David Coates

Calling Progressive Economists into the Public Square

 

“At many stages in the advance of humanity, this conflict between men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress” (Theodore Roosevelt, 1910)[1]

Economists are the new public intellectuals of the age. In more prosperous times, they rarely enjoy that status or play that role. Economics is, after all, a dismal science. In good times, issues linked to the production of new wealth invariably take a back seat to those triggered by the consumption of wealth already in existence. Prosperity brings into view the expertise of the more hedonistic social sciences: psychology, sociology, marketing and the like. It pushes economics aside.  But in the immediate wake of the Great Recession, with unemployment unacceptably high and the welfare state now under serious assault on both sides of the Atlantic, the views of economists are currently everywhere – particularly the views of conservative economists prepared to link unemployment to welfare itself. These are troubled times and we are in danger, if we are not careful, of slipping into a mindset that gives those conservative views a credibility that the nature of economics as a discipline ought properly to preclude.

The danger is that we might yet find ourselves believing that the choice we face is one between harsh but unavoidable economic realities (established for us by the superior knowledge and training of economics as a discipline), and over-ambitious and ultimately self-indulgent welfare aspirations (sustained by scholarship elsewhere in the humanities and social sciences that is somehow less scientific than that on offer from economists). We are in danger, that is, of being hoodwinked by a well-organized corps of conservative intellectuals into the view that the only solution to persistent unemployment is the widespread and immediate rolling back of the modern welfare state. Nothing could be further from the truth.[2]

The current fault lines within public policy do not lie on the borderline between economics and the other social sciences. They lie firmly within the discipline of economics itself.

There is not one economic view, no matter how often Fox News implies that there is. There are many economic views, each one of them rooted in a distinct school of economic thought. Historically those schools were well represented inside each major department of economics. These days, in universities in the United States at least, many of those departments have slipped dangerously into an orthodoxy of a neo-classical kind.[3] Other sorts of economists (Schumpeterian, Keynesian and adherents to various schools of radical economics) are still to be found, of course. If Paul Krugman is right, they are still more plentiful in universities on each coast of the United States than in the center of contemporary America.[4] But no matter where located, even Keynesian economists these days no longer enjoy the leading position which they occupied in academia a generation ago; and that is to our huge cost.

Economists anchored in those very different schools of thought disagree not simply on the nature of modern economies, though they definitely disagree on that.  They also profoundly disagree with each other on matters as vital to the status of economics as an academic discipline as the appropriate organizing assumptions, methodologies, evidence and associated policy preferences of economics itself.  And they differ too in the social interests that their arguments serve: or – in what is the same thing seen the other way round – in their capacity to direct public policy to the advantage of some sections of the community and to the disadvantage of others. There is nothing policy-neutral about the clash of thought between particular schools of economic thought, and let no one claim that there is. There never has been, and there certainly is not now.

Economics, politics, interests and values necessarily hang and fall together: and economists who claim otherwise – any who offer their expertise as entirely objective and value-free – certainly mislead their audience, and possibly also themselves. In a complex modern capitalist society with powerful divisions of interests between classes, ethnicities and genders, economists (like other intellectuals) cannot avoid their work reinforcing some of their interests more strongly than they do others. As Antonio Gramsci wrote long ago, intellectuals have a vital role to play, articulating and disseminating class interests. Each class has its own organic intellectuals – class warriors in the battle for the hearts and minds of an entire society. The 1% of Americans sitting at the top of the income ladder certainly has its own organic intellectuals. The rich have them in abundance. The 99%, by contrast, are less well-endowed.

  • Take, for example, the recent report by the Congressional Budget Office on trends in income inequality in America between 1979 and 2007,[5] or the recent refinement by the Census Bureau of its measurement of the contemporary U.S. poverty level.[6] Both organizations paint a similar picture of intense hardship at the base of American society.[7] So what was the response to those reports from the many economists based in either the Cato Institute or the Heritage Foundation?[8] Was it to concede the existence of unacceptable levels of inequality and poverty, and to urge public policy initiatives to deal with both? No it was not. Instead the Cato Institute’s Alan Reynolds moved quickly to challenge the notion of excess income at the top: claiming its marked diminution after 2007 and the distortion of the pre-2007 data by the CBO’s misunderstanding of how rich people pay taxes.[9] The Heritage Foundation, for its part, issued its own poverty measure, listing the number of cars, televisions, VCRs, microwaves, phones and coffee makers to be found in the average poor household.   All this, as Robert Rector and Rachel Sheffield put it, to correct for “sensationalism, exaggeration and misinformation,” and to demonstrate that “the living standards of the poor have improved steadily for decades.”[10]  No conservative organic intellectuals there!

