What makes economists different?

Economists don’t cut it the same way. www.usoe.k12.ut.us

Anyone with any experience of Switzerland’s direct democracy knows that voters regularly take pleasure in rejecting the accepted economic wisdom.

But why is there such a gulf between the political views of most professional economists and those of so-called “normal people”?

St Gallen University professor Gebhard Kirchgässner, himself one of the country’s best known practitioners of the “dismal science”, believes he may have found the answer.

One factor may simply be the way that formal training shapes students’ approaches to problem solving – in particular, the well-known tendency of economists to provide “either-or” answers to many questions.

As playwright George Bernard Shaw once quipped: “If you laid all the economists in the world end to end, you still wouldn’t reach a conclusion.”

However, Kirchgässner believes a more fundamental reason is the differing way that economists and non-economists define social justice.

To put the argument in a nutshell: while economists (and politicians) are often more concerned with increasing the size of the overall economic “pie”, non-economists tend to concentrate more on how fairly the existing pie is distributed.

Right, left or wrong?

There is a growing body of evidence worldwide to suggest that professional economists consistently hold more rightwing political views than the majority of the population – not to mention fellow academics.

“Economists are different, and in some sense more conservative,” says Kirchgässner. “There is a gap in our society between the economic elite and the other elites, especially the cultural one.

“Academic economists are today [also] significantly to the right of the general public in respect of their political identification.”

And he points to a string of scientific studies, including the so-called “ultimatum” game in which groups of economists and non-economists were both asked to simulate a real-life negotiating situation.

The outcome: the economists behaved more selfishly, or – to put it more politely – more in line with the predictions of mathematical “game theory”.

“It is hardly astonishing that people who know formal game theoretic models are more likely to behave according to the behaviour predicted by those models than those who do not,” says Kirchgässner.

“The really interesting question is whether such behaviour really matters in practice – ie, in real world situations – and therefore effects policy outcomes.”

Economic rubbish?

Kirchgässner says the Swiss political system provides a clear answer: yes.

He gives the example of the 2002 nationwide referendum on electricity-market liberalisation, where the solution favoured by nearly all economists, political parties and other interest groups was rejected by a clear majority of the electorate.

Cantonal-level votes provide further evidence: for instance, decisions on whether to privatise rubbish incinerators. Such proposals have regularly been rejected, even when the centre-left Social Democrats were not opposed to them.

And experience has shown that in the 19 Swiss cantons where there are cantonal monopolies on insurance for fire and elementary damages, it is impossible to privatise them.

Kirchgässner believes there are two basic reasons why economists hold such markedly different views about the best way to deal with broad social problems.

First, and most obviously, their professional training teaches them a certain way of approaching problems: for instance, to consider individual actions as largely rational and incentive-driven, or to focus on the unintended side effects of actions.

Different folks, different strokes

However, he says the more interesting explanation is quite simply a different conception of what constitutes equality of opportunity.

“Economists usually see the market mechanism as a system that guarantees this equality, because whoever is willing to pay the price of a good can get whatever he/she wants.

“[However], other people see this principle as being violated in the market system because the ability to pay depends on the very unequal income positions of the individuals.”

In one classical experiment, participants were asked what they considered to be the fairest way of distributing water bottles on a mountaintop.

Eighty per cent thought standard market mechanisms (pricing systems) were unfair, while 76 per cent favoured a system of first come, first served – in many ways the least efficient, but one where income differences played no role.

When the same study was repeated among economics students at Zurich University, only 64 per cent found the market system unfair – still a clear majority, but 20 per cent less than in the previous study.

swissinfo, Chris Lewis

Key facts

Like scientists, economists are trained to make assumptions and build simplified models to explain the world.
However, unlike natural scientists, they have little opportunity to put their theories to the test.
In the field of policy advice, disagreements can be based both on differences in scientific judgement and on differences in values.

In brief

Kirchgässner says economists think differently about political issues to the rest of the population.

He thinks their generally right-of-centre views are partly the product of their professional training.

But they also have a different conception of what is meant by equality of opportunity – what Kirchgässner calls “normative common sense”.