It’s Time To Relearn Objectivity In 2021

When I left the academic world to found Beacon Economics 15 years ago, it was partly in response to a gap in the quality of research I saw being performed on campus and off. While academics too often focus their efforts on arcane topics that seem out of touch with important public debates, those public debates are, in turn, too often driven by highly flawed private sector studies performed by analysts with clear bias. Beacon Economics’ mission was to push back against this collapse in standards by applying academic criteria of rigor and objectivity in our private sector consulting work. We consider the broad mix of clients we have built over the years, ranging from unions to chambers of commerce, to be one sign that we have maintained our objectivity.

So, it has been especially frustrating to watch the gap between political speech, media reporting, and objective data-based reality move even farther apart than when the firm started. Hearing President Joe Biden, in his inaugural speech yesterday, talk about the need to “defend the truth and defeat the lies” speaks to the urgency of this corrosive national conundrum. The underlying problem of skewed anecdotes and false narratives crowding out objective data-based truths can be seen everywhere, and many of the ‘conventional wisdoms’ that drive public policy today turn out to be neither when examined empirically.

While some of this disconnect tries to gloss over real problems, when it comes to the economy, far more often discussions not only suggest the glass is half empty, but that it is draining rapidly regardless of what the data shows. For my part, I have termed this problem ‘miserabilism’. The increasing intensity of shrill, apocalyptic discussions are assuredly one of the reasons for the rise in populism in the United States, something that helped land Donald Trump—a firm adherent to old political strategy that if you say something enough times it becomes true—in the highest office in the land.

The journalist Matthew Yglesias recently wrote a piece where he describes the same issue, although he uses the term “catastrophism,” which rolls off the tongue nicely. As he notes succinctly “whoever can paint the darkest possible portrait of the status quo is the one who is showing the most commitment to the cause. And you see this norm at work across climate change, health care, criminal justice reform, the economy, and everything else. If you’re not saying the sky is falling, that shows you don’t really care.”

Yglesias worries that such rhetoric is exhausting, out of touch, and demoralizing. I would suggest we need to go even farther—such rhetoric is also at the heart of a myriad of bad policies being put into place from Washington DC to state capitals to city halls. At its grotesque extreme, it can be seen as one of the drivers of the horrendous attack on the U.S. Capital Building by people who committed acts of sedition in their quest to ‘save a stolen election’ and ‘prevent the rise of socialism by the radical left’.

This isn’t to suggest that social scientists have all the answers. Limitations of data and theory mean there can be honest, competing interpretations of the world around us. Sadly, these critical debates are often held up to diminish and attack the relevance of experts in policy conversations and to undermine the credibility of established facts – all in the name of ensuring that an ideological belief or agenda holds firm no matter the evidence or the consequences.

Consider one of the priorities of the incoming Biden administration, a national $15 minimum wage. Supporters of this policy claim it’s needed to combat what they say has been an enormous increase in income inequality over the last two decades. Yet according to the best data available—IRS tax records studied by the Congressional Budget Office and released annually—once we account for taxes paid and public subsidies received, it turns out that income inequality was roughly the same in 2017 (the most recent year available) as it was in 1999. Data from 2017 to 2019 shows that the biggest earnings gains in the United States were among low-income workers. The long-term shift that has occurred over recent decades has been in wealth inequality, which is a real problem but is different than income inequality and has a different set of policy prescriptions.

Moreover, there is little evidence that a higher minimum wage does anything to reduce income inequality, while there is plenty of evidence that shows it hurts small businesses, particularly restaurants, personal care establishments, and non-profits. This is truer in lower income communities (think Bakersfield) than in higher income ones (such as San Francisco). Of course the United States should help lower income families—a nation this rich can and should commit resources and devise policies that lift people out of poverty. But such policies should be targeted specifically at those who need the help and be based on a track-record of empirically measured success. For example, far more valuable and effective than a minimum wage in combating wealth inequality is universal Pre-K Education and the Earned Income Tax Credit. Unfortunately, the new administration is making the national minimum wage a priority, and the frenetic political debate that will surely ensue will make these other mechanisms less likely to be brought to the forefront.

And there is another cost to the collective miserablism we seem to be mired in—the opportunity cost of wasted political capital. These quixotic missions to solve problems that don’t exist (income inequality) with policies that do more harm than good, distract from dealing with real problems (wealth inequality). A higher minimum wage will not meaningfully move wealth from the top 1% to the bottom half of the wealth pyramid. Yet a serious policy effort here is unlikely with public discourse focused firmly on the minimum wage.

And this particular issue is hardly unique.

• Consider the ferocious debates over the eviction moratoriums, despite limited evidence, which actually suggests that nationally fewer than 1.5 million renting households are falling behind on rent due to the pandemic. Moreover, we will surely see an extended stimulus package that will hand $2000 out to the vast majority of people in the nation and expand PPP loans at a cost of over one trillion dollars in new debt. This will happen despite evidence that a large majority of households receiving support have not suffered any major income loss due to the pandemic. Indeed, economic activity has bounced back at a remarkable pace even as the nation works through its worst surge in COVID cases.
• Consider California’s AB5 bill, which tried to force Uber, Lyft, and other ‘gig economy’ firms to classify their workers as employees. Doing so has created chaos in so many industries that rely on subcontractors. It was passed to address what lawmakers called exploitatively low earnings in the gig economy despite evidence that, on average, these workers earn far more than the minimum wage. In the case of driving companies such as Uber and Lyft, it’s difficult to ignore the basic reality that, pre-pandemic, hundreds of thousands of Californians willingly and for the most part happily (according to surveys) joined the ranks of these companies despite the state’s record tight labor markets and the availability of many unfilled minimum wage jobs.

There are too many examples of false narratives driving public policy to list here and it is not something that is exclusive to one political party, or really to the United States. One could easily throw in both the Bush and Trump tax cuts, which were supposed to stimulate growth (they didn’t); Britain’s exit from the European Union; the constant push to undo Obama-care; the continued resistance to basic efforts to control global warming from climate change deniers; and on and on.

The underlying dynamic is simple—if we continue to ignore empirical reality, paying attention to those who shout the loudest rather than who have the most expertise, and if we continue to make policies to deal with non-existent existential threats, we may very well end up creating existential threats. To avoid worsening the situation, we need to return to an evidence-based approach to policy. We live in the information age. Social scientists have unprecedented access to data, and with even small increases in their budgets, government agencies in charge of collecting data could do even more. Instead of taking advantage of these resources, public policy is becoming a battle of memes and tweets.

Additionally, we have to start holding our leaders accountable for their words. We cannot allow truth in this nation to be determined by whoever posts the cleverest meme. While the United States was founded on freedom of speech, in our internet age, there have to be repercussions for those who use this freedom to spread falsehoods that can affect the entire nation. While we appreciate the enormity of this from a social perspective, the first step is acknowledging the problem. We hold the deepest hope that President Biden’s administration will be able to move the needle in this direction and wish them the very best of luck.