Making the Case for Equitable Growth: Comments on the 2020 David Gordon Memorial Lecture

1. Introduction

Before I begin, I want to say that if there is anyone in the audience who is having an uncanny sense of déjà vu right now, it’s not in your head. In April 2016, Heather presented her book Finding Time: The Economics of Work-Life Conflict (Boushey 2016) for the annual Schwartz lecture at The New School, which was followed by my comments as a then-student discussant. ¹ The opportunity to reflect on Heather’s newest work was an honor and privilege then, and it is an honor and privilege now. Heather Boushey is one of several women economists who earned PhDs in economics from The New School and have gone on to receive national and international recognition for their work. ² As the economics community begins to reckon with the pervasive culture of discrimination affecting women and minority economists, ³ we should also recognize the people who demonstrate our shared progress despite our professions’ many shortcomings. Heather and the work that she does have made it possible for me, my peers, and future generations of women economists—especially those who graduated from heterodox programs—to imagine ourselves in high-profile and politically influential positions.

It is even more meaningful to have the opportunity to discuss Heather’s new book, Unbound: How Inequality Constricts Our Economy and What We Can Do about It, at this lecture named in memory of her teacher David Gordon. While I did not know David Gordon, I am confident that he would be proud of all that Heather has accomplished as an economist, as any teacher would feel of such a stellar student. As you all know, Gordon left an indelible mark on our intellectual community. Gordon’s spirit lives on in the Economics Department at The New School where he taught, and where Heather and I studied. The building that houses my own research institution, the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst, is named after Gordon’s legacy. Unbound is dedicated to the memory of David Gordon for inspiring “generations of economists to look at evidence and engage with the world” (Boushey 2019). ⁴

2. Boushey’s Theory of Change

As the dedication page suggests, Unbound is about “the power of economic evidence to change how we think about the economy” (Boushey 2019). This book is a description of scholarly research of a number of economists associated with the Washington Center for Equitable Growth, but it is more than a summary of their findings. This book puts forth the theory of change that informs Heather’s work and organization. In Unbound, Heather argues that to change the policies that hurt our economy and the people we care about—austerity measures that gut education, the lack of universal investments in early childhood, and ever-lower taxes on corporations and the rich—we need to chip away at the dominant economic paradigm through empirical research. Her argument is that if we use the best data, the best tools, and the smartest minds, we can prove that supply-side economics is wrong and change economic policymaking for the better.

Specifically, Heather is concerned with Arthur Okun’s “big tradeoff” between equity and equality. As the name Equitable Growth suggests, the goal of Heather’s organization is to break this paradigm by demonstrating that inequality harms our economy by suppressing talent and innovation and that equity-enhancing investments in human capital will have efficiency returns leading to economic growth. We can bake a bigger pie and ensure everyone gets a piece.

Human capital theory as developed by Becker and Mincer made important insights that contributed to a number of fields, including feminist economics. But there are more expansive frameworks such as the capabilities approach of Amartya Sen or Martha Nussbaum. As an economist, I agree that investments in human capital improve productivity, but that is not the only reason to make these interventions. Doesn’t everyone in this country and on this planet deserve a decent life, irrespective of economic growth? It seems that the intended reader of Unbound is not expected to share this value.

This may be because unlike some of Heather’s earlier books and articles that contribute to radical political economy, ⁵ the intended audience of Unbound is not a URPE member. This book is written for policymakers—legislators and their aids—and those who might be able to influence them. The goal of Unbound is to help convince members of Congress—and not necessarily the most idealistic among them—to implement policies that will upend the status quo that has actively enabled, embedded, and emboldened historic levels of inequality in the United States. From Heather’s writing, we learn that that the legislators she hopes to influence speak the language of improving markets. While Unbound is not an explicit defense of the market system, it has implicitly embraced it. There is hardly an inkling that there are other ways to organize the economy, produce goods and services, or meet our material needs.

If it is true that to convince policymakers to intervene in the economy, there must be the promise of an economic boom—or at least not a bust—then appealing to the ability to use policy to promote economic growth is entirely sensible. While it has been a decade since the Great Recession was declared over, low wage growth despite low unemployment is still a bitter reality. It is hard to make sense of our current political situation without taking economic inequality into account. While the equally important matter of climate change is discussed with a reassurance that we can address both economic inequality and ecological disaster together, there is little mention of public investments in green technology or renewable energy. Appealing to growth without an explicit argument for or plan to pursue green growth seems incomplete given the urgency of climate change. I would have liked to read about how industrial policy could be used to address economic inequality, the crisis of care, and climate catastrophe in the form of a Green or Pink New Deal.

