In this episode, sociologist Elizabeth Popp Berman discusses her new book, Thinking Like an Economist, about the “economic style of thinking” and how it took over in US policy circles in the post-war period. It remains embedded there to this day, but alternatives are beginning to emerge.
Full transcript of Volts podcast featuring Elizabeth Popp Berman, April 15, 2022
David Roberts:
Back when I started paying attention to climate policy discussions, in the mid-2000s, one thing I immediately noticed is how keen mainstream environmentalists were to develop and champion “market-friendly” policies, the kind of policies that harnessed competition and choice and incentives. Everyone in center-left policy discussions seemed to be constantly auditioning for some imagined panel of economists. They were desperate to pass muster.
In part it could be explained as a response to conservatives, who by then had mainstreamed the myth that “command and control” environmental regulations are unduly burdensome. (In fact, the environmental regulations put in place in the 1960s and ‘70s are some of the most successful in US history, producing benefits wildly in excess of their costs, saving millions of lives in a way that arguably boosted rather than hampered economic growth.) Environmentalists were keen to find bipartisan solutions, to build a consensus from the center out, and they thought that the emphasis on market-based policies would attract support from Republicans. (Spoiler: it did not.)
But it wasn’t a purely defensive move. There was sincere enthusiasm for the project of treating climate change like an equation to be solved in the most efficient way possible, like math, bypassing the agonizing issues of political economy and sidelining mushy, subjective talk of values and rights. It wasn’t imposed on the center-left; the center-left embraced and internalized it.
That has changed somewhat, but not all that much, and it may end up constraining Biden just like it constrained Obama.
So imagine my surprise as I looked through sociologist Elizabeth Popp Berman’s new book: Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy. It turns out this kind of thinking — what Berman calls “the economic style of reasoning” — has taken over not just environmental policy but the entire US policy bureaucracy, to dismal results. It’s as much something Democrats have done to themselves as anything forced by the right.
One always enjoys having one’s priors validated by scholars of much greater distinction than oneself, so I was delighted to read the book and equally delighted to chat with Berman about the economic style, how it came to dominate, and what might come after.
Without further ado, Elizabeth Popp Berman, congratulations on your book, and welcome to the podcast.
Beth Popp Berman:
Thank you. It's great to be with you.
David Roberts:
Your book is about the economic style of thinking and how it came to dominate in the US. We'll say more about what that style of thinking is, but to a first approximation, it means thinking like a microeconomist in domains outside economics. When did this style of thinking rear its head in the US and what did its march to dominance look like?
Beth Popp Berman:
Economists have been around a long time in government, obviously, but the economic style of thinking that I'm talking about really began to take off in the 1960s. It came into Washington from a couple of different places. For one, a bunch of economists from the RAND Corporation in Santa Monica were brought into Washington by Robert McNamara in order to rationalize the Defense Department and defense budgeting, basically. They moved from there and spread into a lot of different parts of government, and that's at least one big strand of the origin story.
David Roberts:
These were Kennedy's golden boys. There's a whole mythology around these people.
Beth Popp Berman:
Whiz kids. My whole life I heard of the term “whiz kids” and I did not have any idea they were economists until I started studying this. But that's who they were and what they were doing.
The second big strand is a looser network of economists who worked on what's called “industrial organization.” They're interested in things like how specific markets work – so people who study the petroleum industry, or the railroad industry, and are interested in thinking about those markets and what makes them more or less efficient.
So some people from Harvard, some from the University of Chicago, also started to trickle into Washington during the 1960s, and ended up having a lot of influence in the following decade in debates over things like deregulation of transportation and other sectors.
David Roberts:
Then, you say, from 1970 forward, they start branching out like kudzu into other areas of policy. What did that look like? Where did they go?
Beth Popp Berman:
The way I came to think of this over the course of writing the book was that economic thinking really spread in reaction to government expansion in the 60s. There were all the expansions of the Great Society; following that was this whole wave of social and environmental regulation that came to pass, and it prompted this reaction of “we're spending all this – how do we do it more effectively and efficiently?” That ended up circulating a lot of both economists and people who were trained in the basics of economics into many locations within government and many different kinds of policy spaces.
David Roberts:
So as government’s expanding and getting more ambitious, one group is like “government's doing these great things, let's make sure it does them as well as it can” and another group is like “the government's doing all these new things, let's expose the fact that it does them inefficiently so we can make the government do fewer things.” They’re coming from both directions.
