Monday, August 4, 2008

Economists and frustrating laymen

Reading this article in the Guardian on how some experts in biology just cannot seem to manage to make their point against laymen, I kept wondering whether economists have the same problem. Everyone is a self-proclaimed expert in Economics, both because of the confusion between policy goals (the realm of politicians) and policy means (the realm of economists) and because everyone is part of the "Economy."

Now, let me make sense of this long sentence. What are economists good at? Seeing the big picture, finding in which ways things interact in a general equilibrium sense, figuring out how incentives work. Thus, they are more detached from the nitty-gritty and can see the complexity of things, unintended consequences, and externalities. The layman is generally not equipped for this. This is why you need to be trained as an economist to figure out the consequences of policy, for example.

Yet, too often, economists do not manage to convince public and authorities about policy. Think about rent control, labor market over-regulation in Europe, gas taxation in North America, red tape in developing economies, or the overall lack of understanding about the role of market forces. When I speak with non-economists, I am regularly stunned by their reasoning and their unwillingness to understand the "true" Economics, mostly because it does not suit them, not because there would be a logical flaw. Quite frustrating, especially considering that these people then vote.

I am all for people to vote on policy goals. But when it comes to how those goals are to be reached, leave the methods out of the policy debate and let the experts take care of it. If you want to build a dam, you do not let people vote whether it is going to be made of concrete or earth, you let experts decide. And so it is when it needs to be determined whether a particular medical drug is safe or not. Or whether one should put fluoride in city water.

Set a goal for pollution reduction, then let experts take over. Set a goal for educational outcomes, and let experts figure out whether school vouchers are the way to go. Set a goal for dependence on Middle-East oil, then let experts get us there. Set a goal for school achievements, let experts get us there.

Enough for this rant. I promise to be more academic in the next posts.


Vilfredo said...

To your list of misconceptions by laymen you cite, you could have added the misunderstanding of speculation and arbitrage, something you addressed recently, in fact.

Anonymous said...

There is also the misguided idea that the economy is a zero-sum game, that is, when someone is making a profit, somebody else must be making a loss. It drives me nuts.

T-Bone said...

Well, on the other end of the spectrum, there's also a misguided idea that wealth is endless. That everyone could be rich, pampered by servants, if only they went back to school for longer. That everyone can be the owner and nobody has to work the grill at McDonald's.

Profit can be partly created wealth and partly just a different distribution. If I eat at your restaurant, you provide value (created wealth). If I use a coupon or leave a tip or chose a different restaurant, that's zero-sum (a varied distribution, no added wealth).

Cahya said...

An informative blog, thank you.

David Hoopes said...

A few (?) years back the WSJ had some interesting editorials on science and courts. The issue being that juries were deciding scientific issues (breast implants cause auto immune deficiency) that were not supported by scientific evidence.