Economists — they certainly are a contentious bunch.
The latest evidence came last week, in the form of the minutes of the latest meeting of the Federal Open Market Committee, the brain trust that establishes monetary policy. The committee, we learned, is divided on a seemingly straightforward question: Should the Fed take action to goose the economy now, or wait, watch and perhaps goose later?
Similar debates have attended virtually every element of the government’s efforts to turn the country’s fortunes around — even the parts that have been unfolding for more than a year. You might assume, for instance, that there would be a broad consensus about whether the $787 billion stimulus, passed in early 2009, worked.
But generally speaking, economists who thought it was a good idea at the time think it worked, and economists who thought otherwise beg to differ. And both sides make their cases with plenty of hard numbers.
Let’s leave aside the merits of these arguments and ask a question so basic it will sound naive: Why do economists argue at all? Given that Fed members and economists are looking at the same data, and given the reams of evidence accumulated over decades — not to mention a few centuries of great minds, great theories and thick books that preceded this crisis — why isn’t a right answer self-evident?
As it happens, plenty of dismal scientists have pondered this one. After the onset of the Great Recession, there was considerable hand-wringing about what the discipline had gotten wrong, memorably captured last year in an article by Paul Krugman in The New York Times Magazine. But the limits of economics is a subject that many in the field have been discussing for years, in print, in discussions with each other, and, in the case of Robert Solow, Nobel Prize winner and MIT professor emeritus, with graduate students.
“I talk about what it is about economics and economic life that leads to differences of opinion,” Solow said. “One point I always make to my graduate students is, avoid sound bites. Never sound more certain than you are.”
To explain the case for humility in economics, Solow said, look no further than the stimulus bill: “It has run its course over the past year and a half, but it is not an isolated event. One thousand other things were happening that had an effect on employment and real GDP,” a measure of a nation’s total output adjusted for changes in prices. “You want to trace the effect of one of a very large number of significant causal effects, and that’s a very hard thing to do.”