Beth Popp Berman:
Most of my story is about the economists who wanted to make government better. A lot of people have talked about the Chicago School and people who were strong free marketeers and really wanted to limit government. But the bulk of this movement and the most driving force behind it came from the people who thought government was doing important things, but just wanted to make it work better and be more efficient.
David Roberts:
The economic style of thinking as applied to policy has become so ubiquitous that people might have trouble envisioning what the alternative is. It seems so foundational that it's hard to imagine what else you could do.
There's a great case study that highlights this difference really well. The original Clean Air Act of 1970 was not yet overtaken by the economic style, while the 1990 Clean Air Act amendments were thoroughly from the economic style. Tell us about that contrast and what it shows about the alternatives.
Beth Popp Berman:
The economic style came a little bit later to environmental policy than it did to some other areas, so by 1970, it had not had much of a footprint. When the Clean Air Act and Clean Water Act were being debated, they were really coming from a place driven by social movements. It was still pretty centered in ideas about ecology; the idea that pollution is a problem because everything is interdependent and things have these downstream effects; moral claims that pollution is wrong, it's bad, we shouldn't allow people to do it.
It was also based on a different theory of politics, that we need strong rules in order to prevent regulatory capture. It was written on purpose to minimize attention to cost in a lot of areas. There's no attention to cost at all, and that was for a reason.
One of my favorite things is a little book written by an economist a few years later, looking back at this, who subtitled his book about the Clean Water Act, “Why no one listened to the economists.” There was that little influence in it.
David Roberts:
If you strip down the structure of the Clean Air Act to its essence, it basically says, “Americans have a right to healthy air, and government from this point forward should do whatever is required to ensure that the air is healthy.” It doesn't say “as much as is economically prudent.” Cost barely comes up at all; it really is framed in terms of core rights.
It's funny to watch the US system of government try to squeeze out of that ever since. It's so unusual for a law to be so categorical and sweeping, and other parts of the government and the Supreme Court and all these institutions have been like “do we have to?”
Beth Popp Berman:
The whole history of environmental policy since then is in a lot of ways an effort to step back from that and say “we have to weigh costs, how are we going to weigh costs?” That's a very different way of thinking about the problem, which just wasn't part of the original legislation.
David Roberts:
You wouldn't want to say that the writers of this law genuinely didn't care about costs. There are reasons that they don't put cost concerns in there. Some of those had to do with regulatory capture, as you say, and some had to do with, we can't know what it would cost to do what we want to do. Like “we want to go to the moon – how much will it cost? No one knows, but we're confident that if we set this goal, we can do it.” It was that kind of thinking.
Beth Popp Berman:
Right. There was a lot more modesty at the time about what we could reasonably calculate, and also a lot more resistance to certain kinds of quantifications. There was a lot of resistance to the idea that you could place a value on human life and use that as a guide for weighing costs and benefits. Things like that took a long time to become accepted.
David Roberts:
What is the thinking that if you put cost considerations in statute that that will open the door to regulatory capture? How does that work?
Beth Popp Berman:
Cost-benefit analysis sounds straightforward: you're tallying up the costs and tallying up the benefits and comparing the difference between the two. But the devil is in the details, and there's no simple way to account for costs or benefits. Any decisions that you make are going to involve many assumptions about who's being affected and what the costs of those effects are.
It creates a bigger opportunity for people who have a stake in the game to try to ensure that their preferred methods of calculating costs and benefits are going to be the ones that are taken into account. Historically, it's often been industry interests that have had a lot of money and a lot invested in making sure that costs are very apparent and are being counted as expansively as possible.
That can be one way that a cost-benefit analysis that's intended to be neutral can in effect tilt the playing field toward the people who have the most resources to devote to ensuring that the costs are counted and the benefits are not.
David Roberts:
That brings us to the 1990 Clean Air Act amendments; you couldn't come up with a better example of the economic style having completely inserted itself. What's the difference there?
Beth Popp Berman:
The core centerpiece program of those amendments was the Acid Rain Program. The Acid Rain Program was the first large-scale cap-and-trade program. The idea was that we were going to figure out how to reduce acid rain by giving people permits for pollution, allowing them to trade with one another, and using this market mechanism to lower the amount of pollution happening overall.
