Ask a Trained Parrot
Betsey Stevenson and Justin Wolfers have long been among my favorite social scientists thanks to their meticulous, incisive work about economics and the family. Their paper “Bargaining in the Shadow of the Law: Divorce Laws and Family Distress” is one of the most horrifying pieces of non-fiction I’ve ever read. I can’t believe anyone who reads it will ever think about divorce the same way again. And “Marriage and Divorce: Changes and Their Driving Forces” is the sort of work family policy needs more of, rather than the instincts, gut feelings, and greeting-card sentimentality it usually runs on.
But I think we may have had quite enough family policy here lately — not just same-sex marriage, but child abuse, abstinence, population growth, and all the rest — so I’d like to talk about something different… also by Justin Wolfers.
In this NPR Marketplace segment, Wolfers talks about the abject failure of macroeconomic modeling, as studied by two of his students. Simply put, models don’t work. The old ones don’t work. The new ones don’t work. Computers don’t help. Unlike weather forecasting, macroeconomics hasn’t made any meaningful progress at modeling the future. Macroeconomists make big bucks and get a lot of respect, but their predictions aren’t statistically any better than those of a trained parrot.
Which raises some interesting questions: First, why not just find some trained parrots? What do the modelers get us that the parrots don’t?
The answer here I think is simple. Much of what government does is about signaling and allocating status, not about doing any actual good. But to get the process started, we have to signal the professionalism and the integrity of the government — its objectivity; its science. If you can’t do that, then it really is just transparently playing favorites. And if there is any profession that exists solely to achieve the task of enhancing government credibility, macroeconomics might just be it. (Social workers are a close contender, for those still hankering after family policy.)
Second, we have to signal that certain groups are valued and loved by the government — farmers, auto companies, large foreign financial institutions, Pakistan — and here we hit a problem. How do we do it? Politically, these things can be justified only in certain very limited ways. Thanks to our political culture’s lingering classical republicanism, one can’t very well say “Oh here, GM, we’re doing this because we love you and want you to feel valued,” even if that’s precisely what’s going on. No, we have to tie our favoritism, however structured, to some claim about the general welfare.
Enter the macroeconomists. Anthropologically, they act as soothsayers, interpreting the random walk of experienced history (and experienced favoritism) as part of an eternal cycle, only dimly seen, of transcendent justice — understood, à la Rawls, as fairness, or à l’Hayek, as conforming with abstract, impersonal rules. The latter being harder, but only by a little.