When it comes to crafting economic policy, cost-effectiveness, efficiency, choice, and competition have reigned supreme among policymakers for decades. Sociologist Elizabeth Popp Berman says that this style of economic reasoning—prioritizing efficiency above all else—makes good ideas seem like bad policy. She walks us through how that short-sighted style of thinking took hold in DC and explains when policymakers are right to lean on purely economic thinking—and when they should reject it in favor of prioritizing more fundamental values.

Elizabeth Popp Berman is a sociologist at the University of Michigan and the author of “Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy”.

Twitter: @epopppp

Economics: Looking Back to Move Forward https://democracyjournal.org/magazine/64/economics-looking-back-to-move-forward

Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy

https://press.princeton.edu/books/hardcover/9780691167381/thinking-like-an-economist

Website: https://pitchforkeconomics.com/

Twitter: @PitchforkEcon

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Nick’s twitter: @NickHanauer

Zach Silk:

We often talk about the rise of neoliberalism has made it so that neither party is actually working in the best interests of working people in this country.

Elizabeth Popp Berman:

There’s an economic style of reasoning that a lot of people have picked up on and that has spread a lot, basically a microeconomic Econ 101 approach to problems.

Goldy:

Thinking like an economist, that probably would’ve been taken as a positive instruction 30 years ago, but today, not so much.

Speaker 4:

From the home offices of Civic Ventures in Downtown Seattle, this is Pitchfork Economics with Nick Hanauer, the best place to get the truth about who gets what and why.

Goldy:

It’s so exciting to have Civic Ventures President Zach Silk co-hosting the podcast with me this week, especially since Zach, I understand you just got back from our nation’s capital.

Zach Silk:

It’s true.

Goldy:

Yeah. So how’s the swamp or are we getting all the big progressive changes we wanted? It’s all working like clockwork there?

Zach Silk:

Well, I would say it’s complicated. We met with a lot of people. In some ways, it’s the most promising time that I can remember after spending a lot of time in the Obama and Clinton years talking to Democrats about how to help the government improve our lives. That was not so promising. Those were hard meetings, very challenging, very difficult. The meetings now actually are much more promising. I think people in DC in this administration and through the Congress are really dedicated to solving problems. The thing that’s holding them back is the subject of this podcast today, which is some of them are very trapped in an old style thinking, this frankly neoliberal world order. They’ve really accepted it and they’re still trapped in that world order. They’re still trapped in that ideological lens. And it prevents them from thinking creatively about solving the kinds of problems they want to solve.

So the tension you have is you have a lot of people in this administration and on the Hill have figured out that there are some really new ways of trying to come at these problems, but they’re not running up against Republicans. They’re running up against members of their own party who are trapped in this old way of thinking.

Goldy:

Right. And that’s because both parties, both the left and the right for decades, have been trapped in what today’s guest calls the economic style of reasoning, which emphasizes efficiency and cost-effectiveness in designing and evaluating policy, which in a sense insists that we all should be thinking like an economist, which is in fact the title of a new book from our guest, Elizabeth Popp Berman, a sociologist at the University of Michigan.

Elizabeth Popp Berman:

I’m Elizabeth Popp Berman. I am associate professor of organizational studies at the University of Michigan and a recent author of Thinking like an Economist: How Efficiency Replaced Equality in US public Policy.

Goldy:

So the title of the book hit me straight up. The first thing I thought when I saw it was thinking like an economist, that probably would’ve been taken as a positive instruction 30 years ago. But today, not so much. What do you mean by thinking like an economist and how has it negatively affected public policy in the US?