3. Normative Values in Applied Economics Research

A major contribution of Unbound is that it implies that economists and policymakers have the ability and responsibility to make meaningful interventions on behalf of a more prosperous and equitable society. This is an important intervention. As I have discussed elsewhere, in the mid-1970s, the Keynesian belief that economists can and should improve upon the economy through activist policy was largely abandoned in mainstream macroeconomics. Operationalized by the Lucas critique, economists adopted the belief that the most important way to do economics was to build highly idealized Dynamic stochastic general equilibrium (DSGE) models which typically—although not always—found a limited role for economic policy (Moos 2019a). Heather’s perspective—which unabashedly assumes that economists and policymakers can and should intervene in the economy—is an antidote to the values infecting economics since the final quarter of the 20th century. ⁶

The tenuous relationship between post-Lucasian macroeconomics and economic reality has led to an influx of talent to empirical microeconomics. Twin revolutions in data and computer science—made possible by improved surveys, software, as well as breakthroughs in statistical techniques and labor economics—have contributed to the proliferation of applied economics research. The economists highlighted in Unbound want to say something about the “real world” and influence economic policy. Heather is right to support high-quality research which contains an implicit value and belief in the ability of economics research to change policy for the better.

The research presented in Unbound that I find most compelling is related to public finance and national accounts. Piketty, Saez, and Zucman’s work allows us to better understand the distributional effects of fiscal policy. National accounting is also relevant for heterodox economics, including both Marxian and post-Keynesian traditions (Shaikh and Tonak 1994; Taylor 2004). As I have recently demonstrated—in a paper that utilizes tax data from Piketty, Saez, and Zucman (2018)—empirical analysis using National Income and Product Accounts data can also be applied to feminist radical policy economy (Moos 2019b).

You can’t do economics without a theory, so even in a book about empirical economics, there is plenty of theory. The theory of imperfect competition provides suitable models—monopoly and monopsony—for explaining the dysfunction of US healthcare markets and its effect on workers and patients, given the level of concentration in US healthcare. As a New School alumna, Heather is well aware of the theoretical critique of imperfect competition from the perspective of classical political economy, so I will not elaborate on the theory of real competition (see Shaikh 2016). However, blaming the many faults of the US healthcare system on large monopolistic sellers and monopsonistic buyers is somewhat misleading. Because Unbound is silent on single-payer health insurance—which amounts to a publicly-funded monopsony—the passage on healthcare could be interpreted as implying that efficiencies in healthcare are gained with smaller, more competitive healthcare firms. Someone who doesn’t understand the US healthcare system in international comparative perspective might get the false idea that having only one national health insurance provider—as exists in Canada, for example—is a bad idea.

More fundamentally, in Unbound, the fact that we have markets for medicine or medical treatment at all—and that these goods and services are commodities that one can only access through cash or insurance payment—goes unquestioned. Together with the silence on universal public health insurance in the United States, I interpret this as an implicit argument against Medicare-for-All, or at least serious doubt of its political feasibility. But to me and many of our colleagues, single-payer health insurance is an obvious answer to an economic problem which both causes and perpetuates inequality. Furthermore, the US healthcare system, precisely because it is not universal or publicly funded, is also a restriction on economic growth. Researchers at PERI, UMass Amherst, and elsewhere have long argued—and demonstrated empirically—that the United States could have universal healthcare coverage with major cost savings if we were to adopt single-payer health insurance (Friedman 2020; Pollin et al. 2018).

4. An Empirical Evaluation of Boushey’s Theory of Change

Is Heather’s theory of change consistent with the evidence? To determine whether the proliferation of data-driven, empirical economics can lead to a paradigm shift in economics, we need to look at the history of economic thought and the philosophy of science.

To be sure, Okun’s Trade Off and Laffer’s Curve pose empirical questions that can be tested and refuted. Yet, they continue to belong to the canon of economic theories, despite widespread criticism and a dearth of supporting empirical evidence. From the beginning, supply-side economics—especially the Laffer Curve—was openly called “voodoo” economics because it lacked empirical support. Even in the face of the overwhelming historical evidence of its failures—take, for example, Brownback’s Kansas—the Laffer Curve continues to influence state and federal policy. It seems as if some theories never needed to have solid empirical support to enjoy immediate and ongoing acceptance.

Why is this? For starters, Kuhn did not argue that paradigm shifts were the inevitable outcome of empirical breakthroughs. The reason Kuhn emphasized the study of historical developments within scientific revolutions was because he observed that paradigm shifts often did not occur when evidence contradicted the agreed-upon theory. Popper argued that “falsified” theories would be discarded, but Kuhn recognized that many scientific theories remain even after conflicting evidence (Hands 2001: 101). I would argue that the ideas of supply-side economics are accepted as facts because the underlying values embedded in them are compatible with ruling-class politics. ⁷

This is not to say that data-driven social science is not exciting, or useful, or powerful. We employ empirical methods to answer important questions that inform policy, theory, and practice. Occupy Wall Street’s call for solidarity was inspired by a single data point. But even though my own research program employs empirical methods, I will never concede that the conclusions drawn from empirical economics are truer or more relevant than insights from other types of social science analysis. I am convinced that theory and empirics are necessary complements in economic research; one should never be mistaken as a suitable substitute for the other.

The Right continues to demonstrate that it is ideas—not facts—that change the world. The right-wing revolution in economics and politics was waged with big ideas (Blyth 2002). The Right strategically invested in developing and spreading an ideological and theoretical basis for their class warfare (MacLean 2017). My hope is that leaders in progressive economics such as Heather will take heed of this history. An examination of the historical evidence provides the best argument for investing in the development of new and radical ideas, models, and frameworks.