Category: Equitablog

Should-Read: Peter Hall: Ideas and Interests

Posted on by Brad DeLong

Should-Read: The very sharp Peter Hall engages in what I think is some fuzzy thinking here, caused by his paying too much attention to economists’ tautological claim that people maximize their utility, or, as Peter puts it, “pursue their interests”. People’s actions are determined by their interests when they pursue the material well-being and freedom of themselves, their families, and those of particular concern by acting on well-founded beliefs about how the world works. When people act on beliefs that are not well-founded; or pursue goals that are not the material well-being and freedom of themselves, their families, and those of particular concern; are pursue the material well-being of people who do not have particular concern for them—well, then, they are acting against their interest, and according to ideas. To say that ideas shape interest is, in my view, unhelpful. Ideas create true or false consciousness, and then afterwards people act out of concern for their interest or because they are driven by ideas: Peter Hall: Ideas and Interests: “Interests are always interpreted (by ideas), i.e. they do not arise unambiguously from the material world…

…contrast the ‘ex ante’ account from interests with an ideas account of outcomes. But one might put even more emphasis… on… that people always act based on both their ideas and their interests…. It is impossible to have perceptions of interest without ideas (and it is those perceptions of interest rather than the interests in themselves that motivate actors). Thus claims that people are acting on their ‘interest’ are, in effect, claims that they are acting in line with some conventional set of ideas about what those interests are…. Now, there may be small sets of actors who in certain circumstances act against their ‘interests’ in the sense that they realize, by virtue of the ideas they hold, that they will lose something they value (material goods, power, etc.) by so acting. And those actors might do that as a result of holding (other) sets of ideas, eg. of the sort associated with some sort of ‘altruism’….

It becomes interesting to inquire about the role of ideas when there is (some kind of) contestation about precisely what is in the interest of the actors…. The key problem is to explain (make claims about) why some ideas become influential in specific contexts while others do not….

What sorts of implications follow from this? The Germans are probably… influenced by (Hayekian) ideas that tell them that their current posture is in the national interest as they construe it…. We can detect… instances that are distinctive by virtue of something about the prominence of the role that ideas play in them…. What is distinctive is that there was contestation… about how to interpret… the… interests of the populace…. The analytical way forward is… to ask: ‘how might we best distinguish between situations in which ideas play a somewhat different role in the interaction between interests and ideas that underpins all action?’…

Must-Read: Paul Krugman: Good enough for government work? Macroeconomics since the crisis

Posted on by Brad DeLong

Must-Read: But who is this “we”, Kemosabe? Paul Krugman believes that “saltwater” economists have little to learn, theoretically, from the financial crisis. I think that is wrong. I think what “saltwater” economists have to learn is that it was a huge mistake to engage with rather than ignore—”freshwater” economists. People interested in understanding the world and guiding policy should always have been focused on the world outside, rather than on RE and DSGE and RBC and other pointless alphabet soup: Paul Krugman: Good enough for government work? Macroeconomics since the crisis: “hen the financial crisis came policy-makers relied on some version of the Hicksian sticky-price IS-LM as their default model; these models were ‘good enough for government work’…

…While there have been many incremental changes suggested to the DSGE model, there has been no single ‘big new idea’ because the even simpler IS-LM type models were what worked well. In particular, the policy responses based on IS-LM were appropriate. Specifically, these models generated the insights that large budget deficits would not drive up interest rates and, while the economy remained at the zero lower bound, that very large increases in monetary base wouldn’t be inflationary, and that the multiplier on government spending was greater than 1. The one big exception to this satisfactory understanding was in price behaviour. A large output gap was expected to lead to a large fall in inflation, but did not. If new research is necessary, it is on pricing behaviour. While there was a failure to forecast the crisis, it did not come down to a lack of understanding of possible mechanisms, or of a lack of data, but rather through a lack of attention to the right data….