It was really oriented toward, how do we solve this regulatory problem? How do we solve this environmental problem – that isn't so different from the kinds of problems that the earlier legislation was trying to solve – in a way that's as efficient as possible?
In many ways it was successful, but it also was based on a much different and more limited vision of what the range of policy options might actually be.
David Roberts:
When you talk to people about this style of policy, that's the one they all go to, right?
Beth Popp Berman:
Yes. It served as a model for lots of other programs and lots of arguments for programs that never happened.
David Roberts:
There's a common critique on the left about neoliberalism: the idea that liberals were ascendant in the post-war period, and then they overreached, government got too big and sloppy, there was a backlash from the right, and in the face of the backlash, Democrats became Republican lite. I think most people think of neoliberalism as, how can we accomplish the things we want to do as Democrats, but with markets and hardcore cost-benefit analysis and the kinds of things that would pass muster with economists?
How do you distinguish the economic style of thinking from this larger question of neoliberalism?
Beth Popp Berman:
I think the basic outlines of that story are correct in many ways, and that there are these larger global economic forces that were changing the political environment in the 1970s. I'm not suggesting that in the absence of economists Democrats never would have moved to the center and none of the political changes that we saw happen would have happened.
But understanding this economic style of reasoning helps us understand how this shift that was taking place for reasons of its own got built into all these different parts of government in ways that made it very durable and very lasting.
Having this technical ideology that helped to justify these arguments and was built into policymaking in many different ways meant that by the time the 90s rolled around, it wasn’t just that Democrats had moved to the left, it was that the whole range of policy options that were considered within the pale had been constrained, because everywhere in Washington, this new way of thinking had become the norm.
So the way I see it is that that story is basically true, but economic reasoning is the channel through which this shift became durable.
David Roberts:
One of the important points you make, and I’ll quote here from the book: “Over and over again, the economic style was introduced to policymaking by technocrats associated with the Democratic Party who wanted to use the government to solve social problems. This is not first and foremost a story of right-wing economists pushing for smaller government and freer markets.”
Talk to us about the extent to which this was a native phenomenon in Democratic circles and not just a reaction to the right.
Beth Popp Berman:
I agree that this is one of the big takeaways of the book. It's important for people on the left to contend with the way that a lot of the current way we think about policy did emerge from political debates that were basically happening on the left.
There was a period in the 1960s where government was doing a lot of big things, and yes, that did cause a right-wing backlash. As you suggested, that's a standard part of the story, but it also created all this demand for ways to manage it. Sometimes it was about making it more cost-effective, but sometimes it was just about trying to figure out, how are we actually technically going to do all the stuff that we've agreed to do? We've created these environmental laws – how do we actually implement that? We've created new kinds of housing policy – how are we actually going to put that into action?
So there was a real expansion of the role in government for people who had training in economics (or often later it was in public policy programs that had a broadly microeconomic orientation). They were often trying to, again, figure out how to make policy more cost-effective, how to make government work better. But in practice, repeatedly, people who were working within this economic framework who were center-left technocrats ended up forming alliances with the right: whether that was with industry groups who were advocating for less environmental protection, or people who were advocating for a more conservative position on healthcare reform. That's where you really get these interesting alliances that have lasting consequences.
David Roberts:
This is something I've seen play out exactly as you describe in climate circles. The right is happy to make these revisions toward greater efficiency when they serve the right’s goals, but the right is also perfectly willing to ignore economic thinking when it doesn't serve its goals. In a sense, you get a one-way ratchet, moving farther and farther toward the industry side, because as you say, ”the economic style constrained Democrats, while Republicans used it strategically.” Say a little bit about how that dynamic has taken shape.
Beth Popp Berman:
This emerged as early as the 1970s, with Democrats, particularly during the Carter administration, having a real internal debate over regulatory reform. Within the Carter administration, people on one particular side were arguing for more cost-effectiveness analysis of regulation, and people more aligned with the environmental movement or social movement groups were arguing against that and for retaining more strict regulation that wasn't necessarily taking costs into account.
Here's an instance where, again, the people who wanted to take costs into account were able to ally with supporters from industry and on the right to shift policy a little bit, and the position that had been the status quo among Democrats 5 or 10 years before became marginalized. That increasingly became a position that's beyond the pale, because it's only reasonable that we're going to take costs into account – how can you think about policy without having costs?
