More than a decade ago, the commentator Jonathan Chait wrote about the “hack gap,” a striking difference between the behavior of Republican and Democratic experts (or in some cases, “experts”) when their party controls the government. Republican experts praise their leaders blindly, regardless of what they do. Democratic experts seek objectivity and, if possible, are willing to criticize their own leadership.

This is common in many areas. Chait was referring to legal analysis, but it is something I see all the time in my field.

During the Trump years, Republican economists, even those you might have expected to be concerned about their professional reputations, rushed to embrace extravagant and implausible claims about what Donald Trump’s tax cuts would achieve. Some even went so far as to be apathetic in ways that were reminiscent of Putin cronies. Remember when Tomas Philipson of the University of Chicago declared that Trump had economic instincts “on par with many Nobel economists I have worked with”?

Democratic economists, on the other hand, are often eager to criticize Biden’s policies. And while intellectual integrity is a good thing, I’d argue that sometimes the desire to Seem independent leads Democratic economists to overdo it — to criticize arguments or policy proposals that actually make sense, perhaps especially if these proposals would be politically popular.

Let me give two examples, one small and one much larger.

A minor example is a proposal for a temporary reduction in gasoline taxes to decrease inflationary pressures. There are good arguments against this. In the long-term, we want to discourage people burning fossil fuels and not make them more affordable. But I’ve been astonished to encounter Democratic-leaning economists and economics writers asserting that a gas-tax cut wouldn’t help consumers and that it would simply increase oil company profits.

What? The price of crude oil is set on world markets and can’t be much influenced by U.S. policy. But there’s no world market for retail gasoline; Europeans can’t fill their tanks at American gas stations. Because tax rates are different, there are large international differences in gasoline prices. And the data, presented here for the Group of 7 economies, suggests a roughly one-to-one effect — that is, higher or lower fuel taxes are fully passed on to consumers:

Yes, taxes have an impact on the prices at the pump. Credit… OECD, Globalpetrolprices.com

Is there anything more? I can only guess that it’s an instinctive reaction against anything that sounds crowd-pleasing.

The same thing is, I suspect, going on when Democratic-leaning economists summarily reject suggestions — most notably by Elizabeth Warren — that corporate abuse of market power may be one factor in inflation, or (not quite the same point) that stepped-up antitrust efforts might be a useful part of anti-inflation strategy. These views have wide public support, but the Biden administration has been diffident about advancing them, reportedly because its economists are reluctant to challenge the professional orthodoxy that such things can’t happen.

I can see where that orthodoxy comes from. It’s not a naïve denial that corporations are greedy or have price-setting market power. It comes, instead, from the assertion that corporations have always been greedy and had market power, and there’s no reason to believe that these problems have suddenly gotten worse.

However, this argument overlooks two crucial points.

First, market power gives businesses some flexibility in pricing. Yes, there’s a profit-maximizing price, but the cost to a business of charging somewhat less than its profit-maximizing price is small, because lower margins would be offset by increased sales. (To be clear, the losses that result from deviating form the optimal price are second-order. This flexibility means that corporate pricing can be strongly influenced intangible considerations like fear of alienating potential buyers. A similar argument helps explain why social pressure and prevailing norms seem to have a strong effect on wage rates, and a related argument helps explain why minimum wages don’t seem to reduce employment.

Given this reality, it’s not foolish to suggest that some corporations have seen widespread inflation as an opportunity to jack up prices by more than their costs have increased without experiencing the usual backlash. And it’s not just liberal politicians saying this: Recently the market analyst Edward Yardeni, explaining why profits soared in 2021, declared that “it kind of became culturally acceptable to raise prices” because everyone knew that costs were going up. This phenomenon could explain the recent price hikes in meatpacking.

Nobody is smart…

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