Jonathan Kirshner is a professor in the Department of Government at Cornell University, and author of “American Power After the Financial Crisis.”
It does not take a world-class economist to observe that the American political system is not producing optimal public policy outcomes. But one might be needed to diagnose the problem and propose constructive solutions — and few are better positioned to do so than Alan Blinder. An eminent macroeconomic theorist and exemplary public servant, the former vice-chairman of the Federal Reserve is the author of a dozen clearly written and informative books that wed high theory with plain practicality. Among them, “Hard Heads, Soft Hearts” (1987) was the bible for a generation of center-left policymakers; “Central Banking in Theory and Practice” (1998) offered a valuable overview of that oft-opaque process, and “After the Music Stopped” (2013) was one of the best books written about the global financial crisis.
Now, “Advice and Dissent” attempts to tackle the formidable problem of dysfunctional economic governance. A loosely knit effort, the first third of the book sets out its diagnosis, which Blinder roots to the divergent cultures of politicians and economists; the middle passages revisit the themes of “Hard Heads, Soft Hearts”; in closing, Blinder turns toward solutions, foremost among which is to place more economic policymaking in the hands of technocrats who are insulated from the day-to-day tumult of partisan politics, with the Federal Reserve offered as an exemplar of this approach.
Blinder’s account of the “clash of civilizations” between economic theorists and political practitioners, in passages leavened by anecdotes from his experiences in government, is familiar and rings true. Economists emphasize complexity and contingency (thus President Harry S. Truman’s legendary search for a one-armed economist who could not say “on the other hand”), whereas politicians hunger for simplicity and clarity, so that policies can be easily packaged and sold. Economists and politicians have very different time horizons; the latter with eyes fixed on the next election, the former prepared to wait years or even decades for anticipated benefits to materialize. (Blinder calls both sides to task here, noting that economists are too easily content to wait out costly disruptions — a trait that led John Maynard Keynes to criticize his peers with the much misunderstood admonition “in the long run we are all dead.”) Politics commonly boils down to the question of who gets what from whom; economists can be tone deaf to distributive issues, focusing instead on the performance of the aggregate economy.
The expedient needs of politicians and the qualified uncertainties of economics, Blinder notes in his central metaphor, have led politicians to rely on economists the way drunkards rely on lampposts: “for support, not for illumination.” And so, as in a murder trial, each side trots out a different team of experts to testify to the veracity of their diametrically opposing points of view. The result, of course, is to undermine confidence in the very concept of expert opinion — a problem exacerbated by the electronic media, which under the guise of fairness often legitimize disreputable perspectives by giving equal time to both sides.
To illustrate what economists know, “Advice and Dissent” returns to the spirit of “Hard Heads, Soft Hearts,” with its admonition that political preferences can’t rewrite economic laws, which bind partisans of all stripes. Even economists who place great value on ensuring equality of economic opportunity and favor a compassionate social economy must face the stubborn constraints of scarcity and the imperative to act efficiently. Thus Blinder reprises airtight lectures on the inefficiencies of rent control and virtues of free trade, and, in the book’s high point, presents an outstanding exposition the contemporary crisis of inequality in America.
Unfortunately, three basic problems undercut his well-intentioned agenda. One is that the U.S. economy has changed considerably in the 30 years since the publication of “Hard Heads, Soft Hearts.” A reminder that rent control is inefficient does not speak to the existential crisis facing cities today: that the middle class can no longer afford to live in them. Laudable sensitivity to the plain fact that the case for free trade falls flat on its face if society’s losers are not compensated does little to address a culture of capitalism where social norms, market pressures and tax policy have “turned ferociously against labor.”
Ultimately, “Advice and Dissent” reflects the limitations (and outright failures) of the establishment wing of the Democratic Party. One can support the Trans-Pacific Partnership (as I do), and even share Blinder’s palpable frustration with the “astonishing political appeal” of septuagenarian democratic socialist Bernie Sanders, whose utter rejection of constraints (Free everything! For everyone!) is the antithesis of everything that hardheaded liberal economics stands for.
But Blinder’s impatience with dissent from the naive left is a reminder that the Clinton Democrats’ lurch toward the center did not come without cost. “Advice and Dissent” is hand-waving in its dismissal of those who favored more ambitious reforms after the global financial crisis, asking “will someone please explain how” a return to Glass-Steagall-style regulations “will somehow set things right”? This tin ear is telling. The larger point is that the repeal of Glass-Steagall was a centerpiece of the late 1990s misguided mission (abetted by expert economists and blessed by the technocracy) to dismantle the regulatory firewalls designed to keep banking safe and sound — one of a series of blunders that made something like the global financial crisis virtually inevitable.
This problem strikes at the heart of Blinder’s big idea: delegating more policy decisions to the technocrats. One need not be an ignorant, bloviating, faux-populist to observe that in the 1990s and 2000s, the technocratic class became ensconced in its own hubris and seduced by intimacies with power (it was not only celebrity journalists who succumbed to the compromising temptation of obscenely large speaking fees). Moreover, although central bank independence is a good thing, it is a fallacy to presume that it results in apolitical policymaking. Extending the realm of the technocracy to an increasing number of policy spheres, such as tax policy, seems equal parts unworkable and unwise.
Finally, there is the problem of our current historical moment. The reader is repeatedly assured that “Advice and Dissent” could have been written had Donald Trump not become president. But this elides a larger, looming question. As Blinder notes, Trump, “shunning of any kind of expert opinion, even to the point of denying basic facts.” is not guilty of the lamppost problem — he does not rely on economists for illumination or support. But solving the lamppost problem was what motivated this book. With its appeals for a better-educated public, more responsible journalism, less political partisanship, and an ill-timed call for increasing the authority and autonomy of credentialed technocrats, “Advice and Dissent,” even read with sympathetic eyes, is among the victims of our current political catastrophe.
By Alan S. Blinder
Basic. 346 pp. $30