Economics professors discuss candidate’s policies, reasons for decisions

Economics professor Eric Leeper said predicting the effects of economic policy is difficult, even for economists.

“If you say, ‘What’s the effect of the stimulus package?’ and you ask a room full of economists, you’ll get a room full of answers,” Leeper, an expert in macroeconomics and fiscal policy, said.

But politicians running for office often have no trouble boasting about how simple, clear-cut and beneficial their economic platform is, despite the challenges those with years of experience in the economic field have when defining possible outcomes. And the candidates in this year’s midterm election, economists said, are no different.

Missing the big picture

Candidates will often follow similar jargon — “lower taxes,” “support small business,” “provide more education funding” and “protect U.S. jobs,” to name a few of the typical policies economists cited — in an attempt to draw more votes.

“In reality, once you kind of parse through the jargon and whatnot, it doesn’t make economic sense — or, very simply, in some cases, common sense,” Economics professor Paul Graf said.

Oftentimes, policy-makers will use these terms to draw on the emotions attached to them without showing where the burden of the new policy will fall. They don’t address the opportunity costs — what it costs a person to get one good in terms of another good — of their policies.

While candidates might only address the benefits of a policy to serve their platform, they might also do so because they don’t fully understand the potential downsides of the policy.

Gerhard Glomm, chairman of IU’s Department of Economics, said this often leads to general, simplified statements that can overestimate or underestimate the positives or negatives of a fiscal policy.

“It’s relatively easy to say, ‘Look, if you put a plant here... This plant will employ ‘X’ workers,’” Glomm said. “It’s not clear that the number ‘X’ is net job creation. These workers could have come from the next county and given up that job for a better job.”

Leeper said the complexity of conducting economic experiments provides further incentive for candidates to steer away from the subject.

“Fundamentally, economics is an incredibly difficult subject,” he said. “I think politicians want to have nice, simple, clean answers, but economics can’t deliver those.”

Economics of politics

The reason this happens, Graf said, involves the incentives the politician has for running for office.

Politicians, he explained, have two roles: to represent their constituents and to keep their jobs.

These motives can sometimes conflict when looking at how politicians react to a nationally-beneficial policy that could potentially hurt their constituents.

“For example, if a politician comes from a region where there’s a defense contract, and they’re talking about cutting the budget in defense, that politician may argue for keeping the contract alive,” Graf said. “However, that type of spending or that type of bill might be increasing the deficit, and the benefit for that region might be smaller than the actual cost to the entire economy.”

Glomm said candidates who don’t fully explain their policies are not trying to be "crooks" or deceive voters. Much of their rhetoric has to do with the very concept they're discussing.

"If you're a politician, you have very little incentive to say, 'Here's my policy proposal. Here are four advantages and five disadvantages,'" Glomm said. "As soon as you say, 'Here are five disadvantages,' your opposition will say, 'Look at this. This guy's an idiot.'"

Glomm said these criticisms should be looked at carefully.

"There's no policy that I know of that will make everybody better off," Glomm said.

The concept of opportunity costs suggests such a policy would be impossible to create.

It's human nature

Ultimately, the burden of ignorance of the costs of a policy falls on the people. However, even with complete understanding, the conflict between what is best for an individual and what is best for society still exist.

In this case, it becomes what is best for a district or a state versus what is best for the nation.

"There's always conflict, there's always disagreement — self-interest versus societal interest," Graf said. "How do you solve it? It's a tough thing to do."

However, Graf said he thinks people are starting to realize the severity of the nation's current economic situation. That awareness, he said, is key and might change the mentality of politicians when it comes to policy-making.

"I think people are willing to tighten the belt provided politicians also tighten the belt," he said.

Graf said he is optimistic that eventually, people will understand the need to take on additional burdens in order to promote the success of the whole of the nation.

Still, his knowledge of his profession makes that belief difficult.

"As an economist, knowing human behavior and being a human myself, sometimes it's tough," he said.

Graf said while there is often not one correct answer to be found among today's political alignments, the fact that members of each group are attempting to improve the lives of those around them is encouraging.

"Whether you like the Tea Party, the Democrats, the Republicans, the Libertarians — I applaud them all in their interest to do what's right," he said. "I think more of that — more awareness — is the key. Start with awareness, and let's see where we go from here."