Economists almost always are fretting about citizens’ irrational voter choices, irrational behaviour of people, irrational choices. And yet, nations move on. A new paper attempts to track and analyse the huge divergence on policy issues between economists and citizens. In Economic Experts vs. Average Americans, economists Paola Sapienza and Luigi Zingales wonder if this is because ordinary people have not been trained in economics or because economists lack common sense or miss important political considerations — and leans towards the latter.
The authors found a large divergence between economists and citizens on a common set of policy questions that included school vouchers to public school students, CEOs being overpaid and increased taxes. There was divergence among economists too, but the topics “where economists agree among themselves the most, are also the topics in which their opinions are most distant from those of average Americans.” Further, this divergence is not because of lack of knowledge or information.
What gives? A five-letter word called “trust” — citizens do not trust the implicit assumptions embedded into the economists’ answers and that economists give them for granted. Seems citizens believe in the imperfections, the irrationality and the frailties of humans. Economists constantly tell me that economics is a “way of seeing the world”. Implicit in that statement is the superiority of this way — perfect information, rational behaviour and incentives — of seeing. On issues of policy, this paper observes that economists answer questions and address problems “literally and take for granted that all the embedded assumptions are true”. Average citizens don’t.
A case in point is India’s land acquisition bill that has been fighting for a fresh lease of life for years now. Yesterday, political consensus on the bill brought the Congress and the BJP on the same platform, leaving the industry unhappy. Farmer voices were physically absent but it is safe to assume that they have been represented by the parties.
Despite all flawless logical and perfectly rational arguments, we have seen how land acquisition has been abused. “It has taken all of 117 years to re-examine this piece of legislation that has been used as well as abused by successive governments to wrest land, sometimes for ‘public good’ and often for private gains,” I wrote two years ago. “Under the initial Land Acquisition Act, 1894 — and 18 other state and central laws — the people of India have yielded more than 150,000 sq km between 1951 and 1990. That’s bigger than the size of 143 countries, including Bangladesh, Nepal and Greece.” With this experience behind them compounded by stronger voices today, farmers are perhaps demanding their “fair share” of entitlement.
The paper concludes with humility and expands the scope of policy advice: “Our analysis cautions against using these economic expert opinions as a policy tool. Hopefully, the same economists, when they do policy advice, would answer the same questions very differently. Otherwise, we would have to conclude with William F. Buckley, Jr. that ‘I’d rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University’.”