David Roberts:
It was cast as a little bit silly and naive.
Beth Popp Berman:
Exactly. But that's not what happened at all when Reagan came in. Reagan was really good about this, because there were areas where he absolutely promoted economics – he hired economists, he expanded economics offices – and other places where he slashed them.
This happened in antitrust policy, for example. The status quo in economics at the time was arguing for reduced enforcement of antitrust; that was the line of thinking that was ascendant. Reagan expanded the economics office in the antitrust division and at the FTC, and that was happening at the same time that the rest of the agency was being cut.
So if economics is going to support the larger goal, which is fewer restrictions on business, then by all means, let's go ahead and do it. But in other areas – for example, some of these social policy areas where Reagan's political position was basically, we should just have less social welfare …
David Roberts:
For ideological reasons, not because they're inefficient.
Beth Popp Berman:
Exactly. The economists who worked in that area he saw mostly as trying to justify something that shouldn't exist anyway. They're trying to make it more cost-effective when really we should just not have it. So in those spaces, economics offices were decimated.
David Roberts:
This is such a familiar and frustrating story. Democrat technocrats seize on these principles and procedures, take them seriously, really get into them, and are constrained by them, whereas clearly on the right they're used instrumentally – used when they line up with ideological goals, and when they don't, they don't. On the one hand, you want to admire and encourage intellectual consistency; you don't want to encourage hypocrisy. But on the other hand, politically, it sure looks like hypocrisy is working way better for them than consistency is working for Democrats.
Beth Popp Berman:
One thing that is important to keep in mind, and that Democrats often don't necessarily start with, is that an economic approach to policy problems is not a great starting point for negotiation. If you want to achieve some kind of policy goal – because you care about climate change, because you want to ensure universal access to health care, whatever the goal is – presumably the underlying reason is some kind of moral claim. Of course, any time you're dealing with an actual real-world policy problem, you're quickly going to get to the question of costs, and you want policy to be cost-effective, but moral claims tend to be much more politically effective, and they also tend to lead to more ambitious ideas.
Whereas if you start with “what is going to be the most efficient policy design that we can come up with?” it's both a bad starting point for negotiation and often tends to not be very politically appealing either. Think of Obama's health care exchanges. Health care exchanges are not a great rallying cry to bring the masses on board for your program.
David Roberts:
“Economist envy” is the way I've referred to it many times in the past. It’s as though these people within the center left groups are seeking the approval of people on the other side of the aisle, but why? The public doesn't care about cost-benefit analysis. It's like you're trying to be the teacher's pet, but it's not politically giving you anything.
The antitrust case is interesting. The old take on antitrust was just “too big and powerful is bad, so let's break up big and powerful things.” Talk about how the economic style recast the arguments in a way that ended up allowing weaker antitrust.
Beth Popp Berman:
There is a long history in antitrust, going back to the Sherman Act of 1890 that saw antitrust as doing multiple competing things, but often, like you said, was oriented toward this “big is bad” idea.
The 50s and 60s had really high levels of antitrust enforcement. There were these court cases where they broke up companies because they held 5 percent of the supermarkets in a particular region, saying “that's too big, we have to stop this tendency toward concentration.”
There was a movement against that, part of which comes from economics. A new set of experts came in and made the argument that this is a bad approach – that often big companies are more efficient than smaller companies, it makes sense to have consolidation in a lot of cases, and that really we should be evaluating whether antitrust enforcement is needed based on whether markets are operating efficiently, not just on whether there are large companies there.
Over the course of the 1970s, this basically was written into case law by the Supreme Court. It also was implemented because of changes within the antitrust division and the FTC, so there were a lot of internal bureaucratic changes. But by the end of this period, effectively, because how the law is interpreted had changed, efficiency became really the only thing that you can consider in antitrust policy.
So it's not just taking into account that big companies may be more efficient – maybe that's good on its own – but that some of these older, broader concerns about everything ranging from concentrated economic power to the role of small business and civic life, that had been part of the history of antitrust, were just written off the table.
David Roberts:
Efficiency of the market is basically being measured by prices, right? If prices are still low for consumers, the market’s working, however many participants are in it.
