Sunday, July 13, 2008

Greg Mankiw's Spin on Economist's Views on Economist's View

With regard to Gregory Mankiw's article, "What if the Candidates Pandered to Economists" featured on Mark Thoma's Economist's view blog, I think it's important to note first that his actions and writings demonstrate that he has a clear Libertarian bent, but he's also very intelligent and expert in economics. So, from that I deduce that he knows that many Republican policies can be very inefficient and very much reduce growth, total wealth, and welfare, but he's willing often and to a large extent to sacrifice that to have less government restrictions of (economic) freedom, less of the government forcing people to spend money on things through taxation. Although, obviously, when it comes to social, as opposed to economic issues, the Republicans are much less Libertarian than the Democrats, but for a lot of people, economic Libertarianism is the more important, and some people like Grover Nordquist are downright monomaniacal about it.

Therefore, he has worked for and supported Republicans, even though, for example, he has admitted in his 1998 textbook "Principles of Economics" (pages 29-30) the following:

Thinking Like an Economist:
Why Economists Disagree: Charlatans and Cranks:

An example of fad economics occurred in 1980, when a small group of economists advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise tax revenue. They argued that if people could keep a higher fraction of their income, people would work harder to earn more income. Even though tax rates would be lower, income would rise by so much, they claimed, that tax revenue would rise.

Almost all professional economists, including most of those who supported Reagan's proposal to cut taxes, viewed this outcome as too optimistic. Lower tax rates might encourage people to work harder, and this extra effort would offset the direct effects of lower tax rates to some extent. But there was no credible evidence that work effort would rise by enough to cause tax revenues to rise in the face of lower tax rates.

George Bush, also a presidential candidate in 1980, agreed with most of the professional economists: He called this idea “voodoo economics.” Nonetheless, the argument was appealing to Reagan, and it shaped the 1980 presidential campaign and the economic policies of the 1980s....

People on fad diets put their health at risk but rarely achieve the permanent weight loss they desire. Similarly, when politicians rely on the advice of charlatans and cranks, they rarely get the desirable results they anticipate. After Reagan's election, Congress passed the cut in tax rates that Reagan advocated, but the tax cut did not cause tax revenues to rise. ... tax revenue fell... government began a long period of deficit spending... largest peacetime increase in the government debt in U.S. history.

Fads can make experts seem less united than they actually are... when the economics profession appears in disarray, you should ask whether the disagreement is real or manufactured... [by] some snake-oil salesman who is trying to sell a miracle cure...

End Quote

In a textbook it's very professionally embarrassing to go along with ridiculous Republican claims, but putting subtle biases in a newspaper article with misleading statements and omissions is another story, so it's no surprise that Mankiw leaves out certain opinions of economists that go against his Libertarian philosophy.

Perhaps the biggest and most prestigious recent survey of economists was done by Robert Whaples of Wake Forrest in the Fall of 2005. A summary of the survey, along with links to the full results, is in Dr. Whaple's November 2006 Economists Voice article, "Do Economists Agree on Anything? Yes!" .

It appears likely that Mankiw saw and used these survey results in his article because of the size and prominence of the survey, and also because of his reference to the AEA and use of the term "Energy Taxes" as opposed to carbon taxes.

Let's note some things Mankiw left out, or Obfuscated, from that survey:

He writes, "On many issues, from universal health insurance to increased taxes on the rich, economists do not speak with a single voice. But on some issues we do. Here is an eight-plank platform designed to attract a majority of economists.", but the Whaple survey shows 54.3% of economists disagreeing (and only 35.7% agreeing) with the statement, "The best way to deal with Social Security's long-term funding gap is to move to mandatory personal accounts invested in the market.". Why was opposition to privatized social security left out of the economist's platform? Mankiw said the platform was designed to "attract a majority of economists", and a clear majority of economists agree with that position.The survey also found 60.2% of economists disagreed that, "The U.S. should eliminate inheritance/estate taxes.", with only 34.9% agreeing. Again, left out, no opposition to eliminating the estate tax in the platform.

I would also note that 45.8% of economists in the survey agreed (with 38.7% disagreeing) with the statement "The U.S. should adopt universal health insurance.", not a majority, but a strong plurality. Personally, I would bet, though, if just top economists with special expertise in health care were surveyed the percentage supporting universal health insurance, or health care, would be far higher, and most of those disagreeing would really be doing so on Libertarian, not wealth or welfare grounds.

On the other hand, it should also be noted that strong majorities of economists in the survey favored school vouchers and ending the government's postal monopoly. These are Libertarian and Republican positions, and Mankiw didn't include them in the platform either. And the positions he did include that were in the survey had the strongest support, so the article wasn't that biased, but, overall it did mislead somewhat towards Libertarian/Republican positions.

Note: This is, and will be, true of all of my posts: I will not hesitate to constantly polish, correct and otherwise improve them over time, so the post today may have some differences with the same post yesterday. I don't put in cross-outs because this would hurt the readability, and often a lot. My main goal is to teach, to illuminate, clearly, not to display a personal journal as it actually unfolds over time.