Obamaism Beyond Nudgeonomics

Back in January 2008, The New York Times’ David Leonhardt became the first prominent writer I’ve seen to try to define Barack Obama’s economic outlook primarily in terms of behavioral economics. Since that article came out, there have been a few other stabs in that genre, and now Frank Foer and Noam Scheiber have given us the most comprehensive essay I’ve seen along these lines. It’s very much worth reading. But let me say that while I think this insight is basically true, I think there are some real limits to how much light it really sheds.

But to review the basic facts:

• Obama was a professor at the University of Chicago law school, hotbed of law and economics and so forth.
• Obama’s been close to Cass Sunstein, author of a book on how to apply behavioral economics to policy issues, for a long time and has given Sunstein an obscure-but-power office in his administration.
• OMB Director Peter Orszag likes to talk about how we need more Psychology 101 and less Economics 101 in our policymaking.
• The administration has been eager to make it known that people have read Animal Spirits, an attempt to apply behavioral economics to macroeconomic issues.

There’s some more and that’s the core of the case. And I think it’s a good case.

But at the end of the day, I think this would be much more significant if the United States had a very different policy status quo. In a European country that already has high taxes and a generous welfare state, then tweaking the welfare state is about what you would expect a new center-left government to do, so specific ideas about how to do the tweaking would be the highlight of the agenda. But the United States has relatively low taxes and a relatively threadbare welfare state. Consequently, the big issue of the day just continues to be the fairly crude question of whether the government should do more to provide certain kinds of basic services or shouldn’t it.