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Nobel-winning economist: 'I took Brexit as a serious warning'

Paul Romer, co-winner of the 2018 Nobel Prize for Economics, speaks at a news conference at the Stern School of Business of New York University, in New York, Monday, Oct. 8, 2018. Romer has studied the way innovation drives prosperity and has looked at ways to encourage it. (AP Photo/Richard Drew)
Paul Romer, co-winner of the 2018 Nobel Prize for Economics, speaks at a news conference at the Stern School of Business of New York University, in New York, Monday, Oct. 8, 2018. Romer has studied the way innovation drives prosperity and has looked at ways to encourage it. (AP Photo/Richard Drew)

To Paul Romer, this year’s co-winner of the Nobel Prize winner for economics with William Nordhaus, the Brexit vote was a warning for economists.

Answering a question from Yahoo Finance about how economists can get their voices and potentially transformative ideas back into in policymaking, Romer expressed distress about the credibility economists currently have — perhaps best illustrated by the Brexit vote.

“Part of the Brexit vote was people saying, ‘If all the economists are for it, I’m against it’,” said Romer, a professor at NYU Stern and director of the school’s Urbanization Project. “I took Brexit as a serious warning about why economists have lost our legitimacy. Had we overstepped in promoting value judgements over facts?”

The question was a rhetorical one without a concrete answer, but Romer made it clear that economists should stick to the facts.

“There’s a phase that I’m afraid may come across as politically charged, and I don’t mean it that way: ‘You’re entitled to your own opinion, but you’re not entitled to your own facts,’” he said. “And this really is the essence of what science can do. People will make different value judgements, they’ll have different preferences, and priorities. But what science can do is provide a statement of the facts.”

Romer didn’t have any answers to how economic ideas from research can reach policy, but he did express optimism that this commitment to the facts could accomplish a lot.

The Nobel winner pointed to people’s opinion of college as an example of how facts can sway people’s opinions. Today, he said, many surveys show people who think an education is a waste of time, and “hotbeds of liberal views.”

“But if you just show people, ‘Here’s how much your average earnings go up if you get a degree,’ that fact actually changed minds,” Romer said. “They didn’t realize that while you may not like the optics of some places, the university is a transformative place for young people.”

With this approach, Romer said, “We will have done our jobs.”

The stakes for economists, academics, and researchers to reclaim their place in policymaking runs through Romer’s work.

One of Romer’s most important ideas is that technology does not simply fall out of the sky but rather is born of intent, and often from an environment that fosters and prompts new ideas. If necessity is the mother of invention, Romer might posit that while necessity may be a motivating factor, good policy and investment is the real parent.

The U.S. government does not invest in technology in the same way it once did, for example, in the era of Sputnik in the 1950s.

“I’ve been really disappointed that we just haven’t had the kind of political environment where we can think about speeding up technological progress and doing something as bold as we did when said, ‘Hey, let’s invent computer science,” said Romer. “In an early period in the U.S. we invented chemical engineering! I’ve been a little disappointed that the government hasn’t been able to take the lead on anything in tech policy.”

To Romer, the government can play a decisive and crucial role of facilitating Ph.Ds., research, innovation, and other educational investment that can unlock real long-term growth for economies. Ideas, he said, far more than monetary policy, have the biggest bearing on the future.

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, retail, personal finance, and more. Follow him on Twitter @ewolffmann.

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