Wednesday, January 28, 2009

If You Laid All the Economists...

There's an old joke that if you laid all the economists in the country end-to-end, they would still not reach a conclusion.

As snarky as that comment is, it is true that economists disagree about many things. Even those who agree with each other seem to disagree. (See what happens when you host a dinner party with Austrians, Chicagoans, and Virginians.)

President Barack Obama recently asserted that among economists, "there is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy."

He was wrong, of course. There are plenty of economists who disagree that government action is necessary to pull the country out of the recession. Many economists, in fact, believe that government action will do more harm than good.

For evidence that economists do disagree, one need not look any further than today's New York Times, where there is a full-page ad signed by more than 200 economists (including Nobel laureates James Buchanan, Edward Prescott, and Vernon Smith) which says:

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance.
More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.
To see the complete ad, look here:

The signatories on that list do not exhaust the numbers of skeptics about the so-called "stimulus" package. Last Friday on his blog, Greg Mankiw wrote:
...skeptics about a spending stimulus include quite a few well-known economists, such as (in alphabetical order) Alberto Alesina, Robert Barro, Gary Becker, John Cochrane, Eugene Fama, Robert Lucas, Greg Mankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingales--and I am sure there many others as well. Regardless of whether one agrees with them on the merits of the case, it is hard to dispute that this list is pretty impressive, as judged by the standard objective criteria by which economists evaluate one another. If any university managed to hire all of them, it would immediately have a top ranked economics department.
Referring to Mankiw's post, the Cato Institute's David Boaz added this morning:
...of course Mankiw’s list isn’t comprehensive. There’s also former Treasury economist Bruce Bartlett, former Yale professor Philip Levy, former Ohio State and Federal Reserve economist Alan Viard, Russell Roberts of George Mason, and many more. Under the current circumstances, plenty of economists are endorsing large fiscal stimulus programs. But it’s just not correct to claim that there’s any consensus or that “every economist . . . from conservative to liberal” supports the kind of massive spending program that the Obama-Biden administration has proposed.
The next time the Obama administration tries to sell you the view that "all economists agree" about something -- anything -- just remember that old joke. It's a good reality check.

Update: NetRightNation has posted a searchable list of all the economists who signed the anti-stimulus statement. Use it to find your favorite economist, or to see if your alma mater is named.

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