Q&A with Elizabeth Popp Berman, Author of Thinking Like an Economist

Book Cover. Image Source: Princeton University Press.

Interviewed by Zheng Fu on March 31, 2023 for the Spring 2023 SKAT Newsletter

Elizabeth Popp Berman is the Richard H. Price Professor of Organizational Studies and (by courtesy) Sociology at the University of Michigan. She is the author of Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy (Princeton University Press, 2022) and Creating the Market University: How Academic Science Became an Economic Engine (Princeton University Press, 2012).

Q: I want to discuss the relationship between “efficiency” and other values. Your book shows quite clearly that in practice, “efficiency” took over as a value, driving experts to find less costly policy solutions, which are at odds with values like universalism and equality. There is a gap between the promise of “efficiency” as a neutral guiding principle to find the best solution given an end, and what happens in practice, where “Kaldor Hicks efficiency” (38) comes to decide what government should prioritize. I am curious whether economists see the difference between efficiency of means and efficiency of ends? Are both of them seen as equally value neutral? Do you think it is inevitable that efficiency as in finding best means will be coupled with efficiency as in finding the best ends? Can we separate one from the other? In other words, is there a world in which economists could have provided the answer to questions like: what would be the most efficient way to reach universal health care, if the policy priority of “universal health care” has been established? Or, from a pragmatist tradition, maybe we can only see the “end in view”, that is, the experts can only see the ends that their means have primed them to see. In other words, do the economists lean towards policy goals that prioritize saving costs because these are the goals that they are better at solving using cost-benefit analysis?

A: Well, economists use efficiency in several different ways—productive efficiency, allocative efficiency, Kaldor-Hicks efficiency—which I elide over a bit in the book, but which also get elided over in policymaking practice. The efficiency of means that you’re talking about—where you choose what the policy goal is—say, to reduce poverty by 50%–and then consider the least expensive way to get there—is essentially the same as cost-effectiveness. And in this formulation, you can very explicitly separate (or at least try to) the piece that is political from the piece that is technical.

So you can say, oh, well it’s the politicians who choose the ends; we’re just looking at the best means to get there once we’ve been given those ends. Kaldor-Hicks efficiency and allocative efficiency, by contrast, get closer to the “efficiency of ends” that you’re talking about.

So for example in regulation, the question might be “do all the costs of this regulation”—say it’s some kind of limit on pollution—“outweigh all the benefits.” And if they don’t, you don’t recommend the regulation. This is using efficiency to decide what the ends should be: that we should implement environmental regulations whose benefits exceed their costs. Which might be a sensible way to do things—but we also might just want to say, “we should keep pollution below X amount regardless of cost”—perhaps for moral reasons, or perhaps we think that the benefits are hard to measure sufficiently. So in the first case, efficiency has become the end. But in the second case, we might look for efficient (meaning cost-effective) means to achieve our goal of keeping pollution below X amount, but efficiency itself is not the end goal.

Certainly economists distinguish between these technically different forms of efficiency in their work, but I don’t think a lot of them have thought very carefully about what it means for efficiency to be an end: that that in itself it a value choice. I think, instead, that they typically just see efficiency as a good thing—because no one really advocates for inefficiency for its own sake—and don’t recognize that it is a choice about the ends of policy that might actively be competing with other ends of policy—like wanting a social welfare program to be universal, rather than targeted, for moral or strategic reasons, rather than economic ones. I think that efficiency as means can be separated from efficiency as ends, and its implications are less conservative if that is the case. Because you could have some really ambitious goal—say, our goal is to make college free—what is the most efficient way to get there? Although the other kind of efficiency quickly creeps in, because then the first thing someone is going to say is, well, this is not the most efficient way to spend our money; if our end goal is efficiency there is some better way we can be using that money and people can pay for college themselves. So yes, there is a world in which you could set a policy end and then just focus on the most efficient way to get there—and that’s sort of where things started, in the 1960s—but it’s hard for people who value efficiency to stay there, and not start saying, “well, that policy end isn’t the most efficient one so it’s not really good.”

And yes, I absolutely think that part of this is only being able to see problems through the lens of the toolkit you’ve been given. And this is perhaps even a bigger deal for people trained in policy schools, where cost-benefit analysis is taught as the way of evaluating good vs. bad policy.

Q: I want to expand a little bit how efficiency works as an end. I think it is difficult to talk about efficiency without thinking about efficiency for whom and for what. For example,  I have read some articles about how the US healthcare system is not efficient in the sense that healthcare spending accounts for 19 percent of the US GDP and the health outcome in the US is not that great compared to other developed nations. A lot of money end up getting spent on administrative costs like insurance. So market efficiency in the eyes of some might lead to less efficiency if examined from the view of the society as a whole. Is there a default (or hidden assumption) in the mind of those arguing for efficiency, especially in terms of efficiency for whom? Whose efficiency or what kind of efficiency are people trying to maximize when efficiency is promoted as a value?

A: Well, first of all, I do think the modal U.S. economist thinks the U.S. healthcare system is pretty terrible and that single-payer healthcare—whether their first-choice policy or not—would be preferable on efficiency grounds to what we’ve currently got. So no one is defending the current system as ideal. But there are two things we can separate out here.