Elizabeth Popp Berman:

Right. Well, one of the reasons I picked this as the title is because it can go both ways, that it’s both a particular… This is often how economists talk about teaching new people to think in the way that the discipline does. But the book is a lot about what these effects have been of more and more people coming to think like that. And what I talk about is the idea that there’s an economic style of reasoning that a lot of people have picked up on and that has spread a lot, particularly in policy circles. And what I mean by that is basically a microeconomic Econ 101 approach to problems where you’re focusing on these basic concepts like efficiency, trade-offs, weighing costs and benefits, these very simple ways of framing problems that you would learn in introductory economics, and that can be useful, but that also have these real consequences for how we think about policy.

Goldy:

Right. And I’m sure a lot of people listening, maybe not as many in our particular audience after a couple of years of talking to them, but they’d hear that, say, “Yeah. We should think like economists. When we’re talking about policy, we should focus on efficiency and trade-offs and cost-benefit analysis.” Let’s start with how this approach differs from the dominant policy perspective that preceded it.

Elizabeth Popp Berman:

Right. Well, so historically this is an approach that really came to Washington in the 1960s and spread and took off over the ’70s and ’80s. And at the point when it first entered, it’s a way of thinking that feels very natural to us now. And so it’s hard to realize there was a before where people didn’t really automatically take this approach to thinking about problems. But what it really introduced was the idea that one important way of thinking about what government should do is to identify what its goals are and identify possible paths to reach them, and then systematically compare the cost-effectiveness of different ways of getting there.

And it really ran into issues in a lot of different ways. One was just that people didn’t think that way at all. And so there were federal agencies where these ideas were introduced and they were like, “Well, we don’t even know what our goals are. How can we specify and quantify some kind of goal that we’re trying to reach, let alone try to figure out how to get there in the systematic way?” But I think even more than that, it also pushed people’s moral buttons a lot of times. And so there’s a lot of ways in which this approach to thinking about policy comes into conflict with other kinds of moral framings of problems.

And just to give you one example, the late ’60s, early ’70s wave of environmental policy, environmental legislation. A lot of the problem was framed in these very strong moral terms, that pollution is wrong, we should end it, it is a bad thing, and that’s very different from an economic framing of the problem, which is that it’s an externality. It’s undesirable, but it’s not a moral problem. It’s something that you solve by pricing it. And so there really was a lot of pushback initially because this was not the way that most people, regardless of their political orientation, thought about policy problems.

Goldy:

This economic style claims to be morally neutral and really politically neutral. It’s just, what’s the most efficient way to solve this problem. But it isn’t, is it? It introduces its own biases.

Elizabeth Popp Berman:

Yeah. And I think one thing that makes it hard to push back against is that nobody’s arguing for inefficient solutions. That in itself is never anybody’s goal. But it has this surface-level neutrality because it does try to evaluate what the most cost-effective way to achieve a particular goal is without introducing explicitly other values. But efficiency is itself a value. And a lot of times it comes into conflict with other things that you might want to achieve.

So for example, historically, a lot of Democrat success in the 1960s was around creating policies that were universal policies. So something like Medicare, where it is not means tested. It is available to everybody who is over a certain age. Or going back further than that, Social Security. And this idea of universalism is both a morally powerful idea. Sometimes there’s political reasons to do it too, that a policy that everybody has access to often develops a base of support. And so it becomes more sustainable in the long run.

If you argue that efficiency should be your central goal of policymaking, you’re really very rarely going to argue for policies that are universal. You might want to expand healthcare, but you want to do it in ways that involve cost sharing or means testing, that are trying to discourage overuse of medical care. And so on the surface, trying to achieve this goal in a way that’s more efficient may seem like it is a neutral decision, but in practice, it doesn’t necessarily always play out that way.

Goldy:

Right. And one of the current examples right now, I think, is the debate over student loan forgiveness. The universalist approach would be just blanket student loan forgiveness, but what seems to be winning the argument is, “Oh, no. That gives a benefit to rich people and it’s not progressive. And so we should means test it and only offer piecemeal to most students.” And that actually undermines support for it in the short run.

