How the new policy elite have caricatured the dismal science

Globe and Mail

2 days ago

Kevin Yin is a contributing columnist for The Globe and Mail and an economics doctoral student at the University of California, Berkeley.
Being an economist in 2025 feels a bit like being Galileo under the Pope. Now that Donald Trump has fired the head of the Bureau of Labor Statistics and nominated loyalists to the Federal Reserve Board, those studying economics have been left exasperated. And while a somewhat caricatured version of the dismal science has been criticized by other social scientists for decades, only recently has the criticism become more than an ivory tower feud, with far less informed malcontents and far more dire consequences for people's welfare.
Most of us have heard, or even uttered, the standard clichés about economics. Economists are focused on 'abstract models built on unreality,' often 'mistake [...] elegance for truth' and are swayed by simplistic assumptions such as perfectly competitive markets or infinitely forward-looking and hyper-rational agents.
In this vein, Trump trade adviser Peter Navarro has called economists 'damn fools' who 'need to get out more often.' The current chair of the Council of Economic Advisers and nominee to the Federal Reserve Board, Stephen Miran, has argued that economists assume away trade deficits and thus cannot grapple with their implications. Oren Cass, the founder of a think tank, suggested recently that our model of comparative advantage has 'ceased to function.'
To be sure, some of these critiques touch on genuine issues that leading researchers would be sympathetic to. And individual economists can certainly fall victim to any of these traps of dogma. But the 18th-century chalk-and-blackboard version of economic theory that protectionists have been criticizing lately would be largely unrecognizable to most frontier researchers. And the notion that people who spend their lives on these issues have not questioned the competitiveness of markets or the rationality of decision-makers is at odds with decades of study and debate.
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These are tired tropes, first and foremost because much of modern economic research is empirical, concerned with making robust causal inferences from data. And while our understanding is constantly evolving, there is a great deal of empirical research that disciplines our views on the impacts of policy.
On trade, for example, there is substantial evidence that it lowers the cost of living for consumers, improves production capacity via access to better intermediate inputs and can spur innovation by disincentivizing low-tech investment.
Perhaps more subtly, critics have simply not understood the purpose of, or the process behind, the mathematical models they loathe. All arguments are models – including those made by protectionists and heterodox thinkers. The only difference is that mathematical models can guarantee logical validity (but not necessarily soundness) while verbal arguments cannot.
This does not mean the mathematical models are correct, since underlying assumptions can still be false in critical ways, but it does constrain researchers to say something internally consistent. The claim that tariffs could incentivize manufacturers to relocate their production back to the U.S. is itself a simple model of the world – one that, when written down, would be guilty of all the same sins of assumption and more.
This is not mere academic posturing – U.S. policy is currently being defended with reference to such oversimplifications. In his manifesto, Mr. Miran himself cites a paper by Andrés Rodriguez-Clare of UC Berkeley and Arnaud Costinot of MIT to argue that the optimal tariff could be as high as 20 per cent, because the total gains in tax revenue could outweigh the losses to consumers.
Profs. Rodriguez-Clare and Costinot had to point out in an op-ed that this was mostly a pedagogical exercise, that it abstracts away from any trade retaliation and that they themselves do not support tariffs for this reason. In this case, it was the protectionists taking models too seriously, and the authors of those models being cautious.
The caricaturing problem is somewhat endemic to the nature of what economics asks; the logic of these issues is often subtle, and words do not suffice. However, the sidelining of expertise is also partly the field's own fault for settling too comfortably into its 'trust us' approach on policy issues, instead of recognizing that finding an answer and communicating it are entirely separate skills.
Economists are quick to accuse others of failing to understand, but slower to take up the hard work of helping the general public reach that understanding. We would benefit from a dose of humility, acknowledging our own role, however minute, in allowing this confusion to fester.
But this is a digression. Whatever the flaws in conducting and communicating economic research, a vast and rigorous literature still shows that trade is good for the most part, that central banks need to be independent and that deficits must be paid by future generations. Policy makers and pundits can choose to ignore decades of research on these topics, but for the people and businesses who will suffer the consequences, the laws of economics will be anything but abstract.