The intellectual impact of the crisis just seems far more muted than the scale of crisis might have led one to expect. Why?… Macroeconomics hasn’t changed that much because it was, in two senses, what my father’s generation used to call ‘good enough for government work’. On one side, the basic models used by macroeconomists who either practise or comment frequently on policy have actually worked quite well, indeed remarkably well. On the other, the policy response to the crisis, while severely lacking in many ways, was sufficient to avert utter disaster, which in turn allowed the more inflexible members of our profession to ignore events in a way they couldn’t in past episodes….

The DSGE models that occupied a lot of shelf space in journals really had no room for anything like this crisis. But macroeconomists focused on international experience—one of the hats I personally wear—were very aware that crises triggered by loss of financial confidence do happen, and can be very severe…. Did economists ignore warning signs they should have heeded? Yes…. But did this failure of observation indicate the need for a fundamental revision of how we do macroeconomics? That’s much less clear…. Was the failure of prediction a consequence of failures in the economic framework that can be fixed by adopting a radically different framework?… A significant wing of both macroeconomists and financial economists were in the thrall of the efficient markets hypothesis, believing that financial overreach simply cannot happen—or at any rate that it can only be discovered after the fact, because markets know what they are doing better than any observer. But many… knew better… especially those who had studied or been involved with the Asian crisis of the 1990s. Yet they (we) also missed some or all of the signs of overreach. Why?…

My bottom line is that the failure of nearly all macroeconomists, even of the saltwater camp, to predict the 2008 crisis was similar in type to the Met Office failure in 1987, a failure of observation rather than a fundamental failure of concept. Neither the financial crisis nor the Great Recession that followed required a rethinking of basic ideas…

Must-Read: Charlie Stross: Dude, you broke the future!

Posted on by Brad DeLong

Must-Read: In Charlie Stross’s view, the discourse and worries about Artificial Intelligence “Singularity” are of primary interest to sociologists, psychologists, and theologists; and not to economists or technologists. Stross says that economists and technologists should, instead, think of AI as purposeful cognitively informed nonhuman behavior toward goals—and view the development of, growth of, and consequences of those slow AI entities called “business corporations” as our template for thinking about the coming of nonhuman near-Turing class cognition to our world: Charlie Stross: Dude, you broke the future!: “If it walks like a duck and quacks like a duck, it’s probably a duck. And if it looks like a religion it’s probably a religion…

…I don’t see much evidence for human-like, self-directed artificial intelligences coming along any time now, and a fair bit of evidence that nobody except some freaks in university cognitive science departments even want it. What we’re getting, instead, is self-optimizing tools that defy human comprehension but are not, in fact, any more like our kind of intelligence than a Boeing 737 is like a seagull. So I’m going to wash my hands of the singularity as an explanatory model… and try and come up with a better model…. History gives us the perspective to see what went wrong in the past, and to look for patterns, and check whether those patterns apply to the present and near future. And looking in particular at the history of the past 200-400 years—the age of increasingly rapid change—one glaringly obvious deviation from the norm of the preceding three thousand centuries—is the development of Artificial Intelligence, which happened no earlier than 1553 and no later than 1844. I’m talking about the very old, very slow AIs we call corporations, of course. What lessons from the history of the company can we draw that tell us about the likely behaviour of the type of artificial intelligence we are all interested in today?…

Should-Read: Simon Wren-Lewis: Does Brexit end not with a bang but a whimper?

