Economics and Ideology

It’s been my multi-anecdotal experience that even one econ class can move a relatively apolitical person significantly to the right.

I’ve been trying to get a grip on economics for some time. My conclusion so far is that economists, like lawyers, are highly knowledgable advocates rather than scientists the way physicists are. There’s really an enormous body of agreed-upon, uncontroversial physics, but seemingly not of economics.

And where physics often gives you exact, reliable answers, whenever I overhear economists debating it’s always (as Truman complained) “on the one hand…., but on the other hand…..”

I think that the presentation of economics as a science like physics is something of a fraud, and that the math sometimes serves as a screen to hide the ideology (and professional vested interest) behind.

To me disentangling the empirical content and usable understanding from the other shit would be a noble enterprise. (I’m aware that Quine has proved that to be impossible).

Seemingly, too, there’s quite a gap between the top economists in the top schools and the generic, median, modal economists at the generic, median, modal schools (and below).

It’s been amusing to se the hard right become anti-economists in order to defend Bush.

“…many people who take economics courses, as they are typically taught in this country, end up coming out of these courses more right wing than they were going in…”

Couldn’t this just be plain old fashioned self-interest, rather than right-wing indoctrination? The people who are churned out at the end of these courses are in a very different economic position than they were when they entered them. Couldn’t it just be an effect of, you know, class?

The most obvious effect here is that of expanding knowledge. The average liberal student may come into college with a head stuffed full of empty cliches and slogans, but from taking a basic economics course, that student could start to realize that traditional liberal programs (welfare, rent control, etc., etc.) are complicated by the elementary fact that people respond to incentives. Or she could realize that “regulation” isn’t always a matter of good and enlightened government vs. evil corporations (as many liberals seem to think even after a college education). Instead, the question is complicated by regulatory capture, cost-benefit analysis, the fact that big businesses often use regulation to stifle smaller competitors, etc.

Just to be fair, I’ll admit that the average conservative 18-year-old from a rich suburb could well become more liberal after taking a sociology course where he is exposed to the way that poor people really lived, or a history course that really explores the history of race relations in this country.

Either way, what’s going on is a simple-minded 18-year-old suddenly learning that there’s more to the world than adolescent cliches.

Also the “Cafe Hayek dudes” being Austrians (or along those line) and all would be considered out of the mainstream. Definetly not as mainstream as the almost-socialist Arrow or the fairly liberal Solow. So in “there is a strong strain in economics generally” while the word “strain” belongs there, the words “strong” and “generally” do not.

At least as relevant is:

Does Studying Economics Inhibit Cooperation?
Robert H. Frank, Thomas Gilovich, Dennis T. Regan
Journal of Economic Perspectives, Vol. 7, No. 2 (Spring, 1993), pp. 159-171

In addition to changing views on positive political issues, as discussed above, many Econ 101 courses cultivate a cynical attitude that appeals to a strong strain in 18-year-old thinking. The same is true, in a different way, of exposure to some brands of Marxism.

I don’t think this (warning: PDF) is what you were thinking of, but it could be.

This (jstor link from non-access site; YMMV, citation below), though, is likely it. (Rothman and Scott, “Political Opinions and the TUCE,” Journal of Economic Education, 1973)

Too much of economics teaching is reminiscent of calculus as practiced by Wernher von Braun (in the words of Tom Lehrer): “Once the rockets are up, who cares where they come down? That’s not my department,” says Wernher von Braun.

I would suggest it’s important to, err, look at a more complicated model than the single-influence effect theorized here. One thing commentators may be missing is the potential influence of the huge punditry machine dedicated to establishing that economics “proves” Republican and right-wing politics are Scientifically Correct, and all Democrats and/or Liberals are Against Science. Physics doesn’t have this sort of abuse. Evolution does, in the sense of the much-discussed “evolutionary psychology”.

So, while it’s entirely possible the economics 101 is not in any way intrinisically right-wing, combining it with the punditry machine as a co-factor could very well lead to more wingerness as people learn a little bit of economics. It’s not that they now understand that conservative Republicans are right and liberal Democracts are wrong (which would be the propagandist’s prefered explanation). But that they’re now primed in a certain way where there’s a large differential in political marketing (especially to people disconnected from certain realities).

My favorite example of this is Libertarian’s fable that a free market won’t support sex/race discrimination. They have a toy model – the market corrects for unused talent, sex/race creates imbalance, therefore discriminated sex/race must actually be inferior. No matter how many times it’s pointed out them that mathematically, it fails the moment one considers alliances or differential effects, they repeat the toy model – because it’s confirming what they want to believe.

So this is not taking place isolated from very politically interested action in general.

“Minimum wage is one of the issues on which erroneous Econ 101 thinking seems most common.”

The reason min wage gets taught in every 101 course is simply because it is a real life example of a price floor with which students are most likely familiar with. And it’s only “erroneous” to the extent that it might forget to mention the magnitudes of the effect, not the direction.

“Contrary to what has been said above, I don’t think that most intro econ courses give a balanced picture of the minimum wage question.”

I don’t know about most. When I was a TA most that covered it did try.

