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Searching for the gold standard of economic ideas

This is a tough time for experts. Empowered by the Internet and embittered by the sour economy, many people doubt the wisdom of expert elites. Now one tribe of specialists – economists – is striking back. Concerned that the great unwashed have come to see all economic proposals as being equally valid, the University of Chicago Booth School of Business has led an effort to figure out what economists agree on, where they diverge and how certain they are about their views.

The school has called on reputable economists to join its panel of experts, who each week are asked whether they agree or disagree with a particular economic idea.

"Among practising economists, it is understood that the media and the political process paints economists as more divided than they are," explained Anil Kashyap, a professor of economics and finance at the University of Chicago and a leader of the project. "It is more sensational and maybe makes for better reading to have point-counterpoint. It seemed reasonable to provide some context."

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He cited as an example the gold standard, the monetary system in which the standard economic unit of account is a fixed weight of gold. "The gold standard is an insane idea," he said. "I don't know of any reputable economist who thinks it is a wise idea, but it got a lot of real political traction."

Of the Booth panelists, 93 per cent disagreed that the gold standard could improve price stability or employment.

But that is an extreme example. A paper presented this week at the annual gathering of the American Economic Association investigated the survey results in greater detail. "Based on our analysis, we conclude that there is close to full consensus among these panel members when the past economic literature on the question is large," wrote the authors of the paper, Roger Gordon and Gordon Dahl of the University of California, San Diego. "When past evidence is less extensive, differences in opinions do show up."

But they did not find an ideological bias in those disagreements: "There are certainly some idiosyncratic views expressed, but we found no evidence of different camps."

Economists, these results suggest, seek to objectively establish the truth and have a widely agreed-on body of knowledge about how the economy works. But this picture of consensus among experts comes with a few caveats.

One was articulated by Paul Krugman, a Nobel Prize laureate and New York Times columnist who was at the economic association meeting. He accepts that economists share a wide body of agreed-upon, objective knowledge. But he argued that when it comes to a subset of issues – business cycle macroeconomics, or how policy should respond to booms and busts – economists are both divided and biased. This matters, he rightly noted, because beyond the academy these are among the economic issues ordinary mortals care about most.

The second caveat is that consensus may be more fleeting, and therefore less valuable, than the economic high priesthood might like to think. Dr. Kashyap revealed two issues on which the economic conventional wisdom, and his own views, have changed since the financial crisis of 2008.

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One is currency controls: "Having watched all this hot money flow into these markets, I am much more sympathetic to the desire to slow things down."

The second is whether central bankers should try to pop asset bubbles, an idea toward which he has softened: "I don't think the conventional wisdom was very good on this and I was firmly in the consensus."

These shifts suggest that it is worth looking more closely at one clear subgroup among the economists in the University of California study. The authors failed to detect ideological bias, but they did pick up a clear difference between men and women. "Women," they write, "tend to be more cautious in taking a stance." For women making their way in the 21st-century world of work, that reticence is mostly a handicap: A willingness to admit to uncertainty is one reason women are paid less and can find it difficult to break through the glass ceiling.

For the benefit of the community as a whole, however, more female economists may be needed. The quest for objective economic knowledge is surely a good thing, as is the Booth effort to map economists' views. But given how profoundly and unexpectedly the world economy collapsed in 2008, maybe a little more womanly humility about that conventional wisdom would be a good thing, too.

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