 

  • Or take another example. One consequence of the ending of TARP money – the stimulus package designed by the Bush Administration, continued by Obama and roundly criticized by conservative economists as ineffective – has been a sharp decline in the revenues reaching state treasuries. Public employment is accordingly now falling. Teachers are losing their jobs, and in very large numbers. So what has been the Heritage Foundation response?  To publish a report jointly authored by their own Jason Richwine and Andrew G. Biggs from the American Enterprise Institute, demonstrating that public sector teachers are actually overpaid. Overpaid indeed to the tune of 52 percent of “fair market levels, equivalent to more than $120 billion overcharged to taxpayers each year.”[11] No matter that both the Bureau of Labor Statistics[12] and the Economic Policy Institute[13] have argued convincingly that federal and state employees suffer a wage gap compared to their private sector equivalents. No, the experts at Heritage beg to differ, and chose this moment of public sector retrenchment to publicize their case for teacher compensation reduction.

 

  • Then of course we have the famous Norquist “no new taxes” pledge and the associated lack of enthusiasm in conservative circles for government regulation of private industry – the daily Republican decrying of the entrepreneurial “uncertainty” caused by over-active government.[14] Leave everything to the market, we are told:  unregulated markets know best. All that, of course, in spite of the fact – as President Obama made so clear in his speech in Kansas – that it was inadequately regulated financial markets that alone got us into this recession; and that the theory of trickle-down economics underpinning the insistence on “no new taxes” does not stand up well to empirical testing.[15] Trickle-down economics under George W. Bush, after all, gave us the least amount of job growth in any U.S. business cycle since World War II. There is plenty of evidence out there pointing to the neutral effect on economic growth of well-designed government regulations.[16] There is also plenty of evidence pointing to “certainty” rather than “uncertainty” as being currently the major blockage on new investment: the certainty, that is, of a lack of demand in consumer markets kept impoverished by the very austerity packages so favored by the conservative economists wedded to the Republican cause. There is plenty of evidence – just not evidence that organic intellectuals of the Right choose to consider and concede.

 

Such intellectuals continue to perplex me: less about their conservatism than about their humanity. I struggle to understand what makes someone get up in the morning, go to work, and spend the day helping to bring down still further the already low salaries of public school teachers. Nor do I understand what kind of well-paid intellectual responds to the depth and ubiquity of U.S. poverty by seeking to minimize its existence.

Maybe the conservatism of so many neo-classically trained economists has something to do with the poverty of the underlying premises of neo-classical economics itself. Certainly the grasp on reality enjoyed by such economists is hardly improved by a propensity to assume in their models a level of individual rationality, and a capacity for short-term interest calculations, that is literally beyond the capacity of ordinary human beings to deliver. Not that the fault lies with general humanity. It does not. Even Francis Fukuyama, the one-time doyen of the neo-cons who famously granted neo-classical economics the capacity to be right “approximately eighty percent of the time,” was adamant that, even so, there was “a missing twenty percent of human behavior about which neoclassical economics can give only a poor account.”[17] Twenty percent was perhaps generous: there is really no hope for adequate social analysis from an approach to economic life that so misunderstands the full complexity of human motivation, and that fails to grasp the remarkable extent to which even short term interests are shaped by the social context and institutional parameters into which individuals find themselves involuntarily inserted.[18]

Or perhaps – more prosaically – conservative economists find themselves able to be so critical of teacher salaries or of official measurements of poverty only because they themselves have no direct experience of either public school teaching or poverty. Certainly it would be fascinating to see how quickly economists based in the Heritage Foundation stopped using the ownership of old and broken-down cars as evidence of affluence if, instead of writing about the American poor from the safe distance of their warm offices, they actually experienced that poverty at first hand. Perhaps they should try living for a prolonged period of time in a North Carolina county with 20 percent unemployment and nothing but minimum wage work as far as the eye can see, without even a school diploma and perhaps a young child to support alone. No poverty? Easy to live the American Dream? Really? Somehow, I doubt it.

So what is it about modern economics that allows conservative forces in the United States to draw so heavily, and with so little public criticism, on the support of certain economists for their egregious policies? Lots of reasons, no doubt, but this one at least: the excessive credibility, given within both the academy and the wider community, to the maxims of the neo-classical school. We have far too many neo-classical economists playing the unchallenged role of public intellectuals these days. We have far too few Schumpeterian, Keynesian and radical economists engaging in a similar and a balancing activity. It is not simply that right-wing economists are well funded and carefully positioned to disseminate their values in the guise of economic truth – though that is clearly part of the problem. It is also that the counter-voice of more progressive economists is not heard in the same volume and with the same confidence and authority; and is not heard because those counter-voices are not raised with a similar degree of determination and regularity.

