Trying to refine her arguments for a column about why voters appear angry about the economy, University of Michigan economist Betsey Stevenson decided to seek input from another faculty member.
Conveniently, Justin Wolfers was already working from his office in their shared Ann Arbor, Mich., home — and eager to push back on her thesis.
“I told her it was incoherent and that it didn’t work,” Wolfers said of the case laid out by his partner of almost three decades. “I don’t think she was just intellectually frustrated with me.”
“He said something like, ‘Dear, I’m sorry, but it’s wrong.’ He asks all these hard questions, and I walk away feeling a little annoyed with him,” Stevenson acknowledged. “But then I won’t feel satisfied until I’ve answered them.”
The liberal Harvard-educated economists, who have co-produced everything including a macroeconomic textbook and two children, now find themselves on opposite sides of the hottest debate in the field: why public opinion polling suggests people are so upset about the U.S. economy, and what the Biden administration should do about it.
This question has divided Democratic economists across the country — and confounded the White House, which is trying to work through how to respond to a liability that threatens President Biden’s 2024 reelection bid. The stakes are high, because understanding what is driving significant voter disapproval of Biden’s economic management will shape how Democrats respond to it as they try to defeat Donald Trump again. (Some recent survey data suggests that consumer sentiment recently rose, in a hopeful sign for the administration, although it still remains lower than even where it was in the sluggish aftermath of the 2008 Great Recession.)
The disagreement between Stevenson and Wolfers reflects how even two people with largely the same policy goals and academic backgrounds (not to mention views on the Easterlin paradox) can still find themselves at odds over what the financial analyst Kyla Scanlon has dubbed the “vibescession” debate. Not only that: They can even find themselves at odds in the same household. The dispute centers on whether people are unhappy with the economy due to their material conditions, or whether factors beyond the economy itself — such as partisanship or hyperbole on social media — are the real forces driving voter frustration.
Wolfers, 51, has been among the most vocal proponents of the view that U.S. economic conditions are excellent and that polls saying voters feel otherwise don’t make sense. Whatever they may be telling pollsters, Wolfers says, Americans are certainly not acting like they are upset about their own circumstances. Signs of optimism are everywhere: Business owners are making substantial investments; consumers are spending at a rapid clip; and workers are leaving their jobs in droves, reflecting confidence that they can find new ones.
Rather than anything in the economy, which he emphasizes is benefiting from fast growth and low unemployment, Wolfers suspects that other factors might be at play, such as a disproportionate psychological response to inflation that fails to recognize that wages, not just prices, have risen.
“Every indicator of sentiment other than public-source opinion polling is incredibly positive,” Wolfers said. “That right there should lead you to ask: Are all those indicators broken, or is public opinion polling what is broken?”
His co-author of roughly a dozen academic papers, however, has other ideas about the interplay between economic data and reality — as she has from their earliest dates in Cambridge, Mass., as Harvard graduate students following their first conversation in the break room outside their labor seminar.
Stevenson, 52, has argued that voter frustrations are an understandable response to a very real phenomenon — the difficulty families have faced for more than a half-century in improving their material conditions, exacerbated by the more recent shock of inflation and, to an extent, partisan politics.
Since the 1970s, she points out, wages have been largely stagnant as U.S. inequality skyrocketed. After a brutal downturn in 2020 during the coronavirus pandemic, the nation started a healthy economic rebound that gave people a sense of optimism — only to see their gains largely washed away by the fastest inflation in four decades.
Voters are understandably angry about that, she said.
“The higher prices feel like the straw that broke the camel’s back of an economy that has felt so rigged, so hard to navigate, and seems to be putting up roadblocks at every turn. And they’re just fed up about it,” Stevenson said.
Settling this debate between Wolfers and Stevenson could not just bring relief to their children — who have sometimes asked their parents to tone down the economics talk at the dinner table — but provide insight into what has turned this discussion into such a fierce source of contention. (Both Wolfers and Stevenson have shared their views in private conversations with White House officials, they said.)
