Market Power

Musings by an academic economist on the power of markets and the power over markets.

Monday, March 21, 2005

Economists as Politicians

I ran across this at the New Economist.

1. Economics is the study of trade-offs, of costs. ...Politicians, of course, hate the idea of trade-offs and costs.

2. Economists love counter-intuitive ideas. ...This leads to us stressing paradoxical notions – like the notion that outsourcing can be a good thing. Good politicians, by contrast, prefer sound-bites that corroborate the public’s prejudices.

3. Economists are like photographers - we love simple models. In particular ...we’ve loved models that yield bold, controversial but testable predictions.

4. Economists start from assumptions – or better still axioms – and see where they lead. ...Sometimes, though, they can lead to trouble.

5. Economists have a simple, brutal view of human nature – everyone’s rational (though not knowledgeable) and out for themselves. This makes us comfortable with conflict and argument, and uncomfortable about building alliances.

His points are valid. Most economists are by nature spectical, analytical and counter-intuitive. We are much more comfortable being critics than cheerleaders. That makes it difficult to advocate second-best solutions or simple minded policies. But while economists may not be natural politicians (with some notable exceptions), they are a vital part of any team of political advisers.

Larry Summers comes to mind. King at SCSU Scholars has some thoughts on this subject. One economist that did a good job in a political job is Richard Wallace, former Chancellor of Mizzou. While I was there as a graduate student, Dr. Wallace maintained an office in the department of Economics although I never saw him in our building. I did not have many interactions with him and I only went to a few of his speeches. He was always careful with what he said (i.e. meant that his talks weren't exciting). But he seemed to know what to say and how to say it. Mostly, I don't recall any big controversies surrounding him. Like having a football game officiated by the best referees, you know they did a good job because you didn't realize they were there.