Posted on by Brad DeLong

Should-Read: As near as I can see it, the clever Simon Wren-Lewis thinks that what Brexit will mean in practice is that Britain loses its votes in Brussels and Strasbourg, but otherwise things go on as they have been: few in England really want a hard Irish border; or the departure of large chunks of London finance for Frankfort, Paris, and Dublin; or restrictions on Britain’s abilities to visit and move to continental Europe. That’s called “staying in the EU—but without any control over what the EU does because you have Brexited”. And Simon is right to say that this is stupid and idiotic and unsustainable, and would it short order be rationally followed by Brexreentrance. But I think he has it wrong: he presumes that the Tory and Labour politicians in Westminster in the medium-term future will not be cynical posturing morons. And he has no warrant for believing that: Simon Wren-Lewis: Does Brexit end not with a bang but a whimper?: “Most media commentary on Brexit makes a huge mistake… focuses on what the UK government may wish to do or should do…

…We should have known the moment Article 50 was triggered: the EU is calling the shots…. But the fact that the UK agreed to the text, and particularly the parts on the Irish border, has told the EU… the current UK government is not going to walk away with no deal, and even if it did the current parliament would almost certainly stop it. That in turn tells the EU that it can get, to the first approximation, the agreement it wants. So what we should be asking is not what the UK’s next move will be, but what the preferred outcome for the EU is. My guess would be that their preferred outcome is a formalisation of the transition arrangements…. It avoids a hard Irish border, it imposes no additional trade restrictions, and the UK is clearly worse off… has no control over the rules it must obey…. Two alternatives… staying in the Single Market and staying in it just for goods… Dreams of doing trade deals with other countries would no longer be possible, and for that and other reasons a large part of the Conservative party would not be happy. The Conservative’s Europe problem would not be solved. The fact that the Brexiters will still be agitating for a more pronounced break from Europe will be one reason why the UK will stiff suffer in economic terms…. Norway and Switzerland may be able to tolerate being out of the club but obeying its rules because they would probably reason their impact within the club would be small….

Does this mean that any deal will just be the first stage of breaking away from Europe? The Brexiters will agitate for this, but I doubt it will happen. The Brexit is essentially a project of the old. It seems far more likely to me that as time passes a majority for rejoining will emerge, and Brexit will come to an end. This made period of UK politics, and all the political and economic harm it has done, will be a complete dead end, a colossal and damaging waste of time. This is my best guess at how Brexit will end…. The vote that rules them all today will gradually be seen… as just the machinations of a small number of hollow men…

Dinner table entrepreneurship on both sides of the Atlantic

Posted on by Emilie Openchowski
A father and son play with a virtual reality headset. A new study shows that sons are more likely to start their own businesses if their fathers are entrepreneurial.

Want to own a successful business? Then you might want to listen to the wise words of your parent—if they own their own business, that is. New research by Hans K. Hvide of University of Bergen and Paul Oyer of Stanford University’s Graduate School of Business finds that kids who grow up with entrepreneurial fathers are more likely to start a business in the same industry and be more successful at it.

While it is well-established that parents’ career choices have a large impact on those of their children, Hvide and Oyer find that this is even more true when it comes to entrepreneurs. The researchers use Norwegian data to look at the role of IQ and fathers’ labor-market experience in shaping whether children become entrepreneurs, and, if so, what sector they work in. The authors also assess how successful these entrepreneurial offspring are compared to the overall population of those starting their own businesses. (Because one of the datasets used in their research is Norwegian military records, which was compulsory for able-bodied young men from 1984 to 2005, the study does not include female entrepreneurs.)

Hvide and Oyer find that the children of entrepreneurs are more successful and are more likely to outperform their peers whose parents work in other industries. Resources and connections do play a role in this success, but the authors find that the biggest factor in entrepreneurial children’s career choices and success is the kind of insider-knowledge acquired from informal conversations with their parent and exposure to their industry while growing up—that is, what they learn over the dinner table. The researchers believe that’s why, overall, the offspring of entrepreneurs that do decide to start their own businesses tend to do so in the same industries as their fathers—they have grown up learning the family business.

IQ also plays a role: High IQ individuals are more likely to be entrepreneurs overall. But among these next-generation of entrepreneurs, the men with relatively higher IQs are also more likely to start businesses in sectors that differ from that of their fathers, usually in more lucrative fields such as technology.