That's such a great illustration on so many levels. One, how economic thinking came to completely dominate this area, and two, how now we're seeing the results of what happens if you only care about consumer prices. A lot of those older, broader, more philosophical concerns were quite warranted. All those things they warned about are happening – small businesses are being wiped out and big businesses are using disproportionate political influence to malign effect.
Beth Popp Berman:
Some of the biggest companies right now are platform companies; they're not charging us anything to use them. You don't have to pay to use Google. But does it have effects on innovation because it can buy up small companies and kill their products? Well, that's a separate question. Does Facebook have effects on our political discourse that are affected by the size that they are and the amount of reach that they have? That's a separate question.
Some of these issues have become more central in economics as well. One thing ignored by the focus on purely looking at prices as the measure of whether we need antitrust intervention was, what are working conditions like? There's been a lot of research, and a lot of it has come from economics in the last few years, over the extent to which corporate concentration has actually had downward pressure on wages. So there are also new arguments for considering that as a potential harm that antitrust might address.
David Roberts:
You describe so well in the book how the economic style of thinking is so facially plausible. Who's going to hear “we should weigh costs and benefits” and think “no, that's wrong?” In a certain broad sense, yes, literally any decision-making procedure is on some level weighing costs and benefits. But it's one thing to say that, and it's another thing to smuggle in a very specific sort of cost-benefit analysis that weighs certain specific things and does not weigh certain specific other things. It becomes hard to notice the things that aren't on the table.
Beth Popp Berman:
A lot of the power of this way of thinking is that it does have this perception of neutrality. It appears like it doesn't contain values. Like you said: who's going to argue against efficiency? Who's going to argue that we should never take costs into consideration at all? But these are not neutral tools, and we need to really be thinking about the values that they actually carry with them.
Over the history of cost-benefit analysis, there are periodic conversations considering distributional effects. When we're weighing the cost of something, is the cost going to fall on Bill Gates, or is it going to fall on people in low-income communities? Certainly you can adjust your cost-benefit analysis so that you are weighting effects on poor people, or any particular group of people you want to protect, more heavily. But the counter-argument to that is always, “That would be political. Those decisions are better left for the politicians. Yes, distribution is important, but this is cost-benefit analysis. We don't do that stuff.”
David Roberts:
I feel like the economic style of thinking that you describe was at its absolute ascendance right when climate change entered American politics, so climate change got swept directly up into it. From the very beginning, William Nordhaus was trying to find the optimal amount of carbon reduction based on efficiency – we don't want to reduce one more ton than necessary, because then we'd be overpaying! So he did this elaborate, quantified thing that looked like science, and it came out like, the exact right price is $5 a ton.
Almost literally everything we've learned since then shows how wildly wrong he was about a few things, how much he left out, how completely artificial the whole thing was. But the elites were absolutely hypnotized by it.
Beth Popp Berman:
That's a great point about the ascendancy of this and the climate debate. Honestly, I had never quite thought about it that way before. But climate policy from day one was always pretty much framed in terms of carbon tax or cap and trade. Those were the two big options on the table. That was not something that was a way people would have thought about the problem if it had been coming into attention in the 1970s. That was a relatively newer way of thinking about it.
So from day one, that was the main orientation, and more interventionist approaches were never really considered. The idea of the government doing technology forcing has already been abandoned by that point. It was already constrained in those ways.
Your point about Nordhaus creating models that give the illusion that they're objective because they're purely scientific, and also this false idea that we can really optimize some of these things, is a great example of this. There are so many things that aren't built into those models. They don't really account for tail risk. They don't deal with the possibility that maybe economic growth isn't going to continue forever because perhaps the climate is going to collapse and that's going to affect economic growth a little bit.
There are lots of assumptions built in that tend to protect the status quo, and that most people aren't going to be aware of or pay attention to.
David Roberts:
The things I found out when I started digging into those climate economic models just blew my mind. One is that perpetual economic growth is a premise, not a conclusion – and then it gets cited as a conclusion. “Look, climate is not going to hurt us. The economy is going to grow forever!” I'm like “well, you put that in the model.”
My other favorite is discount rates.
Beth Popp Berman:
One of my favorite pieces you ever wrote was about discount rates with otters.