One is the extent to which you think that trying to correct market failures is the path to improving the system. So, do you think that we should treat healthcare as just another market but one that has to be structured carefully because the incentives don’t work like they do in a simpler market—there are all sorts of information problems and agency problems and externalities and so on. If that is your perspective, then what you want to do is consider how to increase competition, how to prevent adverse selection, how to make sure all players have skin in the game, and so on. Historically, this has been the standard economic approach, and you see it reflected in the Affordable Care Act. I think a growing number of economists have moved away from this position, though, perhaps because all our efforts so far to better structure healthcare as a market have been so unsuccessful at containing spending.

The point you are also getting at, though, is “what about distribution.” Who is it that is benefiting from an efficiency improvement, and are there also people who are losing? And here, the question of “efficiency for whom” is often bracketed. It’s set aside as being a political question, not an economic one, or as a problem that should be solved downstream of the point at which you are evaluating efficiency. This has come up a lot in cost-benefit analysis: the Kaldor-Hicks efficiency criterion endorses policy changes in which those who are made better off could hypothetically compensate those who are worse off (and still be better off themselves). Well, first, the compensation is completely hypothetical. So a policy with a group of big winners and a group of medium losers is just that—the losers aren’t actually compensated. Second, it ignores who the winners and losers are. Are the winners rich or poor? What about the losers? The logical extreme of this position is the memo Larry Summers once wrote pointing out that it makes standard economic sense to send dirty industries to the poorest countries, because the health effects will be the least costly because they will fall on the lowest wage-earners! Of course most economists do not think that impacts on the rich and poor should be treated that way, but a common position is to say that it is better to handle distributional concerns through taxes and transfers, rather than by incorporating them into cost-benefit analyses. Of course, that may just mean that they don’t get considered at all.

Q: What would be an alternative to “efficiency” when it comes to judging the best means for a given policy goal, if social scientists are to go beyond the economic way of thinking? Does there exist a truly value-free standard that social scientists can lean on when it comes to judging means?

A: No, of course there’s no value free standard and I don’t think there’s some single alternative concept that should replace it as a core value. And a lot of time efficiency may be a good goal, or the best goal, in some particular circumstance anyway. I think the trick, though, is recognizing it as a value in competition with other values—so that it doesn’t become this trump card, where of course the more efficient option is always the better one—instead, it becomes a consideration, but one that is explicitly recognized as a value, rather than being seen as simply this value-neutral technical tool.

Q: It struck me that both your previous project on economization and economic way of thinking contribute to an understanding of neoliberal policy consequence that is not just about the right-wing pushing their agenda, but about the power of certain style of thinking. But at the same time, it is much more difficult to think about how to combat a style of thinking and its network compared to combatting a certain group of people. What do you think are the implications of your projects on combatting policy trends that increasingly conceptualize the world in economic terms?

A: I think there are pretty clear things that you can do to destabilize this—because you don’t have to get rid of economic reasoning entirely; it should remain a tool in the toolkit. But it needs to be understood as such. And so I think that it is in places like policy schools or law schools that we can be teaching young people who are first encountering such frameworks that they are a way of thinking about problems, that they are not value neutral, and that if one prioritized different values, something else might look like the “best” policy.

I also think that just recognizing when this kind of reasoning is going on is itself an important tool for being able to push back against it. At some level some of my motivation for this project was having always felt frustrated that policies I thought were desirable from the standpoint of values could just be dismissed as “bad policy” or “unreasonable”—meaning not consistent with the economic style of reasoning—and not quite being able to nail down what was going on behind that dismissal. I think that recognizing when the economic style is the roadblock is an important tool in being able to change it. Finally, I also think that it points to the importance of building spaces that are explicitly not buying into this framework. Which can be think tanks, or disciplinary spaces, or offices in government—but really recognizing that those sources of power have to be built over the long term.

Q: Economists were able to wage such big influence in policy partly because of their influential network of economists in think tank, government agencies, research institutes and politicians. Economists can move between industry and academia with ease. In comparison, in sociology, industry jobs after PhD training are considered much less prestigious than an academic job and there are no existing pipelines between PhD to industry. My main question is: why are the economists so successful at establishing connections beyond academia? Or, from an expertise point of view, why has the economic way of thinking been so successful at establishing networks across institutions, and disseminated across such a wide audience?

A: Well, to be honest economists have a technical toolkit that is much more practically useful than sociologists or other social scientists do. So all the economists at Amazon who are using auction theory or doing market design—they actually have something to contribute that increases the bottom line in a way that other disciplines do not. To me the real question is why did those skills happen to get located in the discipline of economics when that was not inevitable; it’s not so clear that it’s “natural” in some way for auction theory, or game theory more generally, to be located in the discipline of economics—they are basically applied math, and that work could have been developed in other spaces like operations research, or engineering. And here I think you get into the power economics has as a discipline, and the fact that part of how its power has reproduced and increased is by bringing lines of work that are economically valuable in the real world into it. Of course you can argue about how useful or effective something like macroeconomic forecasting really is, but economics is fundamentally comfortable developing and applying its tools in the interest of industry in a way that sociology is not.

