Wednesday, February 12, 2014

Why Is Macro So Hard? (What Passes for Expert Advice)

The source of this post is the article entitled “The Economist Who Exposed ObamaCare” from the February 8th issue of The Wall Street Journal.

The main topic of that article will be the subject of another post that we’ll cover later this week, or next. I’ve put a minor part of it here.

The article is the product of an interview with Casey Mulligan. He’s a mid-career economics professor at the University of Chicago. I’ve posted about his stuff on this blog before. The article gives off somewhat of the wrong tone at the front though:

… Many more people may recognize the University of Chicago professor as a serious economist after this week.

Macroeconomists have recognized Mulligan as an important figure in the field since the mid-90s. I think that literally that quote might be true, but figuratively I think it may give the wrong impression.

The money quote for today’s class comes from Mulligan:

Mr. Mulligan reserves particular scorn for the economists making this "eliminated from the drudgery of labor market" argument, which he views as a form of trahison des clercs.* "I don't know what their intentions are," he says, choosing his words carefully, "but it looks like they're trying to leverage the lack of economic education in their audience by making these sorts of points." [emphasis added]

I’ll be covering that argument (i.e., whether or not it’s a good thing that ObamaCare is likely to reduce employment) in the other post.

But the bold quote gets right to the heart of the matter about why macroeconomics is hard: a lot of people make macroeconomic pronouncements that either 1) don’t display much clear thinking, or 2) are targeted at listeners that are unlikely to think clearly about the issues involved.

Those kind of conclusions are tarnishing the field of economics …They're sure not making it look good by doing stuff like that."

The bigger question is why Mulligan’s position wasn’t part of the debate in D.C. until this month, years after ObamaCare was passed?

… How did Mr. Mulligan end up conducting such "unconventional" research?

"Unconventional?" he asks with more than a little disbelief. "It's not unconventional at all. The critique I get is that it's not complicated enough."

Well, then how come the CBO's adoption of his insights is causing such a ruckus?

"I would phrase the question a little differently," Mr. Mulligan responds, "which is: Why didn't conventional economic analysis make its way to Washington? Why was I the only delivery boy? Why wasn't there a laundry list?" The charitable explanation, he says, is that there was "a general lack of awareness" and economists simply didn't realize everything that government was doing to undermine incentives for work. "You have to dig into it and see it," he explains. "The Affordable Care Act's not going to come and shake you out of your bed and say, 'Look what's in me.' " [two levels of emphasis added]

Keep in mind that this is an opinion piece, coming from The Wall Street Journal, so this view shouldn’t surprise you:

Judging by their reaction to the CBO report, the less charitable explanation is that liberals would have preferred that the public never found out.

* Really good students (like you) will look up the meaning of “trahison des clercs”. I did.Winking smile

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