An Economist or a Public Intellectual?
By Arnold Kling
Now that we know that an economist is someone who is honest and a public intellectual is someone who is not, suppose we were to read the following.
We have data on the real income—that is, income adjusted for inflation—of American families from 1947 to 2005. During the first half of that fifty-eight-year stretch, from 1947 to 1976, [the argument for deregulation was not well received] But the economy…delivered dramatic improvements in the standard of living of most Americans: median real income more than doubled. By contrast, the period since 1976…free-market policies became much more widespread. Yet gains in living standards have been far less robust than they were during the previous period: median real income was only about 23 percent higher in 2005 than in 1976.
Starting from a narrow perspective, why is the writer not using real GDP per capita, the standard measure of economic growth? Family income is distorted, over this period in particular, by changes in family structure and size. If a household shrinks from 4 to 2, family income falls in half, but that is a misleading indicator of economic performance.
It turns out that real GDP per capita grew at about the same rate over the period. Using 1946, 1976, and 2005 as endpoints, the average annual growth rate was 1.021 in the first half and 1.020 in the second half.
And what about the choice of endpoints? Why is the author going all the way back to 1947? At that time, the economy was still under wartime controls to some extent, so some of the rapid subsequent growth was arguably due to deregulation. Why not wait until the effects of removing wartime controls had worn off, and start in, say, 1955? Perhaps because from 1955 to 1976, average annual economic growth was only 1.014 percent, while it rose to 1.020 percent thereafter. CORRECTION: it’s 1.02 in both periods. (messed up the spreadsheet the first time). So that particular choice of endpoint is not an issue.
In the larger scheme of things, no economist would evaluate whether deregulation is good for economic growth by looking at this sort of data over time periods like this. Too many arbitrary choices need to be made. Too many other variables (oil shocks, for example) can affect the results.
But suppose that in the economist’s mind there is a clear dividing line between being a professional economist and a public intellectual. Suppose that he believes that a public intellectual naturally has lower standards of honesty. In that case, the economist–er, public intellectual–might attempt such an exercise.