In a new paper in International Studies Quarterly, John Quiggin and Henry Farrell argue that politicians get in trouble when they buck a consensus among economists, but when economists are divided, they can simply ignore the ones they disagree with — so politicians spend a lot of time looking for economists who agree with their policies, then elevate them to the same status as their peers in order to create a safe, blame-free environment to operate in.
In a great summary in the Washington Post, Farrell explains the history of the piece, which arose out of a debate over the financial crisis, and how politicians used economists for cover to establish the policies that led up to the crisis.
From this perspective, it turns out that the Great Recession had two major phases. In the first phase, economists — including previous skeptics such as Martin Feldstein — advocated more spending to boost the economy, rather than adopting austerity policies. This apparent degree of consensus within a profession that usually has a hard time agreeing on anything helped sway politicians. In the words of one important policy observer, “What political leaders got from the economists was that people traditionally opposed to fiscal stimulus and fiscal deficits . . . suddenly had a different view. That impressed the politicians.”
Contrary to Drum’s argument, the apparent consensus among economists had real consequences for politics. German politicians, who didn’t want stimulus, found themselves in an extremely awkward position when their own Council of Economic Experts suddenly did an about-face and started arguing for more spending to boost the economy. Skeptics, such as economists in the European Central Bank and elsewhere, felt it was best either to keep silent or to try to foist their own pet projects onto the stimulus bandwagon, as John Taylor did with tax cuts.
However, it is hard to maintain an apparent consensus among economists when prominent politicians chafe at it. Hence, the second phase of the Great Recession saw renewed fissures among economists (over when one should ease off government spending) and efforts to widen these fissures by governments and other institutions that disliked the policy implications of economists’ advice.
Economists are arguing over how their profession messed up during the Great Recession. This is what happened.
[Henry Farrell/Washington Post]
Consensus, Dissensus and Economic Ideas: Economic Crisis and the Rise and Fall of
Keynesianism [John Quiggin and Henry Farrell/International Studies Quarterly]
(Image: Joxemai, CC-BY)
