Friday, January 23, 2009

Mankiw On the Decision Making Apparatus at the White House

Greg Mankiw is tougher on a Joe Biden statement than even I would be. I'd dissmiss it as Biden just blowing smoke. But, Mankiw has worked for an occupant of the White House before, and I haven't, so maybe he sees something I don't. Here's Mankiw:

In a TV interview last month, Vice President Joe Biden said

Every economist, as I've said, from conservative to liberal, acknowledges that direct government spending on a direct program now is the best way to infuse economic growth and create jobs.

That statement is clearly false.

As I have documented on this blog in recent weeks, skeptics about a spending stimulus include quite a few well-known economists, such as (in alphabetical
order)Alberto Alesina, Robert Barro, Gary Becker, John Cochrane,Eugene Fama, Robert Lucas, GregMankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingales--and I am sure there many others as well. Regardless of whether one agrees with them or not on the merits of the case, it is hard to dispute that this list is pretty impressive, as judged by the standard objective criteria by which economists judge one another. If any university managed to hire all of them, it would immediately have a top ranked economics department.

So what is one to make of the vice president's statement? As a logical matter, I can think of only four possibilities:

Biden knew what he was saying was false.

Biden was saying what he believed to be true and somehow got this incorrect idea in his head without talking about the issue with the very talented team of economists working for the new administration.

Biden talked to his economic advisers about the issue, and they purposefully misled him into thinking that there was a consensus among economists, even though there isn't.

Biden's advisers were themselves mistaken. They expected an overwhelming consensus of support for their fiscal plans and were surprised at the number of prominent economists on the opposite side the issue.

I have no idea which of these hypotheses is correct. I suspect it is either the first or last. But any one of them should make us uneasy about how well the new administration's economic decision making apparatus is working.

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