Elizabeth Popp Berman:

Yeah. And it also highlights these ways that you often have these conflicts between policy directions that are driven by economic reasoning and these competing policy directions are often conflicts that are taking place on the left side of the political spectrum. So it’s not really conservative so much who are arguing, “Oh. Well, we should limit student loan forgiveness because it’s going to be regressive or we should just do a chunk of it and means test it because that’s a more cost-effective way of doing it.” No. It’s often these debates are happening between people who are on the center left part of the spectrum and people who are more on this progressive side of the spectrum. And that’s also been one of the reasons that it’s really changed the space of Democratic politics over the course of decades.

Zach Silk:

Yeah. Can we dig more into that? I thought that was one of the more interesting and provocative assertions, which to be clear, we believe too. We often talk about the rise of neoliberalism has made it so that neither party is actually working in the best interests of working people in this country, and that there’s a real focus on the Chicago school and the rise of the modern right. But what is often left out of the critique is that actually, much of this has risen inside the center left. And I thought you did a good job both in the democracy piece and what you’ve discussed in the book about unpacking the culpability of the center left. And actually, I think you even imply that actually, it may be even more responsible for the rise of this kind of thinking in public policy spaces. Could you talk more about that?

Elizabeth Popp Berman:

Yeah. And I mean, I would not discount the importance of the Chicago school and conservative free market thinking and reshaping the broader space of political discourse, but definitely when you’re talking about, well, how does economic reasoning really get built into the machinery of government? When it starts, it is introduced by liberals basically, by people who are working in Democratic administrations, people who believe in using government to make people’s lives better, and again are interested in doing so in a way that they see as being as effective as possible, which often ends up meaning cost-effective. And the people who are coming from that space who have a great deal of success at introducing this way of thinking into government offices, into think tanks that are surrounding Washington, into policy schools and law schools where people who are going to end up in Washington get their training, that it’s through spreading it into all those spaces that it really becomes diffused into Democratic thinking about policy more generally.

And so that’s really how it ends up becoming particularly influential within center left circles. And what happens, I think among conservatives is that this kind of thinking is still effective, certainly, but starting with Reagan and I think continuing beyond that, Republicans are much more willing to pick and choose when to use this kind of thinking, that it’s not so much a way of disciplining government from being too ambitious. It’s used more strategically to advance policies that you want for reasons of their own, for whatever your underlying commitments are, and to not use this thinking when that doesn’t advance a larger political project.

Goldy:

Does that sound true to you, Zach, that Democrats are more good government technocrats and Republicans are more Machiavellian?

Zach Silk:

In my lived experience, yes. And actually, Elizabeth, I went to a top public policy program [inaudible 00:14:03] and I could tell you, one of the many things I was really surprised by is how focused they were on these think like an economist outcomes. And you are likely if you’re at a school like that, you’re a believer in civil service, the power of government to improve people’s lives, and you see yourself in a career making a difference in the world. But you now have been trained that the only way to achieve that is through these efficiency methods and through, yeah, I guess one of the things you point out is constraining the harms of government rather than releasing the potential of collective action.

Elizabeth Popp Berman:

Right. And I mean, and the reason for that really is that the public policy schools were very explicitly created to do this. They didn’t exist until the late 1960s. There was a discipline of public administration. It was more about managing people and neutrally applying the rules. It wasn’t about this idea of how do we evaluate what makes a good policy. There was really a specific moment when people came in, introduced this new way of thinking about, what is good policy? Good policy is policy that is cost-effective. And once Washington was doing that, universities saw that there was a market for it and they started creating programs that were very much centered around this thinking about policy. And again, it’s got its virtues. It’s very good for answering certain kinds of questions. But like you said, it makes it hard to ask bigger questions sometimes.