This paper adds to a growing bulk of literature exploring the way in which childhood exposure facilitates innovation and entrepreneurship. Late last year, a team of researchers—including Stanford University economist and Equitable Growth Steering Committee member Raj Chetty—released an expansive study of innovation of the United States, looking at factors such as gender, race, geography, income, and more. (The study was partially funded by Equitable Growth.) Chetty and his co-authors also find that while IQ plays a role, being exposed to innovation—whether through one’s parents or neighborhood—is the most critical driver of whether or not an individual innovates later in life.

These results are significant given the rise in economic segregation in the United States, a byproduct of growing inequality. As Chetty and his co-authors say, “children from low-income families, minorities, and women are less likely to have such exposure through their families and neighborhoods, which helps explain why they have significantly lower rates of innovation overall […] the underrepresentation of certain groups among star inventors implies that there are ‘lost Einsteins.’”

Talent gone unutilized exacerbates economic inequality and harms overall economic growth. The reason: Research has established a causal relationship between innovation and economic growth. Considering that the groups that are underrepresented in both entrepreneurship and innovation—women, low-income individuals, and people of color—make up most of the U.S. population, this means policies should address the lost wealth of opportunity that is affecting almost every corner of the nation.

 

 

Can the financial benefit of lobbying be quantified?

Posted on by Emilie Openchowski
Wall Street sign, with the New York Stock Exchange in the background. A new working paper studies the benefits to businesses of lobbying by looking at the participation of financial institutions in the rulemaking process after the enactment of Dodd-Frank.

In a new working paper for the Washington Center for Equitable Growth’s Working Paper series, Equitable Growth grantee Daniel Carpenter and his co-author Brian Libgober at Harvard University seek to quantify the benefits to businesses of lobbying. Specifically, they examine the benefits of “lobbying with lawyers” via the participation of these businesses in the rulemaking process through commenting on regulatory agencies’ proposed rules.

The popular conception of lobbying usually focuses on the lawmaking stage in Congress, but an underappreciated but perhaps more influential stage is the rulemaking process. “Congressional statutes often leave to administrative agencies the essential tasks of specifying content or clarifying statutory meanings,” Carpenter and Libgober observe in their working paper, with one line of legislative text potentially becoming hundreds of pages of regulatory text.

This is where lobbying can turn into lawyering. Agencies are required by the Administrative Procedures Act to make a proposed rule publicly available for a set period of time so that anyone—whether a private citizen or the representative of a firm—can make comments on it. Agencies then review and incorporate those comments as part of its final rulemaking process.

So, what actually are the benefits to firms of participating in this rulemaking process? And is it actually different than if they didn’t participate in the rulemaking process at all? Looking at the participation of banks in the rulemaking process that followed the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Carpenter and Libgober estimate that banks that commented on the proposed rules had stock market returns of between $3.2 billion and $7 billion more than they would have had if they hadn’t participated.

They also did a deep-dive analysis of the Volcker Rule—a provision of Dodd-Frank that was particularly unpopular with banks because of its restrictions on proprietary trading and correspondingly engendered nearly 20,000 comments. The two authors found that the commenting process resulted in the share prices of the 30 firms whose comments were cited in the final rule outperforming the stocks of other banks by 8.2 percent in the first hour of trading after the announcement of the final rule.

The two researchers note that there are some limitations to the conclusions that can be drawn from this kind of analysis. Because they have to rely on publicly available data, for example, the authors could only analyze the returns to publicly traded companies engaged in the rulemaking process. And the 8.2 percent higher returns that those firms cited in the final Volcker Rule enjoyed in the first hour of trading are striking but not statistically significant.

As former Federal Reserve Chair Janet Yellen reminded us all in her final press conference as Fed chair, correlation is not causation. Rulemaking is complicated, there are many actors involved in it, and stock prices contain a lot of different types of information and expectations baked into them. It’s difficult to tease out any one comment or data point as the decisive factor influencing a final rule or stock price.