As far as John Q’s post on economic education inhibiting cooperation, it needs to be pointed out that cooperation is not always and everywhere a socially beneficial phenomenon. I mean, yeah, if we all could hold hands and sing about peace, love and understanding that would work. But more often then not cooperation takes the form of some folks cooperating against other folks. When firms cooperate, that’s usually called collusion and generally lowers social welfare. When a group of kids gang up and beat up some other kid, that’s cooperation. Students cheating on their exams are cooperating. There are many instances where one for one and none for all gets society a lot more than the musketeers credo (and in the twenty years after they must’ve taken some econ classes as the latter darker story tells).

A more damaging criticism would be if economic education lessened altruism (and the confusion here often stems from conflating cooperation and altruism) like say if econ students made lower offers in dictator games – although even that, given expectations about others, would not be clear cut evidence.

Magnitude is something, right? And there are countervailing effects, no? And it’s quite reasonable to say that that minimum wage laws are a good thing, on the balance, isn’t it?

“The reason min wage gets taught in every 101 course is simply because it’s a real life example….” That’s pure assertion, and highly implausible. Cut the crap.

I’ve heard the misleading Econ 101 story on minimum wage over and over again over the last several decades, always outside econ classes, and that’s not simply because it’s a “conveninet real life example.”

What I am saying is that there is a clear ideological spin to the way that economics is often taught and (to expand my claim a bit) expounded in public debate

As a Ph.D. economist who teaches the subject at the college level, I’d certainly agree that it is very possible to teach the subject, especially in introductory courses that constitute the entirety of most students’ exposure to the subject, in an ideologically biased way, and that among econmists that bias is very often a rightward one. I’ve known a fair number of economists over the years who have clearly seen their duty, as an instructor, as being to indoctrinate students into the wonders of free markets.

Introductory courses lend themselves to this because in an introductory course it is all too easy to gloss over the nuances of the subject. Take that minimum wage issue that so unsettles Russell Roberts (who I once TA’d for in grad school). In an introductory course, it is very easy to “cover” that issue by simply presenting the supply-and-demand analysis of a price floor, and leaving students with the simple, unambiguous conclusion that minimum wages reduce employment. Relatively few micro principles courses are going to go into the nuances of the issue, such as whether employers might possibly have some degree of leverage over wages (what economists call market power), whether there is any sort of dynamic feedback such as an impact on job turnover rates and productivity, and the implications of empirical research (few introductory textbooks go into these issues, either). As a result, many students are left with a distorted perspective on the issue.

A more damaging criticism would be if economic education lessened altruism (and the confusion here often stems from conflating cooperation and altruism) like say if econ students made lower offers in dictator games – although even that, given expectations about others, would not be clear cut evidence.

There’s an interesting fillip on the concept that giving away money in a dictator game indicates altruism.

Imagine you are highly altruistic, in a specific way. Your objective in life is to help the worse-off people, not people at random. You live on the bare minimum yourself, giving away all the rest of your money to charities you have researched and deem highly worthy. And you are invited to participate in a dictator/ultimatium/prisoner’s dilemma/etc game at a university (which is normally where these experiments are run). You know that, given the context, it is highly unlikely that the other participants in the game are the worse-off people in the world. So it makes far more sense to try and make as much money as possible, and then donate it to some people you know are very badly off.

So whatever ultimatium/dictator style games are measuring, it’s some value on cooperation, or niceness, or something like that, not altruism (unless it’s a sort of altruism dedicated towards random people without regard to how badly they need the help). I am pretty sure the vast amount of people who make low offers probably just intend to keep the money themselves. But a pure altruist has as much incentive to make as much money for themselves in these games as possible as a purely selfish person.

That that is not the reason it’s taught?

Yes, that’s what I mean. When I hear the anti-minimum wage Econ 101 BS out on the street, it’s clearly ideologically motivated. The minimum wage is, in fact, one of the big issues separating Republicans, conservatives, libertarians, and free-market ideologues from Democrats and liberals.

I have trouble believing that econ professors are unaware of this. They live in the same world I do. My guess is that it wouldn’t be at all hard to find a less ideological real life example of a price floor, perhaps in the area of widget-pricing, but that for most economists the minimum wage example is a twofer. (And anyway, economists as a group are not at all reluctant to use artificial examples instead of real-life examples).

I’ve known a fair number of economists over the years who have clearly seen their duty, as an instructor, as being to indoctrinate students into the wonders of free markets.

In my experience that’s pretty much the norm.

(Can’t find the Caplan article here, but it doesn’t look convincing.)

>Minimum wage is one of the issues on which erroneous Econ 101 thinking seems most common.

Are you suggesting that the bulk of the (advanced, rather than intro) economics literature says that minimum wage laws have net positive results, or are good policy? This seems implausible to me. David Neumark’s most recent literature review, for example, finds quite the opposite.

Also, the mere fact that students become less radical or more skeptical of regulation and government after economics education does not mean that economics education is ideological. To take an example on the other side, if students adopt views more consistent with the Green Party’s on global warming after studying climate science for a few years, that does not mean climate science is ideological.

29: I’m saying that whatever economists say, a strong argument can be made that minimum wage laws are good policy, but that Econ 101 students rarely learn this.

Because of the way you summarized it, Radek. I really doubt that that kind of study can conclusively show that kind of thing. Lot of social science junk out there.

I should have said “it doesn’t look promising”. But if you have an URL post it.

That hand isn’t only invisible, it’s also myopic and not very bright.

Every year hordes of freshmen leave econ 101 with a muddle headed view of how the oversimplified mathematical fictions of models they’ve been show relate to the real world.