David Roberts:
It’s a weirdly persistent piece. It's about how much we value the future. I've actually had an economist argue this with me. I was like, “Well, it seems like that's a question of values that we should debate democratically – how much do we value future benefits?” He's like, “No, you just take the discount rate that applies in today's markets; that demonstrates objectively how much people actually do value the future. That's an objective piece of information that we can put in.”
Beth Popp Berman:
Because the market is aggregating everybody's beliefs about what they think the discount rate should be, so that's a useful representation in some way of what is morally correct.
David Roberts:
Yes. Faux objective. I'm like, “Well, what do you think would happen if you asked individual people ‘do you value future generations of humans more than you value, say, the performance of your 401(k)?’ Perhaps we should talk about this.” The more I think about it, the more this economic style of thinking just absolutely has dominated in climate.
You make a point of distinguishing between macroeconomics and microeconomics in terms of what informs this style. There's been a lot of popular talk and dialogue about macroeconomics – how to handle recessions, Fed’s interest rates, etc. – but that's not really the style of thinking you're referring to. It's drawn much more from microeconomics. Say a little bit about what you mean by that.
Beth Popp Berman:
For the purposes of what I'm doing, I split the two and talk about them as entirely different things. They're both grounded in economics departments, ultimately, but macroeconomics has different channels of policy influence. It's got its own institutions, it's got influence in the Fed, and it's much longer standing in some ways, because it does address these policy areas that are very explicitly economic on the surface – economic growth, unemployment, inflation rates, etc.
Whereas part of what makes the microeconomic story distinctive is that it can be applied to so many different types of policy. It's not just something that is relevant in what we might think of as economic policy, but it is relevant in environmental policy, education policy, transportation policy – pretty much any area where you are going to make policy, this could be a useful way to approach it and to think about it.
David Roberts:
It's framed very much around incentives, right? That's the core thing microeconomists are about: what's the incentive structure, and how do you alter the incentive structure? Which, of course, is broadly applicable.
Beth Popp Berman:
And costs, benefits, tradeoffs, choice, incentives, trying to create rules that are going to let markets function effectively – those are the core concepts that I think about when I think about this style.
David Roberts:
A few years ago there was this flurry of talk about behavioral nudges. There's a famous book about nudging. That seems to me like a paradigm case of this microeconomic modeling being placed over daily life.
Beth Popp Berman:
Right, like trying to nudge people to do things like saving more money for retirement. Some of those early experiments that got traction were about, if we default people into saving money in their 401(k) vs. making them check a box, they're more likely to do it and that's going to produce better outcomes.
A lot of times these kinds of questions are missing fundamental issues like: can people actually afford to save money in 401(k)s? Is there any way that the amount that they save is ever going to be enough to allow them to retire plausibly? Are 401(k)s the best vehicle for savings in the first place? It focuses your attention on these very specific and small tweaks that point you even further away from thinking about bigger picture questions.
David Roberts:
The 401(k) example really reveals the centrality of choice, this idea among economists that choice is the highest value of all. Turns out, people liked it when they just got pensions and they didn't have to choose a bunch of stuff about it. We're finding out more and more that choice is not an unqualified good.
Beth Popp Berman:
This is one of the central tensions throughout the decades in social policy debates: do we want some kinds of social programs that are universal, that apply to everybody, that you don't have to opt in to, that we're not going to means test, there’s not a bunch of choices? Or do we want to try to make programs that are cost-effective, that give people more choice, that account for the fact that people might have different needs, but that also tend to add a lot of bureaucratic complexity to programs?
Health insurance is a great example of this. Over and over there were moments where the US talked about having some kind of universal health insurance, but that was always pushed back in the name of “we should figure out how to means test this because we don't want to pay for people who might be able to pay for it themselves” or “we want to structure it so that people are paying something so that they have skin in the game so that they don't spend more than they absolutely have to.”
David Roberts:
Right. And if they're making choices, they're somehow invested in economizing in a way that a bureaucracy never could be. Now here we are, faced with bazillions of choices every day about our stupid 401(k)s and our health insurance and everything else, and we're all miserable. We universally feel harried and anxious.
I feel like there's a tide of thinking moving away from that a little bit, because it turns out that everything being a choice can be paralyzing in itself.
Beth Popp Berman:
I think that's absolutely the case.
