You just don’t understand.
—title of a best-selling book by Deborah Tannen
The last two chapters were devoted to hoped-for and potential changes in the political system—changes that might increase the demand for illumination, you might call them. If economic policy performance is to improve, politicians must learn that the time horizons that really matter in politics are measured in years (especially to the next presidential election), not in days or minutes. They must also come to appreciate that logic, arithmetic, and facts will ultimately triumph over spin, wishful thinking, and alternative facts—no matter how much they get away with in the short run. So by all means campaign in poetry, but once elected, govern in prose. Realize also that what is right will ultimately matter more to your constituents than what sounds right initially (and superficially). Finally, it wouldn’t hurt if politicians threw a little more statesmanship into the mix. Let them all read the Constitution—or go see a performance of Hamilton.
But what about the supply of economic illumination? Can economists make their advice more useful in the policy process? You bet. The economists’ to-do list is long, but I’ll be brief with each item because we’re the bit players in this drama. The politicians have the starring roles.
For openers, we economists need to speak English more and techno-speak less—at least when we’re out in public. That would help us engage more effectively in policy debates. In particular, it is essential for economists, most of whom are academics, to realize that message matters in a democracy. In practice, it probably matters far more than purity of thought and ingenious design. A brilliant policy idea that just doesn’t sound right to the citizenry is unlikely to appeal to their elected representatives.
As a corollary, economists should keep the KISS principle—“Keep it simple, stupid”—squarely in mind. Many economic problems are inherently complex, and so are their solutions. That’s life. But economists need to learn to live with, even to search out and promote, simpler alternatives. Such policies may fall short of the best solutions economists can think of. But if you can’t explain something to the populace, it’s unlikely that you can persuade the politicians. Ranked on politically relevant criteria, the good may be better than the best.
We economists also need to remember that real people do not behave like the caricatures who inhabit our models. There’s a reason we call the latter Homo economicus. It’s a strange species. Human beings are not walking, talking calculating machines. They make systematic mistakes over and over again. Their emotions often overwhelm their intellect. They are probably more interested in better jobs than in cheaper consumer goods. And when they find themselves in economic difficulty, they want their government to provide a hand up, not a demeaning handout.
We economists must learn to think and talk more about the concerns of ordinary people—as opposed to the things we deem important. In particular, we need to recognize that fairness is far more meaningful and important to most people than the economist’s cherished notion of efficiency. One consequence is that policy proposals that enhance efficiency but strike people as unfair are unlikely to succeed in the political arena. That doesn’t mean economists have it wrong; more often than not, we have it right. But when you are the only lobbying group for economic efficiency—and a tiny, powerless lobby at that—you are going to lose if you go it alone.
We must also learn something we already know but frequently ignore: that sequencing matters. Human life is mostly path dependent, not a matter of returning to previously visited equilibrium states, as so much economic theory posits. So, for example, the order in which Congress takes up a list of policy priorities may strongly influence which ones pass into law and which ones pass into oblivion.
Finally, something that may sound relatively unimportant but is actually hugely important: we economists must stop belittling transition costs. The more we denigrate “short-run” dislocations stemming from economic change as annoying “transition costs” that can be ignored, the more we ensure our own irrelevance in the policy arena. The hard truth is that almost everyone lives in transitions almost all the time. It should be possible to recognize that fact without sacrificing what economics does best: paying attention to the long term.
If the two civilizations—economic and political—are to come closer together, if we are to replace a world in which each side throws up its hands in despair at the other (You just don’t understand!) with one in which the two sides communicate and interact productively, then each must learn some things from the other.
Politicians must learn to appreciate economic constraints and incentives, while economists must come to understand that political constraints and incentives often take precedence. The respective provinces of politics and technocracy may need to be reconfigured a bit. The starkly different time horizons of economic analysis and politics must come closer together. Economists must get over their fetish with equilibrium states (where we’ll be after the dust settles), while politicians must come to understand that the laws of economics are not easily repealed. Economists must think a lot more about fairness, including the perception of fairness, while politicians think a bit more about efficiency.
None of this is impossible, just hard. And if we can manage it, we’ll be in a position to achieve what John Maynard Keynes dreamt about more than eighty-five years ago: a world in which economists are “thought of as humble, competent people, on a level with dentists.” More important, we’ll have blown a hole in the Lamppost Theory and pointed the way toward more useful economic advice met by less political dissent.