ADVICE AND DISSENT: Alan S. Blinder, Princeton University economics and public affairs professor, presented his “lamppost theory” to describe the dysfunctional relationship between politicians and economists at a lecture Saturday morning at the University’s McDonnell Hall.

By Donald Gilpin

Describing economics and politics as two widely disparate civilizations, Alan S. Blinder, Princeton University economics and public affairs professor and former vice chairman of the Board of Governors of the Federal Reserve System, says that both fields have a lot to learn from the other. Speaking to an audience of about 200 on Saturday morning in Princeton University’s McDonnell Hall, he recommended combating economic illiteracy as a first step in closing the gap.

Blinder shared ideas from his recent book Advice and Dissent: Why America Suffers When Economics and Politics Collide, presenting his “lamppost theory” to describe the dysfunctional relationship between politicians and economists. “Politicians use economists the same way a drunkard uses lampposts, for support rather than illumination,” he noted.

On the Princeton faculty since 1971, Blinder, a former member of President Clinton’s Council of Economic Advisors and now a regular columnist for The Wall Street Journal, has spent considerable time in both civilizations and knows them both well. He continued, “If each side

would learn some things from the other, we might get more illumination and better policy.” He emphasized that economists, if they want to influence policy, have a lot to learn from politicians.

Getting beyond the lamppost theory will not be easy, Blinder argued, but it’s worth trying. In response to a question suggesting that economists can be trained to have more practical, political knowledge, Blinder claimed that the top economics programs in the country, at Princeton and elsewhere, don’t provide that real-world training. “That’s why i wrote this book,” he said. “It’s aimed to get economists more in the game.”

He went on to discuss the need for the electorate to be better educated, for more people to go to college, but, even more important, for people to gain basic economic literacy at an early age. “Ignorance is rampant,” he said. “Economic literacy is astonishingly low. There’s little incentive for even smart politicians to act like they understand economics.”

Blinder provided extensive detail of the immense cultural divide between the two worlds. The language of economics is logical and dry, while the vivid language of politicians depends on spin. Economists do their calculations with arithmetic, while politicians weigh everything by its political influence.

Economists depend on intelligence and ideas, while politicians might or might not be intelligent, but they rely most heavily on people skills. The incentive for economists is to maximize the welfare of society, while politicians invariably must focus on maximizing their election prospects.

An additional factor widening the gulf, according to Blinder, is that economists work in the national interest, with a long-range time frame, but politicians are driven by narrow, special interests with too short a time horizon, which is based on election cycles.

In the arena of policy formulation, economists, Blinder argued, are woefully ineffective. “We have very little influence on policy,” he said. “Economists dote on substance to the exclusion of all else,” he added. “Economists neither like nor understand politics. Economists are poor at delivering the message (what sounds good as opposed to what is good) and need to learn that complexity sells poorly. Academics ignore the process or disdain it (at least until they get into government), but business people can’t do that.”

He went on to point out that economists can learn from politicians that fairness trumps efficiency; that unprincipled compromise beats pure solutions; that narrow, parochial interest groups defeat the commonweal; and that academics and politicians have sharply different time horizons.

Closing with a discussion of a case in point to illustrate his theory, Blinder described the tax code as, “a national disgrace, but it was created by politics, not economics, and not by accident.” The chances that a group of economists could create a vastly better tax code, he suggested, would be 100 percent, but the chances that this will happen are zero percent in a world where illumination is not the goal when drunkards use lampposts or politicians use economists.