“There is nobody better than Justin and Betsey at taking economic concepts and making them fun and understandable. They are also among the leading scholarly researchers at the intersection of conventional economic data and measures of subjective feelings,” said Jason Furman, a Harvard economics professor who said he is ambivalent about the “vibescession” debate. Furman and Stevenson also overlapped as members of the White House Council of Economic Advisers during the Obama administration.
A couple since Halloween night in 1997, Stevenson and Wolfers decided long ago not to marry, primarily for tax reasons, although they say they live as “husband and wife.” In a 2008 paper they co-wrote, the economists argued that marriage today is primarily about “consumption complementarities” — meaning being with someone who makes experiences in life, such as watching a movie, more enjoyable. That marks a shift, they said, from previous generations, in which marriage primarily served to augment “production” — for instance, by making it easier for one person to work and the other to take care of household responsibilities. “What drives modern marriage?” they asked. “We believe that the answer lies in a shift from the family as a forum for shared production, to shared consumption. … Most things in life are simply better shared with another person.”
Yet within their own partnership, optimizing individual production appears to be at least a positive byproduct — if not a central advantage.
Stevenson and Wolfers say they make relationship decisions through an economist’s lens far more than even most other economists, because there are two of them. Disagreements about vacations and travel plans will be resolved by discussions of “sunk cost” and net efficiency. They similarly decided to schedule an interview with The Washington Post when “the opportunity cost was lowest,” Wolfers said.
Asked about how they approach editing each other’s work, Wolfers pointed to the theories of the 19th-century economist David Ricardo, who maintained that the most beneficial form of trade is between two economies with very different compositions. Trading between New York and Connecticut does not do much to improve either side, for instance, whereas trading between New York and China does.
That’s also true in romantic partnerships.
“The gains from trade are always the largest from those with the biggest difference in endowments. If we’re interested in joint production, I should seek a co-author who shrinks my weaknesses and vice versa,” Wolfers said. “We’re both Harvard-educated, lean-Democratic labor economists. So it looks very similar. But Betsey has a very different approach to how she thinks about things, and I think the mirror principle holds.”
That difference, both acknowledge, centers on the extent to which experts should believe what people say. Wolfers is laser-focused on the data, which he says conclusively shows widespread economic activity consistent with a prosperous boom. But Stevenson said it is equally important to listen to voters’ stated frustrations and try to incorporate them into an analytical framework also supported by the data.
These perspectives reflect broader tensions within the Democratic Party coalition, which is similarly torn between economists pointing to positive data and advocates who want to empathize with Americans’ suffering.
“Our big distinction is if people tell me they feel bad, I believe them more than Justin does. I tend to believe their emotions, and Justin tends to be more purely analytical,” Stevenson said. “If there’s no gap between the analytics and psychology, then he and I are often in the same place. I try to understand where they are as people.”
On a recent hour-long phone call with The Post, echoing similar conversations between economists across social media and among policymakers, Stevenson and Wolfers gently cut each other off several times as they contrasted their views of economic discontent, eager to avoid being mischaracterized.
After Wolfers reiterated that average Americans were not acting like they were concerned with the economy, Stevenson said, “What makes me feel unsatisfied with that as a full answer — and I know it’s squishy — is when I talk to real people —”
Wolfers interjected, “And this is a terrible answer. I’ll explain to you why it’s horrible and why journalists need to not do this.”
Stevenson forged ahead: “What I found walking around Michigan, in casual conversations — watching people standing in lines together, commiserating over the economy — I feel like people seem to genuinely have real concerns.”
She cited skyrocketing housing prices, high interest rates and ongoing affordability challenges. “Trying to figure out how people feel — it’s true we can look at their behavior, but that doesn’t necessarily tell us everything,” Stevenson said. “Justin should keep making his arguments, and we should be open to many different people’s arguments, because a disconnect like this could be very important for the country.”
Wolfers said this was unsatisfying, because it’s impossible to draw meaningful conclusions about something as large as the economy from casual conversations with strangers in one place. But even as he expressed frustration with his wife’s arguments, he acknowledged that they had again at least forced him to reconsider how to frame his assumptions.
“We have similar values, and so it’s easy to overstate where the values differ,” Wolfers said. “The disagreement between us is sometimes painful. But it’s always productive.”
Joe Biden’s economy, inflation divides brainiac couple - The Washington Post
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