It so happens that it is exactly the same sort of muddled thinking that has taken deep roots in certain conservative camps. One thing about freshmen, they’ll believe pretty much any old slop if you state it authoritatively. You risk leaving them with the false impression that they have seen `scientific’ support of all sorts of policy shenanigans. It’s hard to claim that this doesn’t result in a bias — in any such situation you are pedagogically honour-bound to point out carefully all the flaws in your presented material. I haven’t seen any evidence that this is the norm for econ 101 though.

The arguments in favor of higher minimum wages, whatever these may be, just don’t look convincing.

In canton Geneva where I live the minimum wage is, I think, 22 francs/hour now, that’s about US$17/hour. Meticulously observed. Yet somehow life goes on, people work, drive around, walk the streets, some even smiling. Go figure.

Ah, yes – you have to bag your groceries yourself. Bummer.

Why can’t we just lump mainstream economics, analytic philosophy and literary theory together and say that academic exercises based on falsely analogical pretensions to hard science and self-regarding rationalism will result inevitably in undynamic [brittle, inflexible] models that do a lousy job of describing the world of experience.

hmm?

For Christ’s sake, Leonard. Leonard, there are tons of widgets in economics.

If Econ 101 and what economics says about the minimum wage were true, everything you are asserting would make sense.

Can anyone recommend a few books (including one—I know there’s one out there but I can’t remember it—on sources of economic information) for a non-economist who wants to get beyond Econ. 101?

There was a thread on just this issue a little while back, right here at CT. Don’t have time to track down and link right now–anyone want to help out?

Null hypothesis: What you think of of as ‘right wing ideology’ is in fact the truth (or closer to it than anything else available). You just haven’t studied economics.

I don’t believe that for a moment. I’m with, I think Radek, who said that too many people leave before the “okay, now we explain why markets don’t work quite like how we told you last year” bit. And with Watson:

“Every year hordes of freshmen leave econ 101 with a muddle headed view of how the oversimplified mathematical fictions of models they’ve been show relate to the real world.”

The fault is not necessarily with the models (which are of necessity, fiction of a sort).

“Can anyone recommend a few books (including one—I know there’s one out there but I can’t remember it—on sources of economic information) for a non-economist who wants to get beyond Econ. 101?”

Try (Nobel laureate) Joe Stiglitz: Whither Socialism? (MIT Press 1994). But his textbook on: Economics of the Public Sector (Norton 2000) and his current topical assessment of: Making Globalization Work – The Next Steps to Global Justice (Allen Lane 2006) make for much easier reading for non-economists.

Is there any other science in which students are normally started off on stuff that they have to unlearn later? It doesn’t strike me that any other science have the kind of differences between theory and practice that economics has. My guess is that economics over-theorized and is slow about dumping the excess.

It’s not unlearn, its build on. Well, countercyclical wages they have to unlearn, but that’s the freakin’ textbooks.

What’s so crazy about saying “here’s a baseline model that holds under these assumptions”, then say, “ok now relax assumption no. 1, what happens?” then say, “flip the switch on assumption no. 1 back to on and flip assumption no. 2 to off, what happens?” then go on to assumption no. 3, 4 etc. That’s, roughly, how most of this stuff is taught.

Roy,

Yes, it isn’t the fault of the models per se. I actually had a line about that in my post but it was inarticulate and I didn’t have time to fix it.

I do think that since economists know that many people will leave with a half-baked understanding of what economists actually think, let alone the `truth’ of it — that pedagogical honesty demands they make more clear that the simplified models they produce do have problems. At least more clear than my anectdotal experience suggests they are making it.

Tracy W. I think all would hope that a process of education changes peoples views, and I don’t think any here was arguing it shouldn’t. One has to be careful about circular reasoning though.

Economics isn’t half way to the `science’ some economists & wonks seem to think it is, let alone approaching something with a solid theoretical background like, say, physics. It’s one thing to say that you expect anyone after a study of physics to believe that they are on to something deep with quantum physics (even without agreeing that the standard model is all that), quite another to say you expect students of economics to come out in agreement with policy driven by neoclassical economics.

I’d have to say that what’s in the article is a pretty true reflection of my own experience (VUW Wellington NZ) in a stage 1 equivalent Econ class: two rightwing lecturers teaching from Mankiw while pretending to be centrists).

As a lefty I still found it useful though, in the manner suggested by Brad Delong above.

Also, from the sounds of things, had I taken the paper through the Econ department rather than the School of Government I might have lucked on classes where an old-style Keynesian tore Mankiw to pieces, which would have been fun.

Physicists laugh because physicists use the minimum amount of math that they need, whereas economists use as much math as they cram in.

Economists always pull rank on everyone else, and you tried to do it yourself in 56.

I think that there are two basic issues here:

1. Does having a necessarily simplistic view of economics bias one rightwards?

2. Do rightish profs bias their students further right than the material demands?

So, issue 1: Maybe it does, maybe it doesn’t (I took no econ in college, so have no anecdote to throw on the fire), but if it does, tough cookies. You can’t get a nuanced, deep understanding of any subject in the first year, so until we get knowledge rays that smack us all with a post-grad education in seconds, then the dichotomy is: no knowledge biases you in idiotic ways, some knowledge biases you in slightly less idiotic ways.