That situation has to change, and change rapidly. The President cannot do the heavy lifting alone, and one speech in Kansas, however good, will not be enough. Nor can a handful of already active progressive economists (people like Paul Krugman,[19] Robert Reich,[20] Alan Blinder[21] Dean Baker[22]  and Joseph Stiglitz,[23]), important as their writings are, be expected to carry the full burden of this crucial counter-offensive alone. There is too much at stake for that.  There are progressive economic truths that the average American voter needs to hear over and over again before he/she next heads to the polls. Truths about the self-defeating and self-serving consequences of yet more deregulation, tax concessions to the rich and the culling of public services; and truths about the crucial role that greater equality can play in restoring both immediate American prosperity and the long-term realization of the American Dream. These are not truths that we should allow conservatives to dismiss as just the views of a few well-known liberal economists. It is vital that the American electorate know now that many economists hold these views; and the only way to demonstrate that is for those many economists to enter the public square and say very loudly and very often that they do.

This is no time, therefore, for progressive economists to stay silent in the study. With a presidential election looming that might bring a Newt Gingrich or a Mitt Romney into the White House, it is time for the voice of each and every progressive economist to be organized, heard and disseminated widely. Because if it is not, we might well end up not simply with a Republican president but with what would be even worse – every branch of the U.S. government back in the hands of the neo-cons. Do we really want another round of Middle Eastern military adventurism, with the United States this time taking out Iran? I certainly hope not. But here’s the rub. The upcoming election will not be settled on foreign policy questions. It will be settled on issues of unemployment, taxation and economic growth. If progressive economists don’t win the battle for the hearts and minds of the American electorate on the purely economic issues, more than socially-unjust economics will prevail in Washington DC.  No: it falls on progressives to win the economic argument to make sure that conservatism doesn’t sweep the board across the whole policy agenda. As I say, there is much at stake.

The dark forces of reaction are on the march again, supported in their advance by what Paul Krugman once rightly called “the product of the Dark Ages of macroeconomics in which hard-won knowledge has been forgotten.”[24]  Doing nothing, saying nothing, simply lets those dark forces win by default. The OWS movement had created an audience for progressive explanations of, and solutions for, income inequality and bank irresponsibility. If progressive economists do not bring their skills to the table now, that audience will be wasted, and all the American electorate will hear will be the miscalculations and nonsense of the Heritage people. The Heritage Foundation knows well enough the importance of the hour, so why is that lesson lost on so much of the left?  Disappointment with the moderation of the Obama administration may be keeping many former supporters silent on the sidelines: but this is not the moment to allow requirements for perfection to drive out support for the imperfect and the good. It is not the moment for silence from the economic left. It is exactly the opposite. It is the moment for all of us with the requisite skills to make a sustained contribution to the creation of a progressive economic consciousness in contemporary America. If we do not, and if we do not do it quickly, then heaven help us all after November 2012!

 



[1] Theodore Roosevelt,  New Nationalism Speech , Kansas 1910: available at http://teachingamericanhistory.org/library/index.asp?document=501

 

[2] Paddy Quick, The Great Recession and the Deficit, The Bullet E-Bulletin No. 458, February 3, 2011: available at

http://www.socialistproject.ca/bullet/458.php

 

[3] For an earlier statement on this danger, see David Coates, editor, Varieties of Capitalism, Varieties of Approaches, London, Palgrave, 2005, p. 269

[4] Paul Krugman, “How Did Economists Get It So Wrong?” The New York Times, September 9, 2009: available at http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=all

[5] CBO, Trends in the Distribution of Household Income Between 1979 and 2007, Washington DC: October 2011; available at http://www.cbo.gov/doc.cfm?index=12485

 

[8] The Heritage Foundation , the AEI (see note 11) and the Cato Institute are all generously staffed.  The Heritage Foundation website lists 287 staff and makes reference to over 710,000 members.  The American Enterprise Institute has a staff of 185 in Washington DC and about 50 adjunct scholars in universities across the nation. The Cato Institute website lists 143 policy scholars, adjunct scholars, and fellows. Not all, of course, are economists.

