Saturday, January 19, 2013

Is a revolution in economic policy coming?

I'm reading The Soulful Science: What Economists Really Do and Why It Matters by Diane Coyle. I think it's a successful book in overviewing many interesting aspects of contemporary economics. The goal is to increase public understanding and access to the economics profession, although unfortunately, I suspect that most of its readership will be economists...

The part I particularly like is toward the end, when Coyle is discussing the advances in econometric technique over the last thirty years. She goes on to boldly say
I predict that during the next ten years the astonishing mapping of our societies taking place now, using modern econometric techniques and new data sets, will start to have a revolutionary impact on public policy. The availability of solid empirical evidence on an array of social issues is, however, going to make economics very controversial... A lot of sacred political cows are heading for the slaughterhouse. The buzz phrase in policy wonk circles these days is "evidence-based policy"... What if the evidence suggests you should overturn your old policy? 
She continues:
...the "what works?" agenda of empirical economic research is one of the most pressing challenges facing the modern world today.
I wholeheartedly agree, and its this belief which has driven me to graduate school and various efforts to increase my ability with econometric technique (although the prospect of vast future wealth doesn't hurt, either). However, I'm a little more pessimistic about the role of "evidence-based policy" in overturning current policy.

It seems to large extent, politicians (and by extension, voters) don't care whether policy achieves its stated ends. Rent control has not made apartments more accessible in NYC; foreign aid has not overcome the trap of poverty in Africa; various restrictions on immigration have not improved the prospects for American jobs. Instead, these policies make people feel good because it seems that we are confronting the problem.

Basically, I'm arguing that policies are expressive rather than functional. The challenge then is not just for economists to provide better evidence for what works and what doesn't, but also to shift the way that policies are evaluated so that the "what works?" agenda is even on the radar. Technocracy seems to be unpopular, for some reason...

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