The question of who Donald Trump will choose to head his Council of Economic Advisers now has an answer of sorts: It doesn’t really matter.
The CEA chairman will no longer be included in the president’s Cabinet. Economics has officially received a demotion.
Instead of simply deriding the administration as economically illiterate, we should look at this decision as part of a broader trend — the waning of economists’ prestige and influence.
This is a difficult trend to measure objectively. It’s well-known that much of the public disagrees with most economists on a few high-profile issues, especially free trade. But there’s also enormous demand for the econ major at the undergraduate level, which is one reason economics professors get paid higher salaries than most other academics.
It often seems like one’s opinion of economics is a marker of social class in the U.S. — if you respect economists and listen to their ideas, you’re a member of the educated, globalized elite, while if you decry them you’re part of the unwashed masses.
So it’s fitting that an administration that prides itself on its populist image would snub the profession so publicly. But what should economists do in response? They could keep using the same old defenses — deriding the president as an ignoramus, repeating old chestnuts about free trade and Econ 101 and retreating into the ivory tower. But this could turn Trump’s demotion of economists from a blip into a paradigm shift in American thinking.
If economists fail to change their image, they run the risk that demand for their services — undergraduate education, consulting and political advice — will slowly dry up, bringing down both their salaries and their prestige.
I think there are three big things economists can do to partially restore their social status. First and foremost, they should start respecting what people really care about.
Currently, economists focus a lot of attention on economic efficiency. This is partly because they think it’s uncontroversial — a rising tide lifts all boats! — and partly because it’s often easy to calculate in economic models. But in a rich country, most people care more about distribution than efficiency; how the pie is divided matters crucially for most individuals’ livelihoods, while efforts to make the pie even bigger more will hit diminishing returns.
Distribution isn’t just about inequality — though that’s certainly important. It’s about which industries survive and which ones die. It’s about whether a machinist who spent his whole life learning his trade will have to take a wage cut and shoulder the cost of retraining when his job gets shipped off to China. It’s about whether low-income families who get pushed out of their apartments by rent hikes are forced to pay the cost of their own relocation. It’s about whether dying communities get help, or whether people are told to move somewhere else. It’s about defense contracts and zoning and housing vouchers and corporate subsidies. It’s about who gets what. Economists need to think less about adding a few more percentage points to gross domestic product, and more about how to help society deal with these thornier but often more important questions.
Second, economists need to show the public their empirical side. The profession has shifted pretty strongly from theory to empirics in terms of research; now this shift needs to be mirrored in the way economists make their public arguments. Fortunately, this is already happening — more and more results based on data are making their way into the public consciousness. But it needs to happen more.
Supply and demand theory says that minimum wages reduce employment. Ricardian trade theory says that free trade is always good. To put it bluntly: Who cares? People have learned that economic theory often isn’t worth the paper it’s printed on. But come with some evidence about how a $15 minimum wage hasn’t been that bad for workers in Seattle, or how trade with China was different from earlier waves of globalization, and people will listen.
Undergraduate economics courses are some of the worst offenders here — most of what they teach is vague theory, with little evidence. It feels like indoctrination, and to some extent it is. Make Econ 101 more empirical.
Finally, economists need to avoid talking down to people. Frankly, economists trying to persuade the public to support things like free trade often come across as condescending. Examples of this are hard to pin down, but economists should definitely never tell people that they “flunked Econ 101.” The real world isn’t a classroom, and non-economists are not students. They are smart people who want information, not a lecture.
A share of the blame, of course, must fall on think-tank researchers and economics pundits. These folks interact with the public far more than the average academic, and they also tend to simplify and condescend and fall back on simplistic theories far more often. A number of think tanks are doing the econ profession few favors with their evangelism.
In any case, it seems unlikely that economics can be restored to the pinnacle of influence and respect that it enjoyed before the financial crisis of 2008. But it can do a lot to arrest the slide. Addressing the issues people really care about, relying more on evidence and adopting a less pedantic tone would be three helpful steps.
Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University.