Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy

Published by EH.Net (June 2023).

Elizabeth Popp Berman. Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy. Princeton: Princeton University Press, 2022. 344 pp. $35 (hardcover), ISBN 978-0691167381.

Reviewed for EH.Net by Daniel Kuehn, The Urban Institute and George Washington University.

Something significant changed in the political economy of the U.S. in the last quarter of the twentieth century. Efficiency was elevated as a social goal, while New Deal and Great Society aspirations were increasingly seen as unrealistic or anachronistic. Arguably, some of this new thinking was beneficial, but much of it was definitely not, and economists had something to do with it. Typically, this turn in U.S. policymaking is tied to neoliberalism, and often a subgenre of neoliberalism emerging from the University of Chicago. Neoliberalism has been defined in several different, though related, ways. David Harvey (2005) suggests that neoliberalism elevates market exchange to be “an ethic in itself.” Thomas Biebricher (2018) and Quinn Slobodian (2018) provide a more honed and serviceable definition of neoliberalism as a philosophy of state design that provides the preconditions for a market order that is shielded from democratic manipulation or accountability.

Elizabeth Popp Berman’s book, Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy, is clearly related to the neoliberalism literature, although Berman spends almost no time discussing neoliberalism directly and does not see Chicago as an exclusive origin point. Instead, Berman argues that the tectonic shift in U.S. political economy was primarily ushered in by centrist and center-left economists who entrenched an efficiency-centric “economic style of reasoning” that was, at least superficially, relatively free of political ideology. Berman’s book is balanced, well-argued, and well-written. She avoids the extremes of both Cass Sunstein’s (2018, xi) “technocratic conception of democracy” in his paean to the cost-benefit analysis revolution and Binyamin Appelbaum’s (2019) Chicago-centric attempt to implicate the whole field of economics in a dramatic “fracture of society.”

Appreciating Berman’s use of the concept of a “style of reasoning” is essential to a full understanding of the book. Economists may be prone to dismiss Berman as offering a flat and unfair description of economics if they gloss over her discussions of “styles of reasoning,” and indeed I think this confusion is at the root of many critical reviews of the book by economists, such as Jason Furman’s (2022) attempted exculpation of economists in the pages of Foreign Affairs. The point of the “economic style of reasoning” is not that economists are, as individuals, scientifically obligated to value efficiency over equality, or that they mastermind all policy decisions in Washington. Instead, Berman’s argument is that economists’ basic framework for characterizing and analyzing public problems has been adopted as a way of framing policymaking, crowding out other approaches and values. In some case economists absolutely aid and abet this style of framing policy decisions. In other cases they do not, and many economists speak out loudly for justice, action on climate change, etc. But regardless of what individual economists advocate or value in any given policy domain, the governing logic of the economic way of thinking constrains policy horizons. I think Berman’s original subtitle for the project, “How Economics Became the Language of U.S. Public Policy,” does a better job than the Princeton University Press subtitle of highlighting the “styles of reasoning” concept without treating efficiency and equality as necessarily conflicting goals.

The economic style of reasoning dominates as a logic of governance in part because it provides policymakers with a multipurpose technology that can demarcate what counts as “good policy” and “bad policy” across multiple policy domains. Berman’s book is organized around three policy domains. After providing a history of the emergence of the economic style of reasoning in the academy, the RAND Corporation, and the Defense Department, Berman considers the cases of antitrust policy (Chapters 4 and 6), social or antipoverty policy (Chapter 5), and environmental policy (Chapter 7). Along the way, she takes up related policy areas such as transportation, occupational health and safety, and education. Each policy area illustrates different ways that the economic style of reasoning became embedded in federal agencies. At the risk of oversimplifying a complicated historical process, the experience of antitrust illustrates how academics directly spread the economic style in legal and regulatory communities. The case of social policy illustrates the diffusion of the economic style across federal agencies, with the Lyndon B. Johnson-era Department of Health, Education, and Welfare (HEW) acquiring the staff and practices of the Defense Department more or less directly. In contrast, the economic style was introduced in environmental policy by legislation (the National Environmental Policy Act) that required cost-benefit analysis by federal agencies. In all three cases the intellectual argument grew out of a common rootstock, but the circumstance of adoption in federal policymaking were widely divergent.

If I were inclined to defend the economic style of reasoning, I would probably focus on Berman’s choice to weigh the economic style of reasoning against that of advocacy communities and interest groups. A natural alternative to this would be to compare economists to other social scientific styles of reasoning that were and are in competition with economics. Historian and political science professor Daniel Patrick Moynihan’s 1965 report on the Black family, and the various “culture of poverty” framings from scholars such as the political scientist Edward Banfield and the anthropologist Oscar Lewis, come immediately to mind as alternatives to economists working in the antipoverty space. More recently, one might add the even more controversial political scientist Charles Murray and his influence on the welfare reform debate of the 1990s. These men were not incidental to the history Berman tells, and their analysis was central to pathologizing poverty in the United States. They shaped public discourse and policymaking in their time, just like economists did, and they held the attention of politicians and policymakers in both parties. When economists’ analysis is compared to advocates and sympathetic interest groups, of course the economists come across as lacking passion and warmth. It is the job of the advocate to advocate, and it is the job of the analyst (from any discipline) to analyze. These are different spheres of activity in the policymaking process. If economists are instead compared to other social scientists of the era such as Moynihan, Banfield, Lewis, or Murray, we see some of their relative strengths (and weaknesses) in a new light, at least during that period.