As to subject 2: Probably they do. People are, as a general rule, lousy at controlling for their own biases. If most economics profs are right-of-center or right-wing, then at least a subset of them are going to fail to correct for their biases (or not try), and that’s that.

Some people upthread mentioned that econ classes must be far from alone in college classes in terms of influencing the political views of their students. I’d like to take that point a bit further and say that there are college classes which directly address important policy questions besides economics.

For example, I took a Constitutional Law class in college (as an undergrad — not law school stuff). Did my prof have an ideology? Of course he did — I doubt very much that any con law professor ever was apolitical. Did his biases affect his teaching? Sure, to some extent. Did I get a nuanced and complete understanding of constitutional law from one semester of undergrad? Let’s not be ridiculous. Did it affect my politics? Of course it did.

Similarly, almost any recent history class, from say WWII onwards, probably directly touches on a policy question or two. Most of those students will not go on to become experts in the subject and thus will probably take obvious and uncomplicated lessons from what they learned, unmitigated by the more complex and nuanced whole of the information at hand. And their professors’ views will doubtless influence them.

So what?

I don’t get what there is to rail about, here. Sure, it would be nice if we could package up all of our learning in nice apolitical balls, but that will never, ever, ever happen. Everyone will be tugged in various directions by various authority figures, and everyone will come to a large number of opinions based on simplistic analyses. Is there anything to this post and the ensuing debate that doesn’t come down to Harry having a pet peeve about one of uncountably many examples of this general rule?

Michael, have you ever heard of “the liberal university”. It’s not liberals who are making noise about that. In part, this thread is just a way of pointing out that the university is not uniformly liberal.

Speaking only for myself, I am not convinced that the simplifications of intro economics are justified by the arguments given for them. Nor do I believe that the political skew of the oversimplification is accidental or neutral. In general I would agree with the hypothetical “If economics is right about most things, and if intro econ is taught as well as possible given the difficulty of the material, and without overt bias (in the sense of concealing or misrepresenting inconvenient material), then no one should complain if intro econ changes people’s political views”. It’s the premises that I doubt.

“economists use as much math as they cram in.”

John I think this was much more true about twenty + years ago at the high point of “high theory” and general equilibrium. When I went through grad school you had professors making snarky comments about “pointless but complicated existance proofs” and the like. But I’m not gonna deny that sometimes this doesn’t happen. At the same time I think a lot of economic ideas that survive for any length of time are of the “simple but counter intuitive” variety.

Economists always pull rank on everyone else, and you tried to do it yourself in 56.

Hmmm, yes I did. If a mathematician is a general, and a physicist a colonel, then economists are captains (highest junior officers), the rest of social sciences various ranks of lieutenants, historians are seargants, philosophers corporals, the rest of humanities privates, and business and communications are the whores who follow an army.

(I saved major space there for chemists, biologists and the like for the sake of literary flow)

Well, what is it that they say about middle management? Enough power to be blamed when things go wrong but not enough to command respect?

John Emerson:
Physics. Students usually start off with the Newtonian stuff, which is right under most circumstances, but tends to break down under stress (e.g., the kind induced by traveling at near-light speeds).

This makes a good analogy to economics. It’s not, as some of you are suggesting, that Econ 101 and Newtonian mechanics are WRONG, WRONG, WRONG. It’s just that they’re oversimplifications—but serviceable oversimplifications that give the student a much better understanding of the way the world works than he had before.

One interesting area of economics is the market for ideologies or in Glaser’s terms the market for “frames”. One consequence being that people are more likely to hold incorrect views (such as racial prejudice) if there is little cost to doing so.

You don’t have to unlearn Newtonian mechanics for any of the phenomena it’s used to explain. And a combined form is often easily found — for example, the conservation of matter is now the conservation of matter-energy. As far as I know, physics students are not taught

As far as I know, physicists acknowledge the simplifying assumptions of physics (friction, air resistance, a rigid earth with the mass concentrated at the center) either right at the beginning, or whenever asked. Whereas in economics the nature of the simplifying assumptions seem frequently to be forgotten, and the fictional simplified system taken as real.

Radek will disagree, but I think that what Keen said about Friedman’s “Positive Economics” in “Debunking Economics” is pretty convincing.

“People are more likely to hold incorrect views (such as racial prejudice) if there is little cost to doing so.”

I had a discussion about this and really don’t get it. Supporters of Hitler and Stalin paid a terrible price. I think that the issue is something like “predictable cost”. Even so, the Germans could have known that a lot of them would die in the wars Hitler was abviously going to start.

Matt McI, fortunately these ideas are wrong, or else New Agers would be doing a lot of damage by levitating thengs and so on. And I bet they wouldn’t just cure cancer if they could, I bet that the mean ones would by sending cancer rays at bad people.

I’ve seen some threaten to.

I just don’t think that marginalist theory is comparable to Newtonian physics.

No one said that it is. A better analogy would be with evolutionary biology and arguments over which mechanism is more important in generating change over time, or quibbles about the specific evolution of particular traits. It’s not like you can breed dinosaurs in the laboratory, just like you can’t arbitrarily change folks’ income or prices and see what happens. Even there I think economics comes up a bit short of standards of evolutionary biology, due largely to the nature of the subject.

Darn. That should be “[astrology] is not a science like physics.”

I’ve never actually taken a college economics class, despite my purported interest in Keynes, Robinson, and their crowd. However, I did take AP microeconomics in high school and can assure you that, in the hands of a coach-cum-social studies teacher, “free markets RULE” is how the material is interpreted.