Zach Silk:

Well, and I just wanted to say one point on this. Let’s not let the law schools off the hook here, either. In every law school, when you take antitrust or any number of government intervention, regulatory law, they are teaching you an antiquated Econ 101 way of understanding the world, including that when you raise wages, you lose jobs, that minimum wage is an onerous intervention on a market economy. That is taught as pure factual to an L1 law student in one of these elite… not just elite universities, at all universities across the country. And so you not only have it baked in your public policy, future leaders, you also have it baked in your entire legal apparatus left right and center.

Elizabeth Popp Berman:

Yeah. And I think that sometimes it is this idea that the debates a minimum wage and what the effects are going to be. Sometimes the conversations that are actually going on within economics and within academic spaces are actually more nuanced and deal with some of the complexity better than what people get taught in these spaces where they’re just getting exposed to the ideas, and the idea is just to let’s inculcate law students, new public policy students with the basics of this. And there’s not a lot of nuance introduced in the process.

Goldy:

We’ve heard that defense from economists a number of times on the podcast, even Paul Krugman saying that, “Oh. It’s much more nuanced. It’s much more complicated.” But that’s just Econ 101. It’s an introductory textbook. And yet that’s all most people are getting is Econ 101. Let’s move on. In your article in Democracy Journal, in the book, you used that term, the economic style of reasoning. In the Democracy Journal piece, you call it left neoliberalism. So we have neoliberalism coming from the left, which again, your book, a great history of how that happened going back to the Rand Corporation and the systems analyst approach and how it built all these institutions and the law and economics movement and so forth. But you also have that neoliberalism coming from the right, which we’ve talked about a lot on this podcast, from the Chicago school and The Mont Pelerin Society and so forth. Considering that it’s coming from both the left and the right and the center, how do we get beyond it? What’s the path forward from the economic style and neoliberalism of both left and right?

Elizabeth Popp Berman:

Right. I think there are different ways to approach this. I mean, I think one thing that you have to start out with is not thinking that there’s going to be a single framework that is a coherent, equally compelling alternative that you’re just going to be able to apply to a lot of different policy areas in the same way. But I do think that in these specific policy domains that you really can start by recognizing what’s going on when people make those kind of arguments, articulating what the underlying values are that one is trying to achieve that are not simply cost-effectiveness, that are more important than that, and then using those as a starting point for developing your policy proposals.

And I think we’re also going to need intellectual communities of people who are thinking through these things who are going to be able to provide some of the intellectually ammunition that goes along with that, and that they can provide ways of thinking about problems that are less restrained or that are not willing to be constricted in the same way.

Goldy:

We need to persuade people. And this may be a heretical thing to say on an economics podcast, but there’s much more to life than economics.

Elizabeth Popp Berman:

And there are morally compelling reasons to try to want to achieve things with government. And whether that is making people’s lives materially better, whether that is solving climate change because we’ve all got to live on this planet, those are in and of themselves morally compelling. And there’s no reason… I mean, you go back to something like student debt cancellation. Implementing this policy would just make a bunch of people’s lives better. We do other expensive things all the time without worrying about it. You can start with that moral claim and don’t necessarily have to immediately step back when somebody says, “Okay. Well, yes, but is it cost-effective? Is it possible that some doctor with a lot of income is going to get some benefit from this and they don’t deserve it?” That doesn’t need to be where you start from.

Goldy:

But what about the moral hazard? If we forgive student debt, won’t that just incentivize people to go out and get better educated?

Elizabeth Popp Berman:

Well, I will say I think it’s only going to be a limited solution as long as you don’t solve things on the university end. But yes.

Goldy:

Yeah. And that problem of unaffordable higher education, that is a product of the economic style. We used to fund public colleges and universities, but most of the costs used to be government taxpayer-funded, not tuition-funded. But that was thought of as inefficient, wasn’t it?

Elizabeth Popp Berman:

Yeah. I mean, what really ended up happening is that up into the 1960s, most funding happened to institutions and not to individuals. And so there was a lot of government funding coming in to higher ed, and the way that it got there is that states gave big grants to public universities of money. The federal government gave lots of kinds of money to both public and private institutions. And tuition was relatively quite low depending on where you’re looking at it.

