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Who's the Real Economist?

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from: James K. Galbraith
to: Paul Krugman

Posted Friday, Nov. 8, 1996, at 3:30 AM ET

Mea culpa! I did commit the academician's sin, of implying that the "real" and the "serious intellectual" issue were one and the same.
In the beginning I entered this fray to defend myself, not a class action involving Lind, Kuttner, and Stephen Jay Gould. But Paul now seems to have dropped his complaint against me. The question now arises: Do I want to keep this going by filing a counterclaim?
Well, why not? We have agreed that good economics requires careful theory, data, and arithmetic. Paul has conceded that there are important issues on which "serious" economists disagree. I raised the trade-and-wage-inequality question precisely to make this point. A noneconomist reader might easily have missed it, reading Paul's criticisms of Michael Lind.
Here's the new issue. Are such "serious" disagreements the exception, or are they the rule? It seems pretty clear to me that professional economists are deeply divided over many of the important economic-policy issues we face today. Some examples:

  • The merits of cutting the budget deficit. Do serious economists all agree that cutting the budget deficit will raise savings and investment, and increase the rate of productivity growth? They do not. The late, great Bill Vickrey, who died just three days after receiving this year's Nobel Memorial Prize in Economic Sciences, was only one of many who think our present preoccupation with deficit reduction is dangerously counterproductive. I'm another.
  • The "natural rate of unemployment." Do serious economists agree that there exists a "natural rate of unemployment?" No. Do those who do believe in this concept agree on what the natural rate is? No. Do those who have estimated the natural rate agree on how quickly inflation will accelerate if unemployment goes below the natural rate? Again, no. (The next issue of the Journal of Economic Perspectives will carry a symposium airing this argument.)
  • The alleged overstatement of measured inflation. A commission headed by Professor Michael Boskin has just reported that the Consumer Price Index seriously overstates the rate of inflation. These findings lend support to proposals to cut back on cost-of-living adjustments for Social Security and other programs. But, was Boskin correct? Tracing implications in just the way that Paul Krugman recommends, Dean Baker of the Economic Policy Institute finds that if so, then back in 1960, maybe half the population must have lived below the poverty line (!). Michael Lind is not the only one who might benefit from a monologue about the plausibility of one's story.
  • The effects of raising the minimum wage. A recent, excellent book by Princeton economists David Card and Alan Krueger, Myth and Measurement, showed that we need not necessarily expect a higher minimum wage to cost jobs. You can only imagine the trouble this one stirred up.
  • Is there a crisis of the Social Security system? The most recent issue of Challenge carries a fine assortment of views on this vexing question. Of these, the most persuasive argue that there is no crisis, that possible shortfalls in Social Security can be fixed by very modest adjustments, at most. Unfortunately, alarmists like the dedicated anti-Social Security campaigner Pete Peterson, an investment banker, are dominating this debate. It is regrettable that certain serious economists--it might disrupt present comity if I named a name--have recently stated their categorical support for the alarmist position.

These are only examples. I don't raise them to pick particular fights, only to illustrate that real fights are going on. Those of us who hold minority views within the profession on quite a few policy matters would very much like the outside world to know this.
What, then, about those journalists? I have no objection to correcting other people's mistakes. But, having spent quite a few years off the academic reservation, I may be a bit more respectful, as a rule, of what noneconomists have to say. I have found that professional policy specialists very often have areas of expertise that university-based economists sometimes lack. So I tend to read the former for what they know, rather than for their bloopers.
Paul is surely correct, though, in saying that I'm more critical of professional economists than he is. Professionals should be held to a high standard. Attacking them, when they lapse, is more of a challenge. And when it comes to discussions of economics in the strict sense, to me, the interesting debates are among people who have a pretty good idea what they are talking about to begin with.

dialogues
entries
12345678
from: James K. Galbraith
to: Paul Krugman

Posted Friday, Nov. 8, 1996, at 3:30 AM ET
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James K. Galbraith, a professor of government at the University of Texas, takes issue with Paul Krugman's recent SLATE column, "Economic Culture Wars." Krugman is a professor of economics at MIT.
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