What’s closer to physics as a subject of study: Poker or European history?
Who is closer to being a physicist: an automobile mechanic or an anthropologist?
Who would be better at describing the differences between the Swedish and Italian economies: a physicist or a historian?

I’d be happy to accept the claim that economics is closer to physics than are other social sciences if you’d accept the downgrading of economics, and economists, to the position and the prestige (give or take) of statisticians.

With all this handwringing by liberals & leftists recently over “neoclassical indoctrination” and worrying over the very idea that immersing one’s self in one of the social sciences just might possibly alter their political or economic views, are we going to see similiar wave of worrying over whether exposure to undergraduate level sociology courses are indoctrinating our young people with egalitarian views & a passion for social justice? Me thinks not.

I think the argument that economists use too much math is really wrong, and rather separate from the ideological argument. The kinds of models that economists have invented are the strongest contribution the field has made to human understanding. In any really long chain of cause and effect, it’s hard to keep track of all of the moving parts. A model is a minimal test that what you are saying coheres into a consistent whole.

The danger of using models is that you’ll give short-shrift to anything that’s hard to model, so modelling has to be kept in its proper place. But within that place mathematical models are a step forward for social science.

About the “is physics like economics?” question — as soon as I saw John Emerson’s question in 54, I immediately thought “Huh, that’s how I was taught physics.” So it was funny to see that very point pop up. But the real comparison is not Newtonian physics to more exotic physics, but various conservation assumptions.

I don’t think I’m an idiot, but I actually found it harder to unlearn the phsyical assumptions than the assumptions in micro and in growth models. For example, a very common move in an introductory class is to have objects(a chain or a rocket or something) whose mass changes… That is really hard to think about. Then, when you start relaxing multiple conservation assumptions at once, things get worse. If you phrased the question as “In which discipline is it harder to adapt one’s perspective and analytic toolbox to relaxed assumptions?” I would have to say, physics.

Obviously, physics has less relevance to the social world. When Physics 101 students remember the conservation rules instead of the exceptions, nothing bad happens.

On the meat of what Henry says about intro ec: I think the real problem is that intro ec classes normally don’t use math at all. That makes it difficult to grasp the important of parameters. (I should clarify that by math I mean calculus and statistics.)

The problem with basic econ is not necessarily that it shifts political opinions to the right, but that it reinforces the beliefs of those students who are already right-wing on certain issues. Shifts in opinion might occur because old beliefs are being challenged. The problem is when a student goes into econ with right-leaning opinions on things like the minimum wage and comes out believing that there is a consensus among economists (or among “real economists”) that increasing the minimum wage hurts the very people it is trying to help.

The problem is that the people who are being “indoctrinated” by these classes are sometimes those who will end up playing important roles in shaping the economy or public policy. And these individuals will usually remain certain that things like minimum wages, welfare, etc., are generally damaging to the economy.

Having sat through the main econ sequence at a very pro-market school, I have my own memories of the sorts of free-market indoctrination that goes on in some econ departments. My favorite was the “welfare theorems”, which showed how welfare was maximized in free-market economies (partial equilibrium free-market economies, but this little tidbit was more of a footnote). The irony is that these “welfare theorems”, which were mostly about how consumer surplus was being maximized, were probably the most marxist thing in the whole class. The basic conclusion (from a marxist perspective) was that the wealthiest members of society benefitted greatly from the free-market, and the lower your purchasing power, the less you benefitted.

Radek,

True Mankiw is a New-Keynesian. But the professor involved was – like I said – a good ol’ fashioned Keynesian – liquidity traps and fiscal stimulus and all that.

Moreover, while Mankiw the economist may see a place for a counter-cyclical state his politics are still those of a classical liberal (which IIRC is how he has described himself). And his bias run’s all the way through his text book (albeit subtly). Which is why it strikes me as great that the university could find someone to teach across its politics.

I was taught first-year microeconomics by a card-carrying communist. That was in 1983-4. He knew his stuff and was obsessed that you weren’t a real economist if you didn’t have the nuts and bolts of the math straight. Theorems, proofs, Walras, Debreu, Lindahl. Sure, you could pass your exam and have a career, but you’d always be a charlatan.

I tried this on another thread and got completely ignored by the ‘real’ economists, but what does everyone think about the arguments put forward in ‘The Death of Economics’ by Ormerod and Hodgson’s ‘How Economics Forgot History’ (both of which I have actually read). Also, what about the criticisms of the ‘post-autistic’ revolt? (http://www.paecon.net/).

Essentially, Ormerod argues that all the fantastically complex, incredibly hard to understand mathematical models of the ‘economy’ that economists have struggled so hard to build are (for the most part) worthless because they don’t actually predict anything (or at least nothing important) in the real world. Hodgson, on the other hand, argues on philosophical grounds that the whole AIM of modern economics (to create ‘timeless’ ‘abstract’ ‘laws’ of economics) is incoherent, as economics is not a science in the same sense as physics (in other words, economics should model itself on biology, or, better still, anthropology or sociology, and become a more or less purely empirical science (botany would be another example)).

(Ducks for cover and waits for aggressive abuse from economists).