Notwithstanding those caveats, clearly firms think there is some financial benefit to them from participating in the rulemaking process, or they wouldn’t do it (or they’re not actually rational actors, but that’s a subject for another post). Furthermore, because large financial institutions have extensive resources to hire lawyers who are sophisticated and well-versed in the technical details of a policy, this raises the possibility that the rulemaking process is a channel via which certain actors are able to influence the final outcome of a law in a way that serves their own narrow interest, not the public interest.

Anyone can make a comment on a proposed rule, but it seems plausible that agencies will give more weight to those comments that demonstrate a deep understanding of the reality of how to implement a policy, especially in light of recent reports by The Wall Street Journal finding that thousands of the comments seemingly submitted by regular citizens on rules proposed by agencies as diverse as the Federal Communications Commission, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, and the U.S. Department of Labor, were fakes.

It is reasonable to assume, then, that differences in the size of resources for mobilizing and deploying legal expertise translate into differences in ability to influence policy. As Bloomberg columnist Matt Levine points out about The Wall Street Journal reports of fake comments, if the value of public comments on rules comes from their substance and compelling arguments, then “It gives more weight to the positions of ‘special interests’ with expertise than to those of regular citizens without it.”

If sunlight is the best disinfectant, then the public nature of the notice and comment part of the rulemaking process seems like an excellent requirement. But if meaningful participation in the rulemaking process favors the sophisticated over the unsophisticated, or, more precisely, favors those with the resources to hire the sophisticated, then the chances are high that regardless of the public nature of the agency rulemaking process, participation in it could be a channel via which economic power can be translated into political power. Even if the findings of this particular paper don’t lead to definitive conclusions about the influence of money and power on the rulemaking process, as Carpenter and Libgober point out, the empirical patterns found by it raise many interesting questions for social scientists to consider and analyze further.

Lobbying with Lawyers: Financial Market Evidence for Banks’ Influence on Rulemaking

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01162018-WP-lobbying-w-lawyers

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Authors:

Brian Libgober, PhD Candidate in Government, Harvard University
Daniel Carpenter, Allie S. Freed Professor of Government, Faculty of Arts and Sciences, and Director of Social Sciences, Radcliffe Institute for Advanced Study, Harvard University

Abstract:

How do business firms shape regulation? Can firms use administrative procedures to influence the regulatory environment in which they operate, and how would we know if they were successful? We explore these questions by analyzing the commenting activity of financial entities in Dodd-Frank related rulemaking at the Federal Reserve. Using intra-day event-study methods, we find favorable market reactions around rule announcements associated with participation in rule-making. In response to a rulemaking event, and compared to nonparticipants, commenting banks obtain asset price returns at the 55th to 62nd percentile of ranked returns. Observed Federal Reserve rulemaking participation by publicly-traded banks accounts alone for $7 billion in excess returns in the post-Dodd Frank era. The aggregated influence of firms in financial regulation may be far larger. Closer examination of two rules—Volcker Rule and the debit card interchange fee rule—suggests that these valuations are driven by changes in rules moved by comments. The results illuminate new dimensions of political inequality, namely the differential ability of interests to mobilize legal expertise. They also establish new measures of industry influence in regulatory politics, especially in rulemaking.

Weekend Reading “quitting is awesome” edition

Posted on by Bridget Ansel

This is a weekly post we publish on Fridays with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is the work we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

Iris Marechal highlights new research showing that economic conditions played a very small role in the growing opioid crisis, countering the common “deaths of despair” theory. Rather, the reduction in cost and increase in availability of drugs were the biggest drivers.

Nick Bunker digs into the latest Job Openings and Labor Turnover Survey data release, better known as JOLTS, and what that tells us about the state of the economy.