Q: Your response regarding economists comfortable developing and applying tools in the interest of industry reminds me of an article by Michael Burawoy on the different affinity between disciplines to different fields outside of academia. He talked about sociologists being connected to civil society.  How do you think sociologists have fared in developing and applying tools for the benefit of civil society, compared to how economists have done so for the industry?

A: That is a really interesting comparison, and you prompted me to go back and reread Burawoy on public sociology. I think I am less convinced that there is an inherent alliance between sociology and civil society, unless you define “civil society” fairly narrowly to mean something like organized labor and social movements. There are a lot of ways in which broadly economic tools are more practically useful to, say, a large nonprofit that wants to improve its operations than the structural critiques that sociologists (not excluding myself) tend to offer. And I think a sociology allied with civil society would be much more focused on Durkheimian questions of social order—how do we strengthen the social fabric—whereas the discipline, for better or worse, has moved pretty decisively away from those questions in recent decades.

I do think sociologists have unique contributions to make to our understanding of social movement dynamics and collective action, among other aspects of civil society, and that those have practical implications. But the dominant tendency in sociology is not toward tool-building, but critique. And as a discipline, we really center understanding the effects of social structure and how it is reproduced—which makes us collectively pessimistic about the possibilities of change, particularly incremental change, and less motivated to focus on tool-building. That could change, but only in the context of a broader evolution in the discipline.

Q: In the years that economists expanded their foothold in the policy world during the period of Great Society, how were other social science disciplines (and other disciplines like math and physics that contributed to the policy field early on) responding to opportunities like the need for robust academic research to evaluate policies (112)?

A: This is a great segue from the last question—because those fields were also seeking to respond to the demand for policy research, but they were kind of subservient to economics from the beginning. The University of Wisconsin’s Institute for Research on Poverty was a response to demand for research that came out of the War on Poverty; many sociologists were affiliated with it from the beginning, and continue to be today. But as one report on its efforts said in the early 1970s, perhaps tongue in cheek, that while IRP was not “of the economics discipline,” it was “disciplined by economics”—and this is something you see elsewhere. Sometimes this is because economists have better tools for solving particular types of problems, as was the case at RAND in the 1950s; economists did a better job of coming up with a toolkit for decision-making in the Cold War context than the mathematicians and physicists had been able to. But I also think there’s a history to it; economics built its ties to government in the first half of the twentieth century and increased those during World War II—so they already had an institutional edge as well by the time of the Great Society.

Q: How have economists and those in the field of public policy received your book?

A: I would say the reception has been…mixed? I have been pleasantly surprised that it’s been getting read at all. Certainly there have been some critical reviews; Jason Furman, chair of Obama’s Council of Economic Advisers, wrote a long one in Foreign Affairs that I felt sort of missed the point, in that he was emphasizing how little power economists had, while I was trying to make an argument about the impact of their way of thinking. But I’ve also had some very positive reception, particularly from economists who are more focused on inequality, from some in policy schools, and certainly from heterodox economists. The reception from policy school students, in particular, has been extremely positive.

Q: What is your next project?

A: What I’m really interested in right now is thinking about how new hegemonic frameworks for thinking about the economic world are put into place. This is motivated by the very practical question of “what comes after neoliberalism” that lots of sociologists would like the answer to, and that an increasing number of foundations are asking as well. And I don’t have the answer to what the next hegemonic framework should be. But I do think that if we are to have any hope of maintaining a livable planet, it’s got to come in part from a really serious reframing of what we think the purpose of business, its relationship to government, and how we should regulate it.

A lot of my work has been on the last big hegemonic transformation of this kind, which is neoliberalism, basically. But really looking at the period leading up to that—the 1950s—made me think about the taken-for-granted framework about business, government, and the economy that existed at that point—one that seems appealing in some ways, in that there was more expectation that business should have some social purpose, and more acceptance of the idea of a “public interest,” and more of an interest in limited certain kinds of corporate power—but had lots of problems of its own. But that led me to the question of how that framework was put into place—because it, too, had to take over and become hegemonic. And that transformation really took place in the Progressive Era. So what I’m doing right now is really trying to understand how a hegemonic economic framework was put into place in the Progressive Era, so that I can compare it to what happened in the neoliberal era, with an eye toward thinking about what a similar transformation might look like in the present.

Q: I found it interesting that contingent events like WWII and the Cold War were very important in setting up connections for economists beyond academia at the very beginning. To what extent do you believe recent contingent events, like the COVID-19 pandemics, have offered opportunities for sociologists to showcase their value?

A: Well, to some extent I do; the mention of COVID makes me think of the recent long piece in the New York Times Magazine on the COVID oral history project initiated by sociologists Ryan Hagen and Denise Milstein. Like any other disruption, COVID creates a space of fluidity where social change can occur. But, of course, the default tendency is for existing patterns of power and influence to be reproduced: which you see in how prominent economists were in COVID discourse around school closings, or masking, despite these not superficially looking like very “economic” topics. If sociologists are going to find their moment to shine, though, I think there’s a very good chance it will come at some kind of moment of disruption.


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