There was another paper on a similar subject:

http://www.vwa.unisg.ch/RePEc/usg/dp2004/dp18_kir.pdf

“On the other hand, academic economists are today with respect to their political identifications – on the average – significantly right of the general public. This also holds for the United States, as R.F. HAMILTON and L.L. HARGENS (1993) show. They report the results of a survey taken in 1984. According to those, only 27.7 percent of economics professors identified themselves as being left or liberal, compared to 39.5 percent of all 4,944 professors asked, 66.1 percent of political scientists and even 78.4 percent of sociologists.”

“And if we have good reasons and see economics as a social science, the discussion about indoctrination versus self-selection is not very interesting. This holds not only because it is extremely implausible that there is not at least some indoctrination, or, to say it somewhat more friendly, learning in this respect. It should be obvious that the study of economics changes the perception individuals have of the market mechanism; we who are teaching economics would miss our job if this would not be the case.”

#66: If a mathematician is a general, and a physicist a colonel, then economists are captains…

Radek, the last twenty-five years of philosophy of science called and wants a word with you.

If that doesn’t do it for you, I suggest you take a look at McKenzie’s “An Engine, not a Camera” and Callon’s “The Laws of the Markets.” The History and Sociology of Science seem to be doing a pretty good job describing why economics is and will always be more like the other social sciences than a physical science.

Autism is one of the defining characteristics of 20th century thought.
As I mention occasionally my one well known article is on autism and modern art: Jarry, Duchamp, to Warhol and conceptualism. Wittgenstein of course. The anti-theater of Robert Wilson. Formalist cinema. Orders that describe time as loss and a terror of death.
Atemporal perfection. The esthetic behind the logic of analysis and synchrony. etc etc.
I get ignored too

Back on the topic of Intro to Econ courses: My experience was strikingly similar to Chris Hayes’s in the article. I took an Intro to Micro Econ course with a professor whose graduate committee consisted of Milton Friedman, George Stigler, and Robert Mundell. Needless to say, he was quite a free-market proselytizer. One of the many opinions he offered as pure fact was that unions exist only to allow their leaders and organizers to get rich off of union dues. It’s been years, so I can’t remember many other specific examples (except for one personal anecdote involving policemen and money that was probably illegal and he clearly should have kept to himself), but at the time a friend and I kept a running tab of his biased comments (though we kept our dissatisfaction to ourselves, unlike conservative students who seem to like starting websites to complain about professors’ politics).

Now, I was a senior who’d already read a fair amount of economics and taken an upper-level econ course prior to regressing to Intro to Micro. So, I could spot most of this professor’s editorializing. Yet, I wondered how many of the freshman and sophomores in the course could. (His tests reflected his biases, too. But, they were very easy if you just gave him what he wanted to hear.)

Obviously, every discipline has its own “biases,” but I think one key difference is the way in which economists (faculty and students) assert their opinions. Often, these opinions are presented as if they’re unassailable facts. This was certainly the stance my Intro to Micro Econ professor took. In contrast, to use just one example, my Intro to Sociology professor actively encouraged us to challenge and question his lectures and our readings. In fact, that was built-in to the class, whereas my Intro to Micro Econ professor never allowed deviation from his lectures and often sarcastically shot down any questions or comments that pushed back against his rhetoric (of which there were very few).

#107 …the unemployment among young muslims in France that runs up to 40% at the time of last year’s Paris Riots. The high minimum wages and the job protection laws are a much better explanation for this than racism.

Minimum wage and job protection laws are a better explanation for unemployment among young muslims? Weird.

112 was a little flippant because I’m just heading out the door. I just meant that there is an understandable reluctance to open up cans of worms at that level, especially if it can quickly lead to ground the instructor is weak on.

112, That was my COLLEGE professor. Not a high school teacher.

That reminds me of another anecdote from the class. The first day, the professor went over a list of economic goals/values, such as growth, efficiency, equitable distribution of wealth, etc.

Just as the article discussed, the equitable distribution of wealth goal/value fell by the wayside fairly quickly, while efficiency stayed with us as the centerpiece of his course.

This discussion is fascinating, but it is astounding how much the debate over the minimum wage remains ideological. Sure, the simple supply-demand model with a price-floor is too simple to make policy on the minimum wage. But economics reminds us of the problem of trade-offs, which only Radek mentioned here. Neo-classical economics doesn’t require that you reject the min. wage increase; that depends on your policy goals. For example, a min. wage increase might not decrease employment, but it might decrease hours worked or benefits provided, and thereby reduce real wage increases for workers in min. wage jobs.

Consider abb1’s Switzerland, which has no national min. wage (I thought that it relied on corporatist bargains to set min. wages by sectors, not canton-based legislation, but I could be wrong): sure it has higher min. wages, as do many European states, but its long-term unemployment rate is almost 2.5 times the US rate, and average annual hours worked are well below US levels (1822 v. 1556), all based on OECD figures. Sadly the OECD does not have householdo or worker income data for Switzerland.

For the US, simply raising the min. wage might do little to deal with poverty absent other welfare program improvements.

Michael Sullivan: either you had a bad teacher and textbook, or back in 1963 I had an amazingly good teacher. We were not taught the new theory in any detail, but we were told very clearly that the orbiting steel balls theory was far oversimplified.

I also think that the errors of Econ 101 go beyond mere oversimplification for the sake of introductory presentation.

I think one key difference is the way in which economists (faculty and students) assert their opinions. Often, these opinions are presented as if they’re unassailable facts.