Speaking of JOLTS, Nick is featured on Planet Money’s “The Indicator” this week for their episode, “Why Quitting is Awesome.” Nick discusses why he loves this lesser-known data set, and why more people quitting their job is reflective of a stronger economy.

Links from around the web

Georgetown University economist Harry Holzer pushes back on Walmart’s assertion that the new corporate tax cut incentivized the company to raise wages to provide better benefits. Holzer argues that Walmart probably would have taken these actions even without the new tax cuts in 2018 given the more competitive labor market and the company’s attempt to banish its reputation as a bad employer. [fortune]

Claire Cain Miler and Ruth Fremson look at the growing number of men who have gone into nursing, a historically female-dominated occupation, in an era in which traditionally male jobs are on the decline. [the upshot]

While some are touting the historically low unemployment rates for black and Hispanic workers, Gillian B. White cautions us to not applaud just yet. She highlights how significant racial discrepancies in the unemployment rate continue to exist, even among individuals of similar education and skill levels. [the atlantic]

Branko Milanovic, an economist at the Graduate Center of the City University of New York, looks at the work of early 20th century scholars, such as John Hobson, Max Weber, and Rudolf Hilferding, and what their more holistic view of economic and social forces can teach us today. [vox]

Heather Long writes about a proposal to give each newborn in the United States a “Baby Bond” between $500 and $50,000 depending on their parents’ wealth. The money, according to Darrick Hamilton of the New School and William Darity of Duke University, could help mitigate historic levels of wealth inequality within the United States. [wonkblog]

Friday Figure

From Equitable Growth’s “Fact sheet: Occupational segregation in the United States.”

The opioid crisis: A consequence of U.S. economic decline?

Posted on by Emilie Openchowski
Prescription bottle and pills are seen on a table. The United States has seen a four-fold increase in the rate of opioid overdoses since 1999.

The opioid epidemic continues to devastate families and communities across the United States, causing serious health and socioeconomic crises. The high prescription rate for opioids and the subsequent misuse of this medication by millions of Americans accelerated addiction and has led to a four-fold increase in the rate of overdoses since 1999. Estimates indicate that more than 90 Americans die every day from opioid overdoses. This drug misuse costs the federal government $78.5 billion per year in health care, addiction treatment, and productivity loss, according to the U.S. Centers for Disease Control and Prevention.

Economists Anne Case and Angus Deaton at Princeton University attribute the sharp increase in drug overdoses between 1999 and 2015 to “deaths of despair” rather than to the increased ease of obtaining opioids: That is, their research suggests that higher drug suicides are attributable to social and economic factors such as a prolonged economic decline in many parts of the United States. They show that white Americans are more affected by the opioid epidemic, yet less affected by economic downturns than other racial and ethnic groups in the country. (See Figure 1)

Figure 1

Why are whites experiencing a more dramatic rise in drug mortality than nonwhites? Other researchers associate this growth with the drug and public health environment rather than economic conditions. Research scientist Kyong Ae Ko and his colleagues at the University of Texas MD Cancer Medical Center find that the availability and the use of risky drugs are of particular importance in rising drug fatalities. Health scholars Ashta Singhal at the Boston University School of Dental Medicine, Yu-Yu Tien at the University of Iowa College of Pharmacy, and Rene Hsia at the Department of Emergency Medicine and Philip R. Lee Institute for Health Policy Studies at the University of California, San Francisco, find similar results. Both studies observe that whites have been prescribed more opioids than nonwhites, and assert that this fact explains the racial-ethnic disparities in drug overdose.

In a recently released paper, public policy professor Christopher Ruhm at the University of Virginia sheds further light on the debate over whether the opioid crisis is health related or economy related. He assesses the relative contribution of the opioid addiction crisis and socioeconomic crisis from 1999 to 2015 in 3,098 counties with consistent boundaries over the time period across the country. As a first step, the author measures the impact of long-run economic changes on drug and alcohol suicide by labor-market outcomes, household wealth, and international trade shocks. Ruhm finds that counties that are more affected by economic decline show higher drug mortality than those with better performance. Yet he also finds that the size of this effect is not large enough to explain the opioid epidemic.

