Adam Ozimek -- blogger at Modeled Behavior and associate at Econsult Corporation
In reading the sometimes polarized debate in the economics blogosphere, the discipline often appears to suffer from an excess of disagreement and uncertainty. But this is more about the incentives economists face when writing and speaking in the public sphere than the actual state of knowledge in the field. In reality economists agree about a lot of things, and in many cases they do so with a high degree of certainty.
This fact is on display frequently at the IGM Economic Experts Panel from the University of Chicago. This is a panel of 41 of the worlds top economists who are offered statements about economic policy to which they can indicate whether they agree, disagree, or are uncertain. In addition they rate the certainty of their answer on a scale of 1 to 10, which allows the answers to be weighted. Over the past few months there have been several issues where this ideologically diverse group of economists have shown resounding unanimity. Some of these may surprise people, as it's fairly obvious that public opinion would not side with economists with the same amount of unanimity. So here are a few things economists strongly agree on.
The benefits of free trade and NAFTA far outweigh the costs
None of the economists surveyed disagreed that the gains to freer trade are much larger than any costs. And only two economists even said that the answer is uncertain. In a space for additional comments, MIT's Richard Schmalensee declared "If that's not right, almost all of economics is wrong".
Economists have emphasized the benefits of free trade for a long time, reflecting the field's belief in the importance of specialization, comparative advantage, and gains from trade. Indeed, these results are similar to other surveys that show economists strongly supporting free trade.
So why do pundits and voters lag economists in supporting free trade? In his excellent book The Myth of the Rational Voter, Bryan Caplan provides evidence that people suffer from a handful of systematic biases that influence their beliefs, and three of these can help explain why voters are skeptical of trade: anti-market bias, anti-foreign bias, and pessimism bias.
Paul Krugman provides three reasons why intellectuals in particular resist the theory of comparative advantage that underpins free trade: 1) opposition to free trade is intellectually fashionable, 2) comparative advantage is hard to understand, and 3) they are averse to a fundamentally mathematical understanding of the world.
As is reflected in the comments by some of the panelists trade will create winners and losers, which may also explain some opposition to trade. But economists on the left and the right still struggle the understand the level of opposition to trade, and the rejection of the overall gains. Whatever their reasons for resisting, people should follow economists lead and embrace the fact that the gains from freer trade outweigh the costs.
Government policies don't explain high gas prices
Individual's beliefs about the extent to which the U.S. government should be blamed for high gas prices seems to have a strangely strong correlation with whether they like whoever happens to be in charge at the time. Economists on the other hand strongly reject the idea that the government has much affect on these prices. None of the surveyed economists disagreed with the following statement:
"Changes in U.S. gasoline prices over the past 10 years have predominantly been due to market factors rather than U.S. federal economic or energy policies."
So why do people blame politicians when gas prices rise? Supply and demand, of course. Ideological pundits and politicians are happy to supply arguments blaming incumbent politicians, and ideological individuals are eager to believe them. People should set their ideologies aside and accept the sometimes inconvenient fact that market forces, not politicians, have been the primary driver of gas prices over the past 10 years.
The Stimulus and Bailouts Lowered the Unemployment Rate
Economists may differ on whether the American Recovery and Reinvestment Act was worth the cost overall, but they are in solid agreement that as of the end of 2010 it lowered the unemployment rate. Very few disagreed with or were uncertain about this. In contrast, a significant number questioned whether the recovery act was worth the cost. Importantly, in the space for comments, Stanford's Pete Klenow emphasized what Scott Sumner and others would say is the central issue: "how much was it offset by less aggressive (than otherwise) unconventional monetary policy?" But even stimulus skeptics should keep their criticisms in perspective: economists strongly reject the idea that stimulus is to blame for our economic woes.
In addition, economists strongly agree that the bank bailouts also lowered the unemployment rate. Of course as Austen Goolsbee commented: "the fact it was necessary doesn't mean we should be happy about it."
The Gold Standard is a Terrible Idea
This is an issue that has returned to a certain prominence in the last few years. But despite it's popularity among some on the right -- and Ron Paul fans in particular -- economists overwhelmingly agree that the gold standard is a bad idea. In this sample of leading economists, 100% of disagreed with the claim that returning to a gold standard would improve price-stability or employment outcomes. Nobody even answered uncertain, because this question really isn't up for debate anymore.
Some Other Things Economists Agree On
So economists can agree, and with a high degree of certainty. You just have to ask the right questions.
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