was something that could be widely understood allowed for the media and the general public to appreciate the nature of the debate. Even Stephen Colbert got into the act, devoting a segment of his show to ridiculing Reinhart and Rogoff.
While correcting this error did not turn around the austerity debate, it certainly did open up space. The claim that there was some immediate need for sharp cuts in public debt in order to avert the cliff disappeared from the radar screen. We went back to the more traditional arguments about the virtues of balanced budgets.
The response of the economics profession to this error and its exposure was instructive. To a large extent there was a rallying around Reinhart and Rogoff, two prominent Harvard economists who established their reputations with a long track record of publications in top journals. It was as though HAP had been wrong to drag down the names of such well-regarded economists over a simple spreadsheet error.
Betsey Stevenson and Justin Wolfers gave us an example of this attitude in a piece in which they “refereed” the debate. They told readers:
“It has been disappointing to watch those on the left seize on the embarrassing Excel errors but ignore this bigger picture.”
Of course we all make mistakes and no one would like to be publicly embarrassed over having once inaccurately copied numbers in an Excel spreadsheet. But perspective is desperately needed here. The Excel spreadsheet error was the reason the debate was taking place. Reinhart and Rogoff would not ordinarily be responding to criticisms from two University of Massachusetts professors and their grad student. If this had been a debate just over the correct aggregation method or econometric techniques, it would never have gotten far beyond the PERI website. Few people without advanced training in economics would follow that debate, but everyone can understand an Excel spreadsheet error.
The other point worth noting is that even if we take the most generous possible interpretation of Reinhart-Rogoff’s behavior in this matter, it is hard to see it in a positive light. They have said that the error resulted from the fact they were rushing to finish a draft for presentation. In a later version of the paper the erroneous calculation does not appear. But this later version does not have the 90 percent cliff.
Reinhart and Rogoff are both very intelligent people who surely knew how their work was being used in public debates. They had discussed their work with members of Congress, central bankers, and finance ministers. They knew that it was the 90 percent cliff threshold that was being held up in policy debates, not the finding of a general negative relationship between debt-to-GDP ratios and growth rates. Even if they had been rushed to finish the initial draft, it is difficult to believe that they could not have found the time to check their calculations or ask a graduate assistant to do so in the nearly three and half years between when the working paper was issued and when HAP was written.
Instead of being disappointed by the conduct of Reinhart and Rogoff, Stevenson and Wolfers are disappointed by the people on the left who were highlighting the error. I don’t mean to impugn Stevenson and Wolfers, both of whom are very good center-left economists. However, their attitude in this case shows the tribalism of the profession. If there is a question of seeking out the truth versus protecting leading lights in the profession, the bulk of the profession will opt for the latter. This is the reality that those outside the mainstream must recognize and overcome.
Fortunately the Reinhart-Rogoff spreadsheet error-type situations are not all that rare in economics. I will briefly go through a few with which I have some familiarity.
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