Overall, he estimates that economic conditions explain roughly one-tenth of the drug death increase. Thus, he says the “deaths of despair” theory fails to adequately explain the fatal drug epidemic.

He also finds evidence that the “drug environment hypothesis”—that the availability and the cost of drugs in legal and illicit markets mostly explain the increase in overdose deaths—is valid. Ruhm observes a shift in the nature of the drug involved in fatal overdoses: The beginning of the analysis period was dominated by a rise in opioid analgesic overdoses, while since 2010 overdoses mainly involved illicit opioids such as heroin. If economic conditions were the key driver of the increase in overdose deaths, then there would be no reason for such a shift.

Moreover, he also finds that overdose death rates vary with sex and age, further validating the drug environment hypothesis. Indeed, the groups at higher risk of abusing prescription opioids (females and older adults) have the largest increase in drug death rates early in the analysis period, while males and young adults (a group with higher risk of illicit drug abuse) experience an explosive growth in drug death rates around 2010. Thus, he argues that a change in the drug environment over these years and the people more at risk of specific drug abuse were differently affected.

President Donald Trump in October declared the opioid crisis a national health emergency. Further research into the economic causes of the crisis identified by economists Case and Deaton and the drug environment causes pinpointed by an array of health experts would go a long way toward developing federal, state, and local policies to combat the opioid crisis effectively.

Iris Maréchal is a Fall intern at the Washington Center for Equitable Growth and a French exchange student at the Johns Hopkins University within the Aitchison Fellowship Program.

Must-Read: Michael J. Boskin: Another Look at Tax Reform and Economic Growth

Posted on by Brad DeLong

Must-Read: A strange piece form Michael Boskin. The JCT’s dynamic score assesses the Republican tax “reform” bill as boosting real GDP by 0.2% over the long run. The Tax Foundation—which by excluding any deficit drag greatly highballs the growth effects of tax cuts—sees it as boosting real GDP by 1.3% over the long run. Robert Barro and Michael Boskin, devoting less than 1/20 as much analytical time to the question and with little familiarity with the details and phase-out provisions, say 7%. And they are sticking to it. We are, they say, “not about to cede… professional judgment to others, in or out of government…” That’s all they write. I am, I must confess, somewhat flummoxed. I think the real Boskin position comes in the next sentence I quote: “current reform may well have deviated further from the ideal had we not offered our analysis and advice”, with the nudge-nudge-wink-wink claim that their analysis and advice was only taken because they were willing to say whatever their political masters wanted and endorse the final product. I see it very differently. I see their willingness to say whatever their political masters required at the end as not gaining them a seat but losing them their seat at the policy table. In being willing to make the demanded claims and provide the demanded endorsement, they throw away their ability to influence policy: since they will endorse whatever the sausage-making process produces, others elbow them out of the way and feed the sausage machine. So, then, they should be asking themselves: What’s the point of our being here?: Michael J. Boskin: Another Look at Tax Reform and Economic Growth: “Barro and I have clearly come to a different conclusion than Summers and Furman have about the bill…

…While I certainly respect Summers and Furman’s right to their views, I am not about to cede my professional judgment to others, in or out of government…. I believe that the current reform may well have deviated further from the ideal had we not offered our analysis and advice. The same was true when I and others were advising President Ronald Reagan and congressional leaders on the major tax reforms of 1981 and 1986. Many factors other than economists’ textbook policy proposals affect the final product. Finally, I would emphasize the related point that the actual tax provisions people and businesses will be required to use have yet to be written, and will be determined partly by technical interpretations and regulations in the coming months. In the case of the 1986 reform, I was still getting calls from Committee staff weeks after it had passed, asking me what exactly I thought was meant by this or that provision. No one should expect this time to be different…