They're not used to being ignored.

Photographer: Scott Eisen/Bloomberg

Economists Contemplate Life on the Outs

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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President-elect Donald Trump has so far named exactly one person with an economics doctorate to a prominent post in his administration, outspoken China critic Peter Navarro of the University of California at Irvine. Navarro, who will be heading a new White House entity called the National Trade Council, may well be the last.

That, at least, was the operating assumption of a lot of the economists who gathered in Chicago for the annual meeting last weekend of the American Economic Association and various affiliated organizations.  After a panel discussion featuring former high-level economic advisers to both Republican and Democratic presidents, for example, someone in the audience asked if there was a stigma among “top-level economists” against working for Trump.

“I don’t see that, and I hope it’s not there,” replied Stanford University’s John Taylor, a veteran of both Bush administrations and the most Trump-friendly voice I heard in Chicago.

“I think the president will get any economist he asks,” chimed in Glenn Hubbard, dean of Columbia Business School and chairman of the Council of Economic Advisers for George W. Bush’s first two years in office, with what I thought was a hint of irony in his voice.

Then Princeton University’s Alan Krueger, chairman of President Barack Obama’s CEA from 2011 through 2013, said what seemed to be on everybody’s mind but Taylor’s:

I worry more about the demand side than the supply side. We’ve seen a lot of atypical appointments which don’t put much weight on expertise or understanding or support for the agencies to which they’ve been nominated.

Or, as a story making the rounds at the conference had it, someone on the Trump transition team had told a would-be advice-giver that “We’ve decided to have a moratorium on talking to experts.” I’m hesitant to use a secondhand quote like that; it’s entirely possible that no one said those exact words. But it seems worth mentioning anyway because:

  1. A lot of economists believe it, and
  2. It follows with the actions of the Trump team so far -- the president-elect’s revealed preference, as the economists would put it.

I’m going to leave aside for today the question of whether ignoring credentialed experts is a good idea (it is something I’ve written about before and surely will again). What was most fascinating to watch over the weekend was how these experts are reacting to the prospect of being ignored.

Economists’ influence has been on the rise in Washington for decades, with economics Ph.D.s more or less taking over the Federal Reserve System and playing increasingly important roles everywhere from the Federal Communications Commission to the Treasury Department to the White House. This has been a bipartisan phenomenon: Economics professors, like just about every kind of professors, do tend to vote Democratic, but their leanings are much less pronounced than those of other social science disciplines, and many of the field’s most revered and influential practitioners have been outspoken conservatives.

Under Trump, this rise of the economists seems to have halted. Navarro teaches at a respectable school, has a doctorate from an elite one (Harvard University), and spent the early part of his career writing articles for academic journals on topics such as charitable giving and energy regulation. But he’s going to Washington on the strength of popular writings (and a documentary film) on trade with China that are way out of the academic mainstream. Meanwhile, Trump’s choice for CEA chairman -- a job usually held by a distinguished professor that has only once before gone to someone without a doctorate (Alan Greenspan, who got his Ph.D. not long after his stint in the Gerald Ford White House) -- is a guy with only a bachelor’s degree  who, while he has held jobs with “economist” in the title in the past, has spent most of the past decade and a half as a television host.

So what are academic economists going to do?

1. Wait for it to blow over. "Donald Trump doesn’t matter,” Yale’s Robert Shiller, the outgoing president of the American Economic Association and a winner of the 2013 Nobel Memorial Prize in Economic Sciences, said during a discussion of the long-run prospects for the economy. “He’ll only be here for four years and he's gone." Shiller later admitted that could be wishful thinking: “I’m a natural optimist, so I don’t want to speculate on how bad things could get.” But I got the sense that a lot of academic economists are planning to get back to their research and hope for the best. A lot of them are tenured professors, after all.

2. Learn to communicate better. This came up a lot, usually in the form of vague exhortations to use words that normal people understand. But by the standards of the academy, economists are already spectacularly successful communicators, with far more visibility in the news media than anyone in other social sciences. Jason Furman, the current chairman of the CEA, raised a more interesting point:

In their academic research, the more [economists] know about something, the more they emphasize their standard errors. The closer you get to the op-ed page or policy advising, the standard errors shrink down to nothing. You look at the predictions that economists made about what would happen with Brexit, what would happen with the election of Trump, what would happen with the downgrade of U.S. debt, etc., and a lot of those were appallingly wrong. I think we need to do a better job conveying some of our uncertainty, some of the standard errors around what we do.

3. Change the discipline. The biggest policy disputes between Trump and economists are over trade. The weird thing is that economic theory actually predicted many of the problems that ensued for U.S. blue-collar workers as trade with China exploded in the 2000s -- a seminal 1941 paper by Wolfgang Stolper and Paul Samuelson that can be said to have done just that came up a lot. But in general, economists remain convinced that the benefits of trade far outweigh the costs, and that policy should focus on helping workers instead of blocking trade. So there’s no real sign of a rethink there.

Elsewhere, there are calls to broaden the field’s perspectives. Shiller’s presidential address was a plea for economists to pay more attention to the narratives that move public opinion and animal spirits, not just focus on the numbers. Several eminences spoke of the need to learn from other social sciences, as well as the humanities.

But the most instructive session along these lines may have been the one on “merit and privilege in economics,” in which several economists and historians -- Andrej Svorencik of the University of Mannheim was the apparent ringleader -- documented the dominance of a few economics departments. Of the 537 people who have held American Economic Association office since 1950, for example, 51.1 percent got their doctorates at the University of Chicago, Columbia, Harvard and the Massachusetts Institute of Technology (with Columbia fading after 1981, and MIT graduates becoming the most common). One-third of the members of the Council of Economic Advisers have had doctorates from MIT. And so on.

Elite-level economics isn’t a closed club. Top Ph.D. programs take in students from all over, and MIT rose from nowhere (it awarded its first economics Ph.D. in 1944) to No. 1 in a few decades. But it has become a quite exclusive club, with clear prerequisites (you’ve got to be good at math) and codes of behavior. A few decades ago the field was still divided among “multiple traditions and multiple methodologies,” lamented Middlebury College’s David Colander. Now, “everyone uses the same methodology."

Economics, in other words, has become -- at least compared with other social sciences -- a smoothly functioning technocracy. In a world that seems to be revolting against the technocrats, that might not be the best thing to be.

  1. The main one is the American Finance Association; others include the American Real Estate and Urban Economics Association, the Society of Government Economists, and the Association for the Study of Generosity in Economics.

  2. I too am a guy with only a bachelor’s degree.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net