And in this same time period, late ’60s, early ’70s, you start to see the idea advanced that what we should really do is one, that students should be bearing more of the cost of the higher education because they’re the ones who benefit. It’s a human capital investment. It’s going to pay off for them in the long-run. And so it’s only reasonable for them to be paying more. And you also start to see the idea that by attaching funding to students rather than to institutions you can encourage competition. We haven’t really talked about that, the idea that promoting competition, encouraging markets or market-like mechanisms is a good way to improve outcomes.

And so there’s this underlying idea that if we stop making education very low cost or free, and then we provide grants or loans to help people so that people still have access to it, well, that’s going to improve the system because the students are going to take that money and think carefully about where to use it, and schools will have to compete in order to attract students, and competition will make the system work better. And that was a start of a whole sea change in how we thought about that area.

Zach Silk:

I have a quick question for you on… I read the Democracy Journal piece with interest, and I have just spent some time in DC. And it does seem to me that, well, first and foremost, let’s be clear. Democrats control both chambers of Congress and the presidency, and obviously the federal administration consequently. And one of the things that you see played out is this real tension between how to approach these really vexing problems. Democrats want to solve problems. I think there’s a broad agreement on that. I actually think for the first time, because this was not the case under Obama and Clinton, there’s real debate about how to solve those problems. And actually what you end up seeing is real tension between this neoliberal wing of the party and whatever this new thing that’s rising, which doesn’t really have a great name. I’m curious if you see these tensions between rejection of the old neoliberal way, which is this economic thinking and efficiency way, and what is rising.

Elizabeth Popp Berman:

Yeah. No, absolutely. I mean, I think this is the first administration that we’ve had since, I don’t know, there were both wings of this in the Carter administration and maybe that was the last one where you didn’t have a really strong dominance of this center left technocratic orientation to policy in a Democratic administration. I mean, I think you’ve put your finger on it. It’s both that there’s a new generation of people who are looking at what Democrats have been trying to do for the last 40 years and saying, “Well, that hasn’t worked very well. We’re not going to get anywhere if we just keep trying to do the same thing.” And I think it’s the outcome of a lot of organizing and social movement dynamics, that there is just an energized left in this country in a way that there wasn’t 10 years ago.

And I think as soon as Biden was elected… And I forget exactly what he called, but he brought a bunch of the Bernie people into the initial committees and said, “We’re going to bring the full range of the Democratic Party into these conversations.” And you can see it. And some of his appointees are people who are very much not in this space, not in this economic reasoning space. And their ideas have very much been on the table. Now, how far have they actually gotten? Not that far, but I suppose you could say that the center left ideas haven’t gotten that far either under the current circumstances. But I think it’s a huge change, just that those things are really being debated seriously, that a program like the Green New Deal can be put out there and a lot of people are debating it as a real starting point for conversation, even if it’s not something that we’ve made progress on yet.

Goldy:

Right. And then the CBO score comes in and, “Oh man, it’s just so costly and inefficient. We can’t possibly do that,” because you can’t dispute the CBO score.

Elizabeth Popp Berman:

Right. And yeah. Yeah. And the CBO is very much coming out of the same lineage. And in fact, the CBO was initially created because after the executive branch developed a lot of this capacity for cost-effectiveness analysis, Congress said, “Well, we need this capacity too. We can’t just leave it up to the executive branch to be producing all the numbers. We need our own capacity as well.” And they-

Goldy:

We need to impose constraints on ourselves as well. We can’t just let the administration do that. We’ll constrain ourselves. Okay. Well, we’ve used up most of our time, so we’ll go to our final question we ask all of our guests. Why do you do this work?

