The obvious preface to a response to Len Lardaro’s latest op-ed touting the importance of maintaining state tax revenue is (once again) to note that the state pays his very healthy salary.  That point made, it’s more interesting to highlight the larger point that Lardaro enunciates:

Rhode Island recently tried to move in this direction [of in-house analysis of economic effects of proposed legislation], but in a highly misguided way, by proposing that economists with advanced degrees gather data then pass it on to others who are charged with analyzing it. Not only is this approach backwards, it is an excellent illustration of government redundancy. The people gathering the data should be interns or research associates, and the persons analyzing it should be the economists with advanced degrees. From this analysis, a knowledge base would then be created that would serve as the foundation for a non-understood concept here — a plan. …

… The irony here is that we actually had in-house due diligence by an economist with an advanced degree for the sales tax. Yet, our elected game show contestants conveniently chose to overlook it.

The first thing to note in response is that the reason there was such extensive diligence on the sales tax issue is that the RI Center for Freedom & Prosperity brought in the RI-STAMP model and made the likely effects of the sales tax change relevant not just to reality, but also to the politics of the policy.  Absent that political relevance, the expensive modeling tool that the government bought for the Office of Revenue Analysis would have remained a plaything for the officials in that office.

It is amazing to me that Lardaro insinuates that the Center — not the bureaucracy of insiders — is contributing to the status quo of elected officials.  And frankly, I found it discouraging that, when the bureaucrats analyzed the legislation that their own director had proposed to the sales tax commission, they didn’t use the model to project the effects, but went right back to simplistic static analysis.  (It’s difficult not to infer an ulterior motive for how the numbers are presented.)

The second point I would make is that modeling is not “gathering the data.”  It’s the highly technical integration of economic formulas with a variety of data sources.  You can tell an intern to find and download a file, maybe even to aggregate multiple files together, but it would be foolhardy to tell him or her to figure out which formulas and data to use.

Thirdly, Lardaro is apparently blind to a critical aspect to how our society functions.  Like it or not, the reason a Ph.D. in economics is relevant to policy discussions is technical, not philosophical.  We bring economists into the mix to tell us, as well as they can, what will happen if a certain move is made.  It is not within their competency — at least in the area in which they rightly claim expertise — to tell us whether those outcomes are desirable, or what principles we should use to determine whether it is desirable.

Fourth, that’s actually my major complaint (on which I’ll be elaborating soon) with the modeling that the Office of Revenue Analysis did.  Built into the assumptions behind the objective math are ideological principles and judgments about likely human behavior that are not really within the scope of economists to judge.  There are also assumptions about political decisions that would have to be made with regard to what expenditures to reduce in order to allow for lower taxes.  It’s absolutely clear to me that (surprise, surprise) a modeling contractor for which governments make up the majority of its clients and the government employees who applied the model to the policy happened to choose assumptions that made the tax reductions look scarier to policymakers.

Indeed (fifth), there are hints of the ideology behind the state’s modeling in Lardaro’s op-ed.  Reading his prescription for the state, one would be hard pressed to understand why we have democratic input at all.  If all we have to do is hire betasseled experts to develop policies, analyze them, and plan their implementation, why bother with elections?