 

[9] Alan J. Reynolds, “Tax Rates, Inequality and the 1%,” The Wall Street Journal, December 6, 2011: available at http://online.wsj.com/article/SB10001424052970204630904577062661910819078.html

 

[10] Robert Rector and Rachel Sheffield, Air Conditioning, Cable TV and an Xbox: What Is Poverty in the United States Today? Backgrounder No 2575, July 18, 2011 (Washington D.C., The Heritage Foundation): available at http://www.heritage.org/research/reports/2011/07/what-is-poverty

 

[11] Jason Richwine and Andrew G Biggs, Assessing the Compensation of Public-School Teachers, Washington DC, A Report of the Heritage Center for Data Analysis, November 1, 2011: available at http://www.aei.org/papers/education/k-12/assessing-the-compensation-of-public-school-teachers/

 

[12] Eric Yoder, ‘Federal pay gap widens, report says,” The Washington Post, November 5, 2011: available at http://www.washingtonpost.com/politics/federal-pay-gap-widens-report-says/2011/11/04/gIQArDeFnM_story.html

 

[13] Lawrence Mishel and Monique Morrissey, Garbage in, garbage out at Heritage and AEI, posted November 23, 2011: available at http://www.epi.org/blog/garbage-garbage-heritage-aei/

See also Jeffrey Keefe, Debunking the Myth of Overcompensated Public Employee, EPI Briefing Paper #276, September 15, 2010: available at http://www.epi.org/publication/debunking_the_myth_of_the_overcompensated_public_employee/

and Susan Sclafini and Marc S. Tucker, Teacher and Principal Compensation: An International Review, Washington DC, Center for American Progress, October 2006: available at http://www.americanprogress.org/issues/2006/10/teacher_compensation.html

 

[14] Allan H Meltzer, ‘Four Reasons Keynesians Keep Getting It Wrong,” Wall Street Journal, October 28, 2011: available at http://online.wsj.com/article/SB10001424052970204777904576651532721267002.html

 

[15] “Now in the midst of this debate, there are some who seem to be suffering from a kind of collective amnesia. After all that’s happened, after the worst economic crisis since the Great Depression, they want to return to the same practices that got us into this mess….’The market will take care of everything,’ they tell us. If only we cut more regulations and cut more taxes – especially for the wealthy – our economy will grow stronger….It’s a simple theory….It fits well on a bumper sticker. Here’s the problem. It doesn’t work.” (President Obama, speaking at Osawatomie, Kansas, December 6, 2011): speech available at http://www.guardian.co.uk/world/2011/dec/07/full-text-barack-obama-speech

 

[16] See http://usgovinfo.about.com/library/weekly/aacost-benefit.htm.  See also Isaac Shapiro and John Irons, Regulation, Employment and the Economy, EPI Briefing Paper #305, April 12, 2011: available at http://www.epi.org/publication/regulation_employment_and_the_economy_fears_of_job_loss_are_overblown/

and David Brooks, “The Wonky Liberal,” The New York Times, December 5, 2011: available at http://www.nytimes.com/2011/12/06/opinion/brooks-the-wonky-liberal.html

 

[17] Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity. New York: The Free Press, 1995, p. 13. Details at http://www.sais-jhu.edu/faculty/fukuyama/trust.html

 

[18] ‘For a discussion of the necessarily paradigmatic nature of economic thought, see David Coates, Varieties of Capitalism: Varieties of Approaches, London, Palgrave, 2005: extracts available at http://www.palgrave.com/products/title.aspx?pid=268056

 

[24] Paul Krugman, “How Did Economists Get It So Wrong?” The New York Times, September 9, 2009: available at http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=all

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David Coates holds the Worrell Chair in Anglo-American Studies at Wake Forest University. He is the author of Answering Back: Liberal Responses to Conservative Arguments, New York: Continuum Books, 2010.

He writes here in a personal capacity.

3 Responses to “Calling Progressive Economists into the Public Square”

  1. David Coates: Ensuring that the “Grand Bargain” is genuinely a Bargain. says:

    [...] [15] http://www.davidcoates.net/2011/12/12/calling-progressive-economists-into-the-public-square/ [...]

  2. David Coates: Ensuring that the "Grand Bargain" is genuinely a Bargain. | Political Ration says:

    [...] are saner voices out there in the public square, to which the President now needs carefully to listen. Saner voices [...]

  3. David Coates: Ensuring that the "Grand Bargain" is genuinely a Bargain. - United Wingnut | United Wingnut says:

    [...] are saner voices out there in the public square, to which the President now needs carefully to listen. Saner voices [...]

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