Over the past two weeks, academic economists (and a couple of bystanders) have been arguing about why economics wasn’t able to guide policy better during the Great Recession. Some blame nonacademic economists. Others blame prominent academics. Others still say that economic advice doesn’t really matter, because politicians will pay attention only to the advice that they wanted to hear anyway.

John Quiggin and I have a forthcoming article in International Studies Quarterly that tackles this question, asking why politicians were influenced by a key group of economists early in the Great Recession but not in the later part. Our argument is that the key factors didn’t have much to do with the quality of the advice. Instead, what was crucial was the perceived degree of unanimity among economists. When the profession of economics appears to be speaking with one voice, politicians are more likely to listen, sometimes even when they don’t want to. When the profession appears to be split, politicians are much better able to pick and choose.

Unfortunately for economists, this offers incentives to politicians who don’t much like what economists are saying to elevate and promote dissident economists to create the appearance of intellectual division.

This was the fight

The recent argument began with a disagreement between Unlearning Economics, a blog that is critical of mainstream economics, and Simon Wren-Lewis, a left-leaning macroeconomist, over whether mainstream economics was partly responsible for the turn toward economic austerity during the Great Recession. Unlearning Economics said that it was. Wren-Lewis then retorted that the actual villains were “politicians, with help from City economists [i.e., economists working for private firms in the city of London], [who] started scare mongering about the deficit.” This led Brad DeLong, a Berkeley economist who was prominent in debate during the recession to argue that it wasn’t just politicians and the private sector, but also prominent academic economists who had made the case for austerity. In DeLong’s description: “The fact is that the ‘mainstream economists, and most mainstream economists’ who were heard in the public sphere were not against austerity, but rather split, with, if anything, louder and larger voices on the pro-austerity side.”

Wren-Lewis responded to DeLong by saying that the real problem was that “politicians and a good part of the media choose the economists they publicise,” suggesting that politicians had cherry-picked a small faction of economists and exaggerated their influence. DeLong replied again, saying that the real problem was that economists were almost inevitably going to disagree, even when they were arguing in good faith, raising huge questions for nonexperts who had to decide whom to trust.

Finally, the prominent blogger Kevin Drum said that none of this matters, because economists aren’t really influential — politicians just pick the economic advice that seems convenient to them — and economist Noah Smith argued on Monday that macroeconomists should be far more humble given the poor quality of available evidence.

And this is what they were fighting about

There are three questions underlying this dispute.

First: Should economists be able to reach a consensus over questions like austerity? Here, the disagreement is between Wren-Lewis and DeLong, with Wren-Lewis largely blaming actors outside the academic profession of economics for warping the perception of debate, and DeLong arguing that even in the best of worlds, economists are going to end up disagreeing.

Second: When, if ever, is economics going to be politically influential enough to shape policy outcomes? Here, Drum gives the most succinct answer, arguing that economists’ arguments are window dressing that politicians use to prettify the choices they would have made anyway. Both DeLong and Wren-Lewis, in different ways, would like to see a particular school of economics have more influence, while Smith calls for economists to be more humble in public.

Third: Were academic economists partly to blame for austerity politics after the Great Recession? Here, both Drum and Wren-Lewis suggest they were not — Drum because their opinions don’t matter, and Wren-Lewis because outsiders warped the debate. DeLong and Smith both think that inevitable fissures and disagreements within the profession were partly to blame.

This is what happened during the Great Recession

In our article, Quiggin and I suggest that these three questions are linked in different ways than most economists and outside observers think. Rather than looking at absolutes (economists do or do not have political influence, economists do or do not have fundamental disagreements, debates about economic ideas are driven by economists themselves or by politicians and their lackeys), we try to look at variation. If we want to know when economists have influence over policy debates, we might start by looking at whether economists have more influence when they apparently agree among themselves than when they apparently disagree. We might also look at the extent to which politicians are or are not able to influence economic debate.

From this perspective, it turns out that the Great Recession had two major phases. In the first phase, economists — including previous skeptics such as Martin Feldstein — advocated more spending to boost the economy, rather than adopting austerity policies. This apparent degree of consensus within a profession that usually has a hard time agreeing on anything helped sway politicians. In the words of one important policy observer, “What political leaders got from the economists was that people traditionally opposed to fiscal stimulus and fiscal deficits . . . suddenly had a different view. That impressed the politicians.”

Contrary to Drum’s argument, the apparent consensus among economists had real consequences for politics. German politicians, who didn’t want stimulus, found themselves in an extremely awkward position when their own Council of Economic Experts suddenly did an about-face and started arguing for more spending to boost the economy. Skeptics, such as economists in the European Central Bank and elsewhere, felt it was best either to keep silent or to try to foist their own pet projects onto the stimulus bandwagon, as John Taylor did with tax cuts.

However, it is hard to maintain an apparent consensus among economists when prominent politicians chafe at it. Hence, the second phase of the Great Recession saw renewed fissures among economists (over when one should ease off government spending) and efforts to widen these fissures by governments and other institutions that disliked the policy implications of economists’ advice.

Thus, the European Union’s finance ministers invited Alberto Alesina, a prominent advocate of austerity, to make a highly publicized presentation to them, and the European Central Bank started promoting the work of economists who seemed pro-austerity. Greece’s economic crisis made it easier for these economists to make arguments against government debt, even while Greece’s bailout piled more obligations on the heads of Greek taxpayers.

The economics profession is not separate from politics

What this suggests, as we argue, is that the best way to understand the role of economics in policymaking is to turn not to economic theory but to sociology.

Economic sociologists such as Marion Fourcade have argued that the profession of academic economics is deeply bound up with the political systems that it lives within and shapes. Prominent academic economists, far more than other social scientists, are likely to go back and forth between universities and roles in the Treasury Department, Federal Reserve, International Monetary Fund and World Bank. This means that economics has far more political clout than other social sciences, but it also has reshaped the profession, turning external policy influence into an important form of internal disciplinary prestige.

This provides enormous advantages for economics — yet it also opens up important weaknesses. It allows political actors to exert more influence over which economists and which economic ideas enjoy prestige within the profession than would be true, for example, in political science (which of course has its own particular professional deformations).

One of the key reasons disgruntled policymakers and politicians could widen splits within economics is because the world of economic politics and the world of economic thought are deeply intertwined. Channels of influence rarely flow only in one direction, as some economists have discovered to their dismay.