This has been my experience in almost all of my experiences with center-right-to-right economists. They’re proud of having learned to “think like an economist” (counterintutitively), but don’t seem at all aware that sometime people, especially them, need to learn NOT to think like economists.

Becker’s essay on the family seems like a completely disastrous and obnoxious example of “thinking like an economist”, and if I’m not mistaken it doesn’t even make economic sense since the child is sometimes a commodity, sometimes “human capital”, and at 18 becomes an independent economic agent, and because Becker talks about choices as rational for “the family” — which is what — a firm? Is the child property of the firm, a co-owner, or what? What happens to the firm when the child reaches 18, a spinoff?

It’s certainly an ideology I don’t like. And it’s misrepresented as sure science when one of the things about economics which contrasts with physics is the absence of a large body of agreed-upon theory. And a lot of economists actually seem to believe that their ideological bias is simply truth. The reason we’re talking especially about Econ 101 is because the thinking of the top economists in the field often (not always) is less ideological and less right-wing than Econ 101 is. And a big part of the criticism is that some of this stuff is not just simplified or unproven, but actually wrong.

I’m not familiar with the rest of the university to say in detail, but I imagine that there probably are other forms of indoctrination out there just as bad as economics indoctrination. I don’t agree that “everyone does it”, though.

Those last two rhetorical questions of yours are some silly shit. You oughta quit doing that kind of thing.

The really striking thing about economics is the level of insecurity/arrogance that is taken as normal in economics courses. I’m an Adorno-ite on this – what people see as “conservative bias” is the same psychological complex as “physics envy” and both are deeply linked to the fact that there are even fewer women in economics than in electrical engineering.

I mean, really, in what other field are people with basically less than an undergraduate degree encouraged to pontificate all over the place and call other people “idiots”, on the basis of half-understood models? Are there lots of people out there expressing opinions on the CERN collider based on a planetary model of the atom because that’s “Physics 101”? Is there anything in physics remotely equivalent to Steven Levitt’s godawful book, pretending that one or two half-assed gedankenexperiments give the definitive word on complex and controversial subjects, because this is the “physicist’s approach”?

The only remotely similar field I can think of is the Dawkins/Pinker axis in evolutionary biology, in which all sorts of lepidopterists, linguists and philosophers appear to have parasitised a subfield, and this is a good test for my theory because evolutionary psychology is chock full of total arseholes too. This absolutely is how economics students are encouraged to behave and it’s their professors who do it.

Ironically, the reason for the attractiveness of economics to mediocre minds who then behave appallingly about it is that it professes to give clear and simple answers to difficult questions. In other words, people become economists because deep in their hearts, they believe that there is the intellectual equivalent of a free lunch.

OK, according to this, since the end of the WWII until 1990 the unemployment rate in Switzerland was

Agreed on Econ 101 Eric. Depends on the prof you have basically.

Delong says,
“Say, rather, that neoclassical economics is a very useful set of disciplinary tools for somebody whose instincts and intuitions are on the left.”

These tools are NOT neutral but presume a particular (ideological) vision of the world.

But I’ll let Martha Nussbaum do the talking: referring to standard economics she says, “Sometimes it seems like an odd exercise, finding subtle errors in economic theory of behavior, when one’s inclination is really to say, we can’t even assess a theory this crude, let’s throw it all out and begin all over again.”

“I think the real problem is that intro ec classes normally don’t use math at all. That makes it difficult to grasp the important of parameters. (I should clarify that by math I mean calculus and statistics.)”

I concur with that – and it’s not just lack of calc and stat but even algebra, though it depends where you’re doing your teachin/learnin. One school I was at did use calc in the Intro courses a bit but this course was required at sophomore level and there was a freshman calc requirement. Students complained (some complain when you write down y=a-bx on the board) but I had the impression that even the grumblers walked away with more knowledge then they would have otherwise. Dumbing down leads to dumb students. I think that’s a bigger problem then any kind of ideological bias.

“I think the real problem is that intro ec classes normally don’t use math at all.”

I find that crazy. The main points of mainstream economics can be explained in simple English. Claiming that “fully understanding” mainstream economics requires math is a move implying that somehow “knowledge” of economics is very esoteric and akin to some modern-day Gnosticism.

Even served with ample side orders of calculus, Econ 101 is mostly ideology, which is the main point.

To an economist, anything that increases production is good.

No, no, no. This statement in fact is a perfect illustration that you don’t really know any “real” economists. I don’t know who you hang out with but you should stop.
I mean seriously, that’s about as strawman as strawmen get.

“no, no, no. This statement in fact is a perfect illustration that you don’t really know any “real” economists. I don’t know who you hang out with but you should stop.”

While in professional meetings “real” economists would shy away from “more is better at the aggregate level” they do use in such thinking to move from unclear mathematical models to policy: “yes going from a trade to a non-trade situation creates winners and losers and our welfare theory doesn’t let use say anymore but, damn it, trade lets us have MORE gnp and, so, what they heck let’s have do the trade thing.”

That’s a use of more is better at the aggregate level.

Above I meant “non-trade to trade” but it works out either way.

Has any economist ever said, for example, that Country X’s GDP/capita is a little bit too high and should be reduced? Or that Country X’s GDP/capita is about right and shouldn’t be increased? Has any economist ever said that some population is working too long and producing too much, and should chill out for awhile?

