Averages do not predict individual experiences, and individual experiences do not negate the average. They can contrast without presenting a conflict.
As simple and even obvious as it sounds, I think so much of our policy debate and understanding of the economy gets this wrong. The economy is large: there are 165 million workers (according to the Bureau of Labor Statistics). Anything that can be true, will be true for someone. Not appreciating what that means and its implications affects our ability to design and implement effective policy.
The temporarily expanded Child Tax Credit gave $3000 ($3600 if very young) a year, distributed monthly, to every child. Their parents did not have to work to get it. Surveys in real time showed what research later confirmed: if you give money to parents of young children who have lower income, they spend it on food, shelter, and debt.
But the political discussion was mainly about parents who would use the money to buy drugs, or lazy parents who would stop working now that they had money without strings attached. It forced proponents to defend the credit by saying something to the effect that those drug using parents don’t exist, or that few, if any, parents would stop working. That’s a burden of proof— no one can use money from the government unwisely—that no program or tax rebate could overcome.
The problem with pitting the anecdote versus the average is that the existence of either disproves neither. In policymaking, I think of both as informing design. Take them both on face value and follow them to their logical policy conclusion.
The Child Tax Credit helped parents afford necessities, providing stability for children. It did the job it was intended to do, and it did it well.
Would some parents use the Child Tax Credit to buy drugs? Yes, because drug addiction is an undeniable presence in our society. Addiction is by no means limited to lower-income individuals; rich parents also buy drugs.
The Child Tax Credit, however, wasn’t designed to fight drug addiction, it was designed to help kids. If drug addiction is getting in the way of that, even on the margin, it’s a big enough problem that it deserves its own policy response.
Imagine if someone was asked, “what should we do to curb drug addiction in America?” and their response was “limit who gets the Child Tax Credit,” you’d think they don’t know what they are talking about, don’t care about drug addiction, or both.
Would some parents stop working if they got cash without any strings attached? Yes, but that says more about the job than it does about the parent. Our labor market has no infrastructure to support working parents: no requirement for paid sick days, no requirement for schedules being known with any advance notice, no regulation in shift scheduling or time off between shifts, and no protection from being fired for missing work to care for children.
Child care fell through? You can be fired. Kid has the flu? You can be fired. Don’t want to work the closing shift because you opened today? Fired! If parents are exhibiting tenuous labor force attachment, let’s not forget the other half of that equation.
Policy is better if we think through all the cases: exceptions and rules.
And taking it all on face value is more inclusive way of informing policy. I’ve found that concerns about the exception—the drug addict, the lazy worker, etc.— are often driven by someone’s personal experience; they are drawing from what they saw happen in their own life to themselves or a friend. To say that it’s wrong, or doesn’t matter, is to negate that experience. By extension, it says a person’s experience doesn’t matter for policy making. It matters, it just doesn’t dictate it.
There’s a lesson for economists and other experts like myself in there, too. Anecdotes drive a person’s understanding of the economy. It radiates out from their individual experience and then those of their family, friends, and acquaintances.
I think of this as economists debate whether a recession will occur, or if the Fed should pull back from the rate hikes. We speak with authority and say things like, “price growth is slowing” and “the labor market remains strong,” even as many families struggle to afford goods, and more layoffs are announced. I have to remind myself that the things I’m saying directly contradict many people’s experiences.
A friend told me not long ago they found the constant news questions about recessions infuriating. “I can’t afford rent anymore; I’m in a recession.”
If you think about people and their experiences on one side and experts and their evidence on the other, my point—that averages do not predict individual experiences, and individual experiences do not negate the average—isn’t just about what people get wrong, it’s about what experts get wrong. It’s a two-sided street.