Saturday, January 26, 2008

Is John McCain an economist?

I think John McCain's being a little too hard on himself:

"They are complicated," McCain said of economic issues, "and I freely admit I am not an economist."

It probably depends on whether he's thinking of economics or economic policy. Senator McCain also says:

"But I know there are some people who have literally immersed themselves on issues of economics, how Congress works on it, the tax code, that sort of thing. I would look for that kind of talent not in a vice president but in close advisers."

What economist doesn't like the sound of that? However, studying or doing research in economics is very different from formulating economic policy.

"Economic policy" is simply policy that influences the way we organize our use of resources, and I think Senator McCain is probably a lot better at it than he gives himself credit for.

If Senator McCain asks his advisers "What would happen if I did this?", we need to figure out the chain of causes and effects that trickle through the whole country's decisions and their response to the proposed change in policy. If he asks "How can I achieve that?", we need to do the same thing backwards to somehow ask if there's any action the policymaker can take to alter the end product. These are positive economics questions: what's going to happen? I think this is what McCain might be worried about answering.

Deciding what policy is best is where it gets tricky; we have to somehow compare countless options, many of which have outcomes which aren't even certain. Then we have to deal with the familiar problem of measuring the satisfaction of the people, at least notionally, if we're to make any headway in choosing the "best" policy. These are normative economics questions, and I think John McCain is just as qualified as anyone to answer these.

In the ideal world where our policymaker - or anyone - has figured out or been appraised of the true and full consequences of a policy, it's out of the hands of "science" and becomes all about a value judgment. In a democratic society, who better than our elected representatives to make the value judgment on behalf of his constituents?

Being a normative economist is easy: all you need is an opinion. How informed that opinion is relies on the honest work of true positive economists. The study of economics should never confuse the two. The perception of economics might be inescapably tied to capitalism, but economics is not about promoting one system of organizing our resources over another. It's about figuring out what the consequences of the system would be (positive), seeking a means to compare them (normative) and then asking "what do you want?".

Of course, it is election season. Maybe McCain, normative economist of the people, is just trying to distance himself from economists - it makes him more likeable, I imagine...

1 comment:

GoodLiberal said...

He also said the other day 'cutting taxes always leads to more revenue'. Let's hope that when he says that he'll surround himself with 'economists', the 'trained' part is implied. The likes of Jude Wanniski and co. are to economics as witch doctors are to modern medicine.