The role of an economist in the arena of public policy is difficult, muddled at best.
This is due to the nature of the political game and comes from the dichotomy between efficiency and politics.
The two are not compatible.
Two main areas in which the policy economist may thrive are as a scientist (of sorts) or lowly philosopher and advisor.
First, a policy economist may be useful as a scientist in showing or explaining cause and effect and quantifying the effects of a given policy. The important distinction here is eulogized by Frédéric Bastiat and later popularized by Henry Hazzlitt:
The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences.
Possibly here the term “bad economist” should say “non-economist.” One who only accounts for the effects right in front of them necessarily will not account for all costs and benefits in the correct way. This issue, I believe, is also more complicated by policymakers who view all “science” as the same and, many times, hold economists to unrealistic standards.
This unfounded expectation stems from the philosophical differences between inductive exploration into the physical sciences and social sciences. The scientific method, practiced in the physical sciences, is precise in application. Adding chemicals A, B, and C to plant D will have the result of Y. This is not true in the social sciences where the result Y varies both between individuals and over time.
For a policy economist, quantifying that which is difficult to quantify in a meaningful way leads most analysis with the caveat of: “…if the trend continues…on average…and everything else is held constant.” A policy maker who does not understand the limitations of science, in general, and science as applied to the social sciences, in particular, will systematically find the results of economic analysis disappointing.
Second, as a lowly philosopher and advisor, there is the issue of assigning value to a given course of action. Should the policy economist be influencing the direction of policy? Should the economist deal explicitly in value-free analysis? Is value-free economic analysis even possible? Answering these questions can be difficult. This is because policy analysts are often far removed from policy implementation – and analysis, completely free of value-judgments, is mostly impractical.
As Murray Rothbard once noted:
The economist, of course, is a technician who explains the consequences of various actions. But he cannot advise a man on the best route to achieve certain ends without committing himself to those ends. An economist hired by a businessman implicitly commits himself to the ethical valuation that increasing that businessman’s profits is good.
At the core, the policy economist must serve the role of “The Reminder.” He or she is essentially there to tell the politician or policymaker what they are, or are not, capable of. There must be someone present to, over and over, drill into the head of the non-economist: “There is no free lunch.”
As Thomas Sowell has opined, “The first rule of economics is scarcity. There is never enough of something to satisfy all those that want it. The first rule of politics is to disregard the first rule of economics.”
The policy economist should be there to see that implementing the first rule of politics is difficult to near impossible, or, at least, not done without a dissenting voice.