David Roberts:
One of the critiques of the economic style of thinking is that it's often not even correct on its own terms: meaning, even if you accept the idea that things should be formalized into a cost-benefit analysis and that we should maximize choice and options, that leaves out a lot of human psychology. They're leaving out a lot of things that ought to be quantified in those calculations. It's incomplete even on its own terms.
I’ve been ranting and raving about cost-benefit analysis for years, and one of the things people always say in response is, “if you think the value of another species not going extinct is higher than is reflected in the equations, then just raise that value. Or if there's something that's not represented in the equation, put it in the equation.” In other words, why not just use this style of thinking better, in a way that better serves progressive goals?
Do you think it's possible for it to be rehabbed and used in a way that will serve progressives, ultimately?
Beth Popp Berman:
I think there are two answers to that question. At one level, we do need tools to weigh costs and benefits, and some of those are going to be quantitative. Some form of these tools are going to be put into play and are necessary and probably worthwhile.
The question is, how do you make sure that they are expansive enough to include all the things that we want to include? The nature of the tools has a bias against including a lot of types of values, because the things that are easy to include are the things that you can come up with some sort of market-based way of measuring. But what's the value of a species? How much would people be willing to pay for that?
David Roberts:
I love the idea of average Joe on the street answering a survey question: how much would I pay to preserve dodos? A buck, buck 50? What does the answer to that question mean?
Beth Popp Berman:
There's been a lot of research on this. People have tried to do this with survey methods, and they don't work very well, because people don't think that way. They don't know how to value a species in the abstract.
The Grand Canyon is something that we value because it exists. We're just glad it's out there, and we don't want to destroy it. You can come up with ways to measure the value of that by looking at how much people travel to get there: How many people are traveling? How far? What does that imply about how much value they attribute to this thing?
Which is interesting and clever, and gives a way to put a number on it. But so many of the things that we actually care about, like the existence of species, don't lend themselves very well to that form of measurement.
David Roberts:
Even if you do come up with numbers at the end of that process, I mean, come on. At that point does anybody really think you've captured some sort of quasi-scientific value? What if I'm sitting at home, never visiting the Grand Canyon, and just valuing the shit out of it? I'm left out of that equation. It starts to seem arbitrary.
Beth Popp Berman:
What often happens is people develop methods of measuring things that more or less fit with people's moral intuitions. You come up with a number for a formal set of reasons, but that number is only going to be adopted if it's roughly in line with what people believe is appropriate anyway.
What's the value of a human life? There are different ways you could theoretically measure that. Historically, one way that people did that was look at expected future income. That could be one way you value people's lives, but it suggests that people who are retired or who don’t work for whatever reason have no human value. So that was never a way that caught on very far, even though it's one logically consistent way to do it, because it's so far from our moral intuition to say “if you're over 65 or you're unemployed, your life has no value at all.”
David Roberts:
One of the dangerous, insidious things about this economic style of thinking is that a lot of these procedures, which when you really think about them seem quite obviously flawed and incomplete, have over time been insinuated into the whole US federal bureaucracy such that things proceed along those lines now automatically, even if no one's explicitly thinking that way. Talk about how that happened.
Beth Popp Berman:
It's about regulatory policy. It's about how the laws actually get enforced in practice, through these regulations that are set in bureaucratic offices by people who are not necessarily particularly political, who are doing this as relatively technical actors, and they develop conventions for how to measure things and how to count things. The conventions that a particular federal agency adopts, the conventions that get accepted within a particular profession, just start to become taken for granted.
Once everybody's using the same assumptions, they become pretty hard to change. Even though people may look at one assumption that's being made and say “that's kind of ridiculous, we shouldn't do it that way” that becomes the convention. It's very hard to suddenly shift gears and say “we think we do care about distribution, so we're going to add that on top of this now.”
David Roberts:
Hasn't it been the case that the Supreme Court has tried to impose microeconomics style cost-benefit analysis thinking even in areas of environmental law where the statute is clear that they don't belong?
Beth Popp Berman:
Until the 21st century, the Supreme Court was generally holding back the rise of cost-benefit analysis. It was coming from administrations and from the regulatory state, but when the Supreme Court would look at it, they would point back to the law and say “that's actually not what the law says, and you can't force agencies to count costs in this particular aspect of the law.” But in more recent years, that has eroded somewhat.
An even bigger issue is the risk that the courts will stop allowing agencies to make these decisions relatively independently, which is historically what they've been able to do, and will say that they have to be able to justify any decision to the court – that we should essentially give the courts the upper hand relative to agencies that are doing the regulating.
