Why Tax Lawyers and Tax Economists Can’t Communicate

Any close observer of the making of tax policy can see it: Lawyers and economists looking at the same issue through entirely different prisms. I’ve been fascinated by how their respective brains work, and why they have so much trouble communicating with one another. It turns out I am not alone.

In a newly published paper in the William & Mary Policy Review, University of Oregon professor Roberta Mann explores why tax lawyers and economists often talk past one another, how their misunderstandings can profoundly affect policymaking, and what they can do to improve matters. Her title says it all: Economists are from Mercury, Policymakers are from Saturn: The Tax Policy Implications of Communication Failure.

Prof. Mann is a professor of business law so she does not come at this as an entirely objective observer. When she posits that economists are from Mercury and policymakers (a word she uses interchangeably with lawyers) are from Saturn, she is writing as a proud citizen of that giant planet. Still, she has worked at both the IRS and the Joint Committee on Taxation, so has at least visited Mercury on occasion.

She is exactly right when she says economists and lawyers speak different languages. And as a lawyer with some knowledge of economics, she is also on the mark when she says that much of what economists do is incomprehensible to non-economists.

In one of her 216 footnotes (no economist would ever have that many citations in a 25-page paper), Mann quotes a classic of the genre:

“Multivariate time-series regression techniques were used to determine the statistical significance of the estimated relation between the top statutory tax rates and various indicators of economic growth. The standard errors were corrected allowing for heterosekdastic and autocorrelated error-term using the Newey-West procedure with 5 lags.”

Here she’s being a bit unfair. True, academic economists do often write this way. But bad writing is not endemic to the economics profession. Besides, there is—pardon me—a good economic explanation for why it happens: Academics have powerful financial incentives, such as promotion or tenure, to publish frequently and to do so in technical journals that have no interest in being accessible to a non-expert audience.

But good policy economists know how to strike a decent balance between careful analysis, including the necessary qualifiers, and explaining an issue to lawmakers. Mann worries that faced with a paper filled with equations, an uninformed legislator will confuse precision with accuracy. It is interesting that much of what she finds incomprehensible in economic analysis is often nothing more than an explanation of  the author’s methodology (such as the bit she quotes) or a warning to readers that results are uncertain.

Here at the Tax Policy Center, we spend a lot of time trying to find the middle-ground between rigor and accessibility. We may not always succeed, but we are aware of our audience. And while most of my colleagues are economists, we like to keep a lawyer around, and often have law professors spend a semester as visiting fellows. Many of them come with training in economics as well as law.

Still, lawyers and economists do think differently. To my mind, it’s because economists want to know why tax law works the way it does and how it changes behavior. Lawyers focus on the mechanics of how the law works. It is a bit like the difference between and theoretical physicists and engineers.

Mann is wrong when she assumes that lawmakers and lawyers are interchangeable. Only about 40 percent of the members of the current Congress have law degrees. Many others identify themselves as business people or educators. My guess is that many staff (who are the true consumers of economic analysis) are non-lawyers as well. I have no idea how many are economists but outside of some committee staff, I’d guess not many.

She asks the most important question at the end of her paper (why do lawyers and economists always put the best stuff at the end?): Why do policymakers misinterpret economic analysis? Mann thinks it is because they don’t understand it. I fear it is because they choose to misread it. Misstating data serves their political interests in the same way as mischaracterizing an opponent’s vote.

They may not have taken a class in economic theory, but they understand incentive effects.

Thanks to Paul Caron and his always-useful TaxProf blog for tipping me off to this fascinating paper.

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