Why is the CEA So Effective?
Over the 34 years since I was a senior economist with the Council of Economic Advisers (CEA), I’ve compared notes with other senior economists who worked there at different times–a few earlier than me, but most later (and often much later) than me.
Last week, I attended a seminar at the Naval Postgraduate School. The presenter was Abby Wozniak of the University of Notre Dame. I took her to coffee beforehand and it turns out that she was a labor economist at the CEA early in the Obama administration. We talked about our experiences and then Abby asked me why I thought the CEA was so effective. The background, which we both knew, is that the CEA professional staff and support staff number no more than about 30 people: about 20 are the chair, members, senior economists, junior economists, and interns and about 10 (it was about 15 when I was there, before the widespread use of PCs) are support staff. So if the CEA has much effect at all, it’s incredibly effective per employee.
I answered that I thought it was for two reasons:
(1) Whereas we might think that the differences between economists on economic issues are big, they are relatively small compared to the differences between economists and non-economists. For example, as I noted in my obit of Kenneth Arrow, I unearthed a memo he wrote as a senior economist at the CEA in the mid-1960s in which he advocated deregulated natural gas prices. (That was a big issue back then: deregulation, though, didn’t happen until the 1980s.) Or think about economists on free trade: they are almost unanimous on the bottom line that free trade is good and on the reasons it is good.
As a result, the CEA provides a relatively consistent message on such issues. (To be sure, there are bigger differences among economists about monetary and fiscal policy.)
(2) The CEA is relatively powerless. As my late boss Bill Niskanen pointed out back when we were both at the CEA, the CEA runs no programs and makes no decisions about government programs. All it has is its arguments. So it’s much, much less corrupted than other agencies that have real power.
On this second point, I told Abby of a conversation a number of us had at lunch one day in the cafeteria in the basement of the Old (now Eisenhower) Executive Office Building. A number of the senior economists were lamenting that with the best arguments in the world, the CEA had just lost a decision about a tariff on some item. One of the economists–I think it was Paul Krugman, but I’m not sure–said words to the effect, “Wouldn’t it be neat if we had real power?” Some other economists nodded. I said, “No, it wouldn’t. If we had real power, we wouldn’t be in these jobs. Other people would be. Once people inside the beltway figured out that employees at the CEA had real power, there would be tremendous lobbying pressure on the Administration to put people in who favored one side or the other.”
May 31 2018 at 10:08pm
Very interesting post! Can you clarify though exactly what you mean by “effective”? It sounds like you mean, “Offers a consistent message that most economists would agree is unbiased” or something like that?
If I’m on the right track, would you go further and say that the CEA influenced Executive policy in any way over the years? I’m just wondering if someone with a different criterion could equally well argue that the CEA was totally *in*effective.
(Or if you find it easier this way: How does the effectiveness of CEA compare to the effectiveness of, say, the Cato Institute?)
David R Henderson
May 31 2018 at 10:20pm
I meant effective in the sense of influencing policy. The consistent message is one of the two reasons I gave for their effectiveness.
Effectiveness versus Cato: hard to say. I think Cato has been effective on some important Supreme Court cases and those can be big enough to outweigh the CEA effect. On day to day policy, I would say CEA is way more effective than Cato, or Hoover, or, or, or.
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