Friday, September 18, 2009

Advice for policy economists

Thanks to Mostly Economics for pointing to this brilliant lecture by Alan Blinder on the market failure in the demand-supply of good policy advice by economists to politicians. He illustrates the difference between good economic advice and good politics and the need for economists to reconcile their advice with the compulsions of their political bosses, especially in a market where demand for any type of economic advice is very weak, even at best of times.

Prof Blinder refers to a few reasons for the apparent divergence between economic advice and political decisions - contrasting time horizons (myopic concentration on the here and now against economists' telescopic concentration on the distant future) and the related transition costs; the need to generate ideas with superficial sound appeal (that often sweeps over sound economics); differing standards of evidence of good policy ("If a proposal sounded good, either in its design or, more commonly, in its objectives, it was taken to be good policy"); swift, quick-fix and hasty as opposed to orderly and deliberate decision making process; legislative sequencing of policy decisions and packaging a bundle of issues/policies so as to carry all political constituents together; and the need to service narrow special interests or specific constituents (is part of the larger issue of fairness in distribution, which is not addressed by efficiency-focused economics).

Also he offer several pieces of sound advice for economic policy advisers

1. The word democracy means rule by the people, not by the technocrats

2. It is not for economists to say whether one group of people should be favored over another. It is for elected politicians

3. To push through important pieces of legislation, "slogans and symbols are more effective than learned dissertations, for mass politics displays little tolerance for complexity"

4. "Politicians are surely guilty of myopic concentration on the here and now. But economists are often equally guilty of telescopic concentration on the distant future. Our particular brand of analysis is wont to focus doggedly on the long-run consequences of any policy action, to the exclusion of many of the transitional problems that loom so large in the lives of ordinary people."

5. About the requirements to push through important policies, he writes, "That means coalition building, vote trading, logrolling, difference splitting—and compromise, compromise, compromise. The policies that emerge from such political horse trading are unlikely to follow the neat contours designed by economic technicians. More likely, they will be ungainly creatures whose central organizing principles are hard to fathom, if indeed they exist at all. It’s a bit like attaching the head of a cow and the tail of a pig to the body of a camel. But technicians must learn to live with such homely creations, even if they never grow to love them."

6. "Policy without politics is neither feasible nor desirable. But politics comes in various shapes and sizes. The trick is to emphasize what I’ll call the 'high politics' — the mediation of competing claims and ideas and clashes between competing philosophies and visions of government - and deemphasize the 'low politics' — politics as sporting event. The latter manifests in the form of damaging populism, opposing policies on purely partisan grounds, name calling, personal attacks, scandal mongering etc."

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