- COMMENT
- Business
- The economy
This was published 7 years ago
Why most economists are so worried about Donald Trump
By Justin Wolfers
If the November election was intended as a rejection of elites, of expertise and of the sort of technocratic advice that economists often give, it's a punch that has landed.
In sombre analyses, huddled hallway conversations and pointed asides during endless panel sessions at the annual conference of economists last weekend in Chicago, the major theme was a sense of anxiety about the incoming Trump administration.
This foreboding was evident in roughly equal measure among conservative and liberal economists. But it is in direct contrast with the feelings of small-business owners and Wall Street traders.
Most of my fellow economists remain convinced that university-trained economists can offer useful insight to the new administration. Few believe it will matter. The life force that animates the econ tribe - that what they're doing matters - has been drained away.
"Our companies can't compete with them now because our currency is too strong. And it's killing us," Trump told the Wall Street Journal. Credit: AP
Few see useful channels for influence.
Partly this reflects US president-elect Donald Trump's plans. On issues like restricting trade, directly intervening to assist specific industries or corporations, targeting tax cuts to the wealthy, his agenda stands as a rejection of the advice that mainstream economists have typically offered.
Partly this reflects his appointments. Few of his key economic advisers have economics training, and the only official who is an academic economist - Peter Navarro, who earned a Harvard PhD in economics and will head the newly formed National Trade Council - stands so far outside the mainstream that he endorses few of the key tenets of the profession.
Concern about the role of economic advice translated into concern about the economy.
Over three days of intense discussions, I didn't encounter a single economist who expressed optimism that Trump's administration would be good for the economy. The optimists were those who thought he would not have the energy to actually implement his agenda; the pessimists' thoughts veered toward disaster.
I feared I was talking to an unrepresentative group until I stumbled upon a recent survey of leading academic economists showing a similar pattern. Of the 31 respondents to the University of Chicago's IGM Economic Experts Panel, 28 disagreed with the claim that the "seven actions to protect American workers" in Trump's 100-day plan would improve the economic prospects of middle-class Americans. The dissenters were two economists who were uncertain, and one who had no opinion.
The pervasive pessimism among professional economists stands in stark contrast with the judgment of financial markets, which rose strongly in the wake of Trump's election, and have remained buoyant since.
It also puts economists at odds with the judgments of small-business owners, according to the latest survey from the National Federation of Independent Businesses.
In October, the pessimists who saw business conditions as likely to worsen outnumbered the optimists by 7 percentage points; the latest survey from December shows that the optimists now outnumber the pessimists by 50 percentage points. It's an extraordinary shift - one the association described as "stratospheric".
I'm not quite sure how to reconcile these conflicting signals. One possibility is that Trump remains something of an unknown, and each group is filling in the blanks differently.
Small businesses, pleased to see a businessman in the White House, might be tempted to believe the best. By contrast, there's a reason that economics is called the dismal science, and few economists trust politicians - of either stripe - to get things right. Greater uncertainty gives economists a broader canvas upon which to project their pessimism.
Maybe these groups are describing different things. Businesses and markets care about profits. Economists focus on workers as well as the businesses they work for, on buyers as well as sellers, and on new firms as much as existing firms.
Trump's anti-regulatory zeal may help businesses but hurt workers; his anti-trade agenda could help sellers but hurt buyers; and his instincts to protect existing jobs may help existing businesses at the expense of new entrepreneurs.
Or perhaps the optimism of small-business owners is about what they think is most likely to happen, particularly in the short run.
My conversations with economists revealed them to be more focused on the long run, particularly on the risk of really bad outcomes.
By this view, the short-term optimism may be well placed, but should be juxtaposed with the possibility of a trade war, a catastrophic economic decision like defaulting on the national debt or a foreign policy crisis. Nearly every economist I spoke with said the risk of these events had risen.
Perhaps this fear makes sense: it's the double whammy that worries economists, that Trump's populist pose assigns less value to economic expertise, while also creating the conditions under which it's most likely to be needed.
New York Times
Justin Wolfers is a professor of economics and public policy at the University of Michigan