Elizabeth Popp Berman:

I do this work because I am somebody who came of political age in the ’90s and this has been a burning question for me of why it always felt for my entire adult life that the political horizons are very constrained. And so it’s just both an intellectual problem that’s driven me and also one I think with really important practical implications. So I do it in the hopes that these ideas could be useful to somebody else, and in some indirect way, make a difference in the world.

Goldy:

Well, the good news is that as you point out in your book, the economic style didn’t always exist. So that means it’s not inevitable and permanent. We can overturn it.

Elizabeth Popp Berman:

No. Yes. Unlike Margaret Thatcher, there is no alternative is not really actually the case.

Goldy:

Thank you for joining us and thank you for doing the work you do.

Elizabeth Popp Berman:

Thank you. Great to talk to you.

Zach Silk:

Yeah. Thank you so much. What a pleasure. Well, that was a great conversation about the economic style and how it’s built into the fabric of our policymaking in ways that are constraining for progressives. And I know we hear at Civic Ventures and on this podcast spend a lot of time talking about how this insidious idea of market fundamentalism and neoliberalism has made its way into all of our policymaking. I saw it recently on my trip to DC and I think it’s just an incredibly important part of our understanding of what’s going on in our moment. What’d you think, Colby?

Goldy:

Well, it speaks to the heart of a lot of what Nick and I talk about, particularly this notion of efficiency, which is at the heart of market fundamentalism, that we should always be focused on efficiency. And there’s a couple of ironies here, not the least of which being is that the market is not efficient. I don’t know how many times we have to say this on the podcast. Markets are not efficient. They are incredibly wasteful. What they are often is effective, but that’s different. Being effective at evolving new solutions to human problems is not the same thing as being efficient. So we often confuse this. And by focusing on efficiency, we end up with policies that aren’t particularly effective at solving the problems we need to solve. So that’s one right off the bat.

The other thing is that efficiency is never the goal. It’s a tool. You can try to design a very efficient program, but it’s not going to achieve much. And I think what struck me, particularly in reading the book, is how this economic style, this left neoliberalism, this emphasis on efficiency and cost-effectiveness, has caused us to abandon other values and other goals, outcomes that used to be dominant in our college C approach, but now have been lost forever. I mean, one of the examples she uses that the Great Society, President Johnson’s Great Society in the 1960s, when it was conceived, it was not conceived within this economic style of reasoning. And one of the things it initially focused on was developing more community organization, more democratic participation. Democratic participation was one of the major goals of the programs of the Great Society.

And instead, what the economists did, they came in and said, “No. Actually, if you want to address poverty, you don’t need to worry about things like democratic participation. You just need to worry about making people less poor. Just focus on the money. It’s the money. If they have more money, they’re less impoverished.” And so a number of things happened out of this approach is that A, we did not have programs that effectively addressed poverty because we weren’t focusing on the broader picture, but also, we undermined support for these programs because when you have programs that are only for poor people, nobody else wants to pay for it.

Zach Silk:

I think the other thing that struck me coming out of these recent conversations with the DC power structure is there is quite a lot of change afoot and we should have hope. The most important thing is there is a new group of policymakers who are really rejecting this old world order. They are ready to move beyond neoliberalism and they are ready to move into new spaces. And for the first time really in a generation, they are in positions of power and authority.

There is a reorientation around what policy should do, but there’s no question there’s a lot of work to be done. I think the reality is that this neoliberalism, market fundamentalism, and this focus on efficiency, it was a project that was built over two generations and installed at every level of government, and tearing that down is going to take time. But we really do see shoots sprouting here in the spring. And I think we should really encourage it. And it is one of the most important parts of our overall work is to both tear down this old way of thinking and create new thinking. And that will lead to new language, and that will lead to better outcomes.

Goldy:

Right. And congratulations to Professor Berman for helping to build that new narrative.

Speaker 4:

Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on Medium at Civic Skunkworks and peek behind the podcast scenes on Instagram at Pitchfork Economics. As always, from our team at Civic Ventures, thanks for listening. See you next week.