Why is it that people keep publishing articles about the economic philosophy that underpins Barack Obama’s policy proposals without publishing similar articles about the other Presidential candidates? This time, Noam Scheiber writes about Obama’s economics. I find the pragmatism of a behavioral economics-based approach very appealing.
There’s a ton of good stuff in the article, but I’ll highlight a few paragraphs:
And, yet, it’s not just the details of Obama’s policies that suggest a behavioral approach. In some respects, the sensibility behind the behaviorist critique of economics is one shared by all the Obama wonks, whether they’re domestic policy nerds or grizzled foreign policy hands. Despite Obama’s reputation for grandiose rhetoric and utopian hope-mongering, the Obamanauts aren’t radicals–far from it. They’re pragmatists–people who, when an existing paradigm clashes with reality, opt to tweak that paradigm rather than replace it wholesale. As Thaler puts it, “Physics with friction is not as beautiful. But you need it to get rockets off the ground.” It might as well be the motto for Obama’s entire policy shop.
Like their intellectual godfather Thaler, the Obama wonks aren’t particularly interested in tearing down existing paradigms, just adjusting and extending them when they become outdated. (Thaler urges his students to master the same traditional, mathematical models their colleagues do if they want to be taken seriously.) For example, a central tenet of the economic thinking favored by Bill Clinton and his Treasury secretary, Robert Rubin, was that cutting the deficit lowers long-term interest rates, which in turn stimulates the economy. The Obamanauts are perfectly willing to accept the relationship between long-term rates and economic growth. But recent evidence suggests that low rates weren’t quite as central to the success of the Clinton years as they appeared, and that investments in infrastructure and R&D might be as important as deficit reduction. Not surprisingly, Obama plans to focus less on the deficit than Clinton did.
And yet, just because the Obamanauts are intellectually modest and relatively free of ideology, that doesn’t mean their policy goals lack ambition. In many cases, the opposite is true. Obama’s plan to reduce global warming involves an ambitious cap-and-trade arrangement that would lower carbon emissions 80 percent below 1990 levels by 2050. But cap-and-trade–in which the government limits the overall level of emissions and allows companies to buy and sell pollution permits–is itself a market-oriented approach. The companies most efficient at cutting emissions will sell permits to less efficient companies, achieving the desired reductions with minimal drag on the economy.
And here’s how that philosophy works in the realm of foreign policy:
Still, there’s probably no better illustration of the Obama camp’s Hamiltonian sensibility than the debate over the war. Former Clinton officials like Lake, Rice, and Danzig all opposed the idea from the get-go (as did Hamilton himself). In doing so, they faced down pleas from within the Democrats’ permanent State-Department-in-waiting that opposition would be politically disastrous. “Many Democrats had opposed [the first Gulf war]. And these people–particularly the older people, felt like that had been a big mistake. They didn’t want to make it twice,” recalls an Obama adviser. “It got rather acrimonious.”
In the face of these arguments, the would-be Obamanauts didn’t invoke some sweeping alternative paradigm–say, the kind of abstract theorizing you’d get from a Kissinger tome. They simply pointed out where the Bush doctrine of preemption and democracypromotion broke down–the “anomalies,” if you will. Intuition told them that an easy war was a fantasy, that the United States would face a long and brutal occupation. Many had security clearances during the Clinton administration and had never seen credible evidence of an Iraqi nuclear program. Almost everyone worried that an invasion would detract from the fight against Al Qaeda. “It should have been obvious to anyone who’d served in government that we can’t walk and chew gum at same time,” says one Obama adviser. “That’s not a paradigm, that’s a judgment.”