Another related problem is that the advocacy community is of course not always so egalitarian. Plutocrats have their advocates as well, and a commitment to conducting a cost-benefit analysis forces those less sympathetic interest groups to at least confront the costs they impose on the public. It would be easy enough to opt for egalitarianism if egalitarianism was always the alternative to efficiency, but that simply isn’t the case in the political economy of the United States. A world without cost-benefit standards may be more egalitarian, or it may be a polluter’s and plutocrat’s paradise. It’s difficult to say.

It may be a self-serving reading, but to a certain extent, I come away from the book less ashamed of or concerned about the nature of the economists’ analysis and more frustrated with how much responsibility policymakers have abdicated to the economic style of reasoning. It is difficult for me to see the Council of Economic Advisors or the Congressional Budget Office per se as the problem, so much as a Congress that constrains itself to arbitrary budget rules or Democrats that parrot junk economics on the deficit. A major lesson of Berman’s book is that problems arise when economics transcends the boundaries of social science and becomes an all-encompassing governing logic, crowding out other values and lulling policymakers into naivete about the exercise of power.

One theme of the book is that Republicans have been more willing than Democrats to ignore the strictures of the economic style of reasoning when it conflicts with their priorities. This rings true, but if so, it implies that the governing logic of efficiency is fairly easy for politicians to get out from under. That raises the question of why Democrats don’t get themselves out from under it more often. How is cost-benefit analysis supposed to be such an all-encompassing governing logic if it so clearly does not act as a constraint on half of Washington? It seems like a political choice Democrats make as a party rather than a logic that economists are imposing.

Berman (232) concludes with a call for progressives to stand firm when their values conflict with “the values of economics.” This is sound advice, as is her call “to recognize the values within expertise,” that is, the values that are imported into policymaking through the economic style of reasoning. I think Berman is right that simply asserting that economics is value-free would be naïve. But I also think we can be more assertive in identifying and rejecting the economic style of reasoning that smuggles in efficiency as a value unto itself.

A good guide to this commitment to constrain the economic style of reasoning is provided by William Gorham, a character in Berman’s book responsible for bringing the Planning-Programming-Budgeting System to HEW. Gorham (1967, 6-7) warns that “even if we could conceptualize and measure the benefits of particular programs, there is the fact that benefits of different programs go to different people. Shall equal benefits to different individuals in the population be weighted equally? Is it equally important to raise the educational attainment of a suburban child and a slum child?” The importance of these equity considerations put real limits on what cost-benefit analysis could and could not do for policymakers. Gorham continued that “the incommensurability of the benefits makes it difficult for cost-benefit analysis to contribute greatly to the choices that must be made among major categories like health, education, and welfare. For such decisions, the major contributions of analysis will be in providing the ‘trading’ terms of resources devote to different purposes.” The economic style of reasoning, in other words, is one tool that we can use to define the policy space in a meaningful way, but it cannot set agendas or make decisions. This is a much humbler vision for cost-benefit analysis as one component of an informed choice that required weighing values well beyond economic efficiency.

References

Appelbaum, Binyamin. The Economists’ Hour: How the False Prophets of Free Markets Fractured Our Society. New York: Little, Brown, 2019.

Biebricher, Thomas. The Political Theory of Neoliberalism. Stanford: Stanford University Press, 2019.

Furman, Jason. “The Quants in the Room: How Much Power Do Economists Really Have?” Foreign Affairs 101(4): 182-189 (July/August 2022).

Gorham, William. “Notes of a Practitioner.” The Public Interest 8: 4-8 (Summer 1967).

Harvey, David. A Brief History of Neoliberalism. New York: Oxford University Press, 2005.

Slobodian, Quinn. Globalists: The End of Empire and the Birth of Neoliberalism. Cambridge: Harvard University Press, 2018.

Sunstein, Cass R. The Cost-Benefit Revolution. Cambridge: MIT Press, 2018.

Daniel Kuehn is a Principal Research Associate at the Urban Institute, where he studies registered apprenticeship, and an adjunct instructor at George Washington University, where he teaches cost-benefit analysis. He independently studies the history of economics, with a focus on James M. Buchanan and Warren Nutter, including the recent article “James Buchanan, Gordon Tullock, and the ‘Radically Irresponsible’ One Person, One Vote Decisions,” in the Journal of the History of Economic Thought.

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