David Henderson on Disagreeable Economists

Episode Summary

Executive Summary: Russ Roberts and David Henderson argue that economists agree on far more than the public realizes, especially on basic price theory, trade, rent control, and many micro issues. They explore why disagreement is more visible in macroeconomics, how ideology and incentives can distort public economics, and how rising media/political opportunities may encourage more provocative, less disciplined economic commentary.

Main Topics: Economists’ Hidden Consensus (Priority: 5/5): The conversation centers on the claim that economists actually share a substantial body of agreement, especially on core analytical propositions, despite the public image of endless disagreement. Rent Control, Price Controls, and the Law of Demand (Priority: 5/5): Henderson uses rent control and price controls as classic examples where economists broadly agree on harmful effects: shortages, deterioration, and distorted incentives. Microeconomics vs. Macroeconomics (Priority: 4/5): Roberts and Henderson discuss why macroeconomics tends to generate more disagreement, while microeconomics has a larger settled core; they note exceptions such as inflation and growth. Minimum Wage Debate and Ideology (Priority: 5/5): They examine why the minimum wage remains contentious despite basic supply-and-demand logic, including a petition by hundreds of economists and the role of ideology in policy advocacy. Free Trade and Outsourcing Fears (Priority: 4/5): Trade is presented as another area of strong economist consensus, contrasted with public anxiety and sensational estimates about job loss and outsourcing. Behavioral Economics and Policy Paternalism (Priority: 3/5): The guests discuss the rise of behavioral economics, its challenge to the rational actor model, and the leap from behavioral insights to government intervention. Incentives, Media, and the Incentive to Be Provocative (Priority: 4/5): They argue that expanded media and think-tank opportunities may reward provocative, ideologically framed, or oversimplified economic claims.

Key Arguments: Economists agree on many foundational propositions, but public perception is shaped by media attention to disagreements rather than consensus. Rent control is a nearly settled case: it reduces housing supply, worsens quality, and discourages new construction. Most economists historically oppose minimum wages as anti-employment, though the consensus appears to have weakened somewhat over time. The minimum wage question is often asked poorly; "increases unemployment" is not the same as "decreases employment," since workers can exit the labor force or stop searching. Trade barriers reduce general welfare; economists overwhelmingly agree tariffs and quotas are harmful, even if the public and politicians often do not. NAFTA-style trade changes tend to reallocate jobs rather than create or destroy them overall. Macro debates remain more unsettled, especially on business cycles and some growth questions, though inflation is now much less disputed than in the past. Behavioral economics has produced real insights about biases and defaults, but those findings do not automatically justify paternalistic government policy. Greater opportunities for economists in media, blogs, think tanks, and politics may create incentives for ideological performance and sensationalism rather than careful analysis. Economists should be judged by triangulating multiple sources, not by treating any single economist or outlet as authoritative.

Data Points: Economists agreeing tariffs and import quotas reduce welfare: 97% (1970s), 92% (1992), 93% (2000) - Survey results discussed to show strong and stable consensus on free trade Economists agreeing minimum wage increases unemployment among young and unskilled workers: 90% (1970s), 79% (1992), 74% (2000) - Survey data used to show weakening but still large consensus against minimum wage claims Estimate of jobs at risk of outsourcing: 40 million service jobs - Alan Blinder’s estimate discussed in relation to public alarm over outsourcing Time horizon for outsourcing estimate: 15 years - Blinder’s warning about potential offshoring of service jobs Illustrative annual job displacement from outsourcing estimate: 4 million jobs per year - Roberts’ arithmetic dividing 40 million by 10 years in a simplifying example Share of jobs in U.S. economy used for comparison: 140 million jobs - Used to show why the outsourcing estimate would be a modest annual share if spread out Share of jobs disappearing annually: roughly 20% - Used to explain that job turnover is high even when total employment remains stable Economists signing petition to raise minimum wage: over 500 economists - Referenced as evidence of ideology and controversy around the minimum wage Questionable columnist impact example: under 10% positive informational value - Henderson’s estimate of how often Paul Krugman’s later New York Times pieces informed him positively Time span of encyclopedia revisions: early 1990s to mid-2000s - Henderson describes preparing the first and revised editions over roughly 15 years

Pivotal Quotes: "the most effective way to destroy a city other than bombing is with rent control" — Asser Lindbeck (quoted by David Henderson): Used as a vivid example of economist consensus on rent control’s harms "there are no good economic arguments for your proposal" — Steve Kelman (quoted by David Henderson): Illustrates the tendency of agency economists to oppose politically favored proposals on economic grounds "It's hard to accept that argument. ... I think ideology trumped economic thinking." — Russ Roberts: Roberts reacting to the petition of economists supporting a minimum wage increase

Implications: Listeners should treat economic claims skeptically and distinguish consensus analysis from ideological advocacy. The episode suggests economists can be useful guides, but only when their incentives and biases are recognized and multiple sources are triangulated.