Op-Ed: The epistemological error of ‘accessible’ economics

Talk of the young, newly powerful and outspoken congresswoman Alexandria Ocasio-Cortez has reached a climax with her recent announcement of advocacy for a 70 percent marginal tax rate. Since then, many outlets have published articles in support of her tax policies — Vox, the New York Times — all lauding the historical basis for her policy. Moreover, many cite the studies of economists such as Emmanuel Saez and Peter Diamond and Thomas Piketty to back up such a claim. However, the use of economic studies by an economically illiterate population inherently raises some issues. In the same way that you could find studies supporting high taxes, you could look to think tanks such as the CATO Institute to find studies that support the exact opposite policies. This seems to be reminiscent of a terrifying tendency of all politically inclined people to believe first and justify later. In the case of AOC, she’s a highly captivating and attractive figure; she represents a new generation, a new voice and maybe a new movement. But what she certainly does not represent is a master of economics — no one does. Even Simon Kuznets, who won the Nobel Prize in Economics, was absolutely wrong about his most important contribution to economics, his self-named Kuznets Curve. Just as well, thinkers like Milton Friedman, who also won the Nobel Prize, were incorrect about the effects of concentrated wealth and its supposed benefits to the economy. 

The new support for AOC’s 70 percent tax rate does not really seem to be generated in an academically rigorous fashion; that is, by looking at the data and then formulating an opinion. Instead, the power of populistic politics has reversed this preeminent formula into many people taking their stance, then finding economic sources to back it up. I hold the highest respect for those oft-cited economists. However, the question is not simply whether or not they are credible, but instead if we would even know if they were not. I am quite confident that the vast majority of the population, including myself, is not economically literate enough to understand the complexities of the mathematics and logic behind many of these grand economic formulae. If even those with Nobel Prizes have been massively wrong about their own conceptions of economic mechanisms, why do we unfairly endow ourselves with such confidence about our understanding of economics? 

Again, I’d like to reiterate that I, too, actually believe that those previously mentioned works from the French economists are accurate and intelligent. But much like the vast majority of the population, I do not honestly know if they are correct or not. For both myself and (if my perception is correct) nearly the totality of the population, it is impossible for us to effectively deny any parts of it as mathematically or logically flawed. I know that most of us, if we came into reading them with no preconceptions, would be just as swayed by studies that claim the exact opposite of those works we are now hailing as canonical. 

We believe the claims in these studies not because we know them to be true — neither you nor I have checked the math, methodology, or logic — but because we want them to be true. Just as none of us really knows how to falsify the economic studies supposedly proving the effectiveness of Reaganomics, we nonetheless choose not to believe them. AOC is a reminder that even we, the politically sophisticated liberals, are not immune to the blinding and reductive forces of populism. 

The University of Chicago regularly runs surveys on top economists, posing simple but fundamental questions of economics, such as queries on the benefits of free trade. They released the results of a survey about this very question, asking if “raising the top federal marginal tax on earned personal income to 70 [percent] … would raise substantially more revenue (federal and state, combined) without lowering economic activity.” The response to this question? Mixed. With responses weighed by each expert’s certainty, 63 percent disagreed, with only 21 percent agreeing. A staggering 17 percent were completely unsure of the answer. And the sizeable majority who disagreed are not just old-school, Friedman-like economists championing the Laffer Curve and Reaganomics. Those who disagreed include the Harvard and Stanford economist Raj Chetty, who is famous for his work on the economics of equal opportunity. What is clear from this survey is that there is no clear consensus for such high marginal tax rates, and that it could be even argued that there may be a bit of a consensus against that policy. In general, it is not clear whether or not such a tax plan would work. As such, we should wait for more research and more consensus on this topic. In the same way that we understand climate change to be factual as a result of a massive, field-wide agreement, we should expect the same level of accord among economists until backing such a radical political project.