David Roberts:
This is something we discussed in a previous podcast about the Supreme Court and the EPA cases, where, in sharp contrast to last century, they're now going to say “agencies are too sweeping, that's too big, Congress has to do that.”
Where are they getting too big? What's the line for too big, the criteria for too big? Who knows – it just lives in Alito’s head somewhere. But there's an explicit turn toward restraining government from doing anything sweeping and not narrowly economically tailored.
Beth Popp Berman:
Economics can point to policies that are going to move things in a more progressive direction, or it can point to things that are going to move policy in a more conservative direction, and whether it is actually put into practice is in part going to depend on the larger political environment. If the Supreme Court is dominated by people who have a conservative agenda, they're going to be less interested in allowing EPA or whatever federal agency to use its own economics, to make its own regulatory decisions, and more interested in shifting the balance of power back to themselves.
David Roberts:
As we say, it's a one-way ratchet that seems to be still underway.
Within the climate movement, in the last decade or so, there's been an explicit rejection of the economic style of thinking and its manifestations in the obsession with market mechanisms. There's more embrace of industrial policy, more embrace of ambition and social justice. Do you think that's a broader phenomenon on the left in the US right now, this general turn away from the economic style of thinking? And is there a coherent alternative on the table?
Beth Popp Berman:
Absolutely, that's a broader phenomenon. There were bits of this even in the years after the financial crisis, so this has a little bit of a longer history to it, but especially since the election of Trump and, in the last five years, much more energy coming from the left and from young people. People who are disillusioned with the status quo don't particularly believe that an economic approach to policy problems is going to be the right one, or going to be enough, and are interested in and willing to entertain much bigger or different kinds of policy options. I absolutely think it's a broader trend.
But is it going to emerge into a coherent alternative? There are a lot of efforts to do that right now, and it still remains to be seen how much those are going to coalesce into a single framework. In law schools, there's a law and political economy movement, which emerged in opposition to the law and economics movement that has been very influential, which is trying to create a new framework for thinking about legal questions that is centered on economic, environmental, and racial justice. It is much more attentive to power as a central factor that should be considered, and it thinks about economic questions in a very different way.
What these alternatives lack at this point is that the economic style is tidy. It's a very neat, conceptually coherent approach to thinking about problems. That's going to be the interesting question: whether we can create a coherent intellectual alternative that maybe takes some of what's best about what economics does, adds in other kinds of concepts that we're not able to address within those frameworks, and then uses that to generate new kinds of ideas about policy and new approaches to politics that actually can have the potential to usher in a different kind of political era.
David Roberts:
You make the point that this is mostly a phenomenon of Democratic elites – the whiz kids. In a sense, the Democratic masses were never on board with this at all. Pretty frequently, the Democratic elites and the masses ended up at odds.
So it's one thing to say the Democratic voter masses are turning against this; are the elites turning against it? Or is it still just as fixed in the Harvard / Yale / RAND world as it ever was?
Beth Popp Berman:
On the one hand, there are a lot of ways in which intellectual movements follow what's going on in the world. The way that I'm telling this story is as the influence of a particular way of thinking about problems. But why does this stuff actually come to influence at a particular moment? It's because the social conditions are ripe for it.
If we're going to see some kind of coherent intellectual movement emerge that provides an alternative way of thinking about problems, that's going to start with grassroots change and follow that rather than driving it.
Social movements, grassroots activism, energy from people who haven't been involved in politics before – that is actually the thing that leads people to elect people who are more progressive, who are open to other kinds of ideas. The intellectual frameworks will follow from that.
There are people out there doing that kind of work, and it just needs the right moment for it to come together and create some kind of synthetic alternative. But that's where it's going to have to come from, because in spaces of power, in elite institutions, this is still the default way of thinking about problems, and it takes effort to dislodge that. It's easy to fall back into it.
David Roberts:
This is fascinating. Thank you so much for this book. It gives me a vocabulary and a conception to put around this thing that I've felt for so long. So thanks so much for writing it and thanks for coming on the podcast.
Beth Popp Berman:
Thank you so much. It was great to talk to you.
Volts podcast: Elizabeth Popp Berman on the "economic style of thinking" that consumed US policy