Teaching evolution in biology class is not ideology. This is hilarious, because the last time I was arguing with economists I was compared to and Intelligent Design proponent. Make up your minds, guys!!

re: 136

Ummm, pretty much all of Real Business Cycle Theory is based on this – which is why they say don’t worry too much about recessions, people work less because that is what they want to do.

Taxing a polluting firm would lead to lower production but be socially beneficial.
That’s two of the top of my head. The point is that an economist would say that all else equal – your labor input, no externalities, etc. – more production would be a good thing. Of course all else is not equal in the real world but economists, unlike the strawmen you hang out with, already know this.

Oh, here’s a third one. Saving rates, which translate into higher future output can be too high – either for Solow like ‘golden rule’ reasons, or for Keynesian ‘paradox of thrift’ . reasons. Though I doubt this currently applies in the US.

“…teaching evolution in biology class is ideology. But so what?”

This is certainly a misuse of a reasonable definition of “ideology.” Yes you need a framework to interpret those sense data coming in (says, I guess, Kant) but this does not make every intellectual framework “ideology.” The term “ideology” generally implies that acceptace of some framework is driven by a (desired) political consequence of adopting this framework. I think.

Taxing a polluting firm would lead to lower production but be socially beneficial.

In my experience economists are the last of all to admit this, except for the actual owners of polluting firms.

I was taught first-year microeconomics by a card-carrying communist.

I missed John Roemer by a year but he used to teach first year grad course in Micro Theory (using Mas-Collel no less) and horror stories about mathematical difficulty still abounded a few years later. I mean, supposedly, you didn’t just have to know the Kuhn-Tucker theorem but derive it and proove it, complementary slackness, and all.

Alright John, at this point your denials are just getting surreal. This isn’t just strawmen, these are like ethereal strawmen unicorn Yetis.
What the hell do you think Mankiw’s been saying for the past year with his Pigou Club thing? And that’s an economist who worked for Bush for chris’s’sake.
Or go read Milton Friedman (RIP) and find the relevant passages in Free to Choose or any other book where he talks about how polluting firms over produce and should be taxed. Until then I just don’t see how you could be arguing in good faith here.

If there was a magazine called “The Physicist” that talked about physics at the level at which The Economist talks about economics, and made similarly dogmatic statements about controversial issues in physics with a similarly sneering tone, I am pretty sure that physicists would object to it vociferously.

In my experience economists are the last of all to admit this, except for the actual owners of polluting firms.
Maybe, but your experience is just one example.

Well, I think that the advanced research economists, many of them, are less right-wing than the median-modal economists. I think that the institutionally-dominant economists (e.g. Lazear, but there are lots) are more right-wing than the advanced research economists (e.g. Sen or Gintis).

I think that there’s a lot of conservativism about teaching methods because real economics is harder to teach to beginners than schematic imaginary rightwing economics.

And economists in general, though not universally, have an identification with business conservativism, and for them it’s easy and comfortable to pump out pro-business memes. (Economists can do a lot of side consulting, almost all in the business world. So the conflict of interest is really there.)

The shitty thing was your heavy sarcasm, specifically the words “McDonalds” and “conspiracy”. I wasn’t offended, I just responded in kind.

The tragedy of this is that there is, within the bloated corpus of economics, a perfectly nice slimmed-down little science struggling to get out.

That’s what I’ve been trying to figure out. My idea is that if you strip off the physics-imitation and excess math and formalization, and junk all the little ideological homilies and dogmas, and knock it down to what economists actually know, there will be something actually there. But most economists want to keep the methodological mystification and the ideological homilies (e.g., about the minimum age). And far too many economists are completely untroubled, and impervioous to criticism.

Must have been McClosky.

“But most economists want to keep the methodological mystification and the ideological homilies (e.g., about the minimum age). And far too many economists are completely untroubled, and impervioous to criticism.”

Couldn’t you say this about most successful social scientists? Disciplines (or at least sub-fields within) are generally based on a common methodology that will seem somewhat mysterious to outsiders. Abstruse prose can easily play the part of dense mathematics. It may be that economists (for whatever reason) are more likely to play a role in shaping policy and therefore should be more sensitive to the shortcomings of their methodology. That’s fine, but I still believe that this behavior is characteristic of the academy, not just economics.

The mainstream argument against the minimum wage has a number of problems:

But, no, freshmen are taught a bizzare S/D model of the labor market which has little to do with the real world and, so, leads to the clear “conclusion” that min wages lead to unemployment.

Arrrghghghrhrhgghghghghh! I’m on the verge of conforming to dsquared’s stereotype of an arsehole economist here and start calling people ‘idiots’ indiscriminately.
Look, yes all those are potential freakin’ problems with the argument. But the freakin’ data sayz that when minimum wages go up usually unemployment freakin’ goes up as well. There might be an exception here or there, you can slice up the data a bit differently and get lower effects but most freakin’ studies find that MINIMUM WAGES INCREASE UNEMPLOYMENT IN THE REAL FREAKIN’ WORLD. Maybe not as much as some pundits try to scare you with but still. The “bizzare S/D” model, for all its simplicity and potential problems, fits that fact and provides a freakin’ explanation. A very intuitive explanation. As costs of freakin’ labor go up employers lay off their least productive employees or cut their hours. If you were an employer wouldn’t you do this? Yeah the story is more complicated then that and it depends on some parameters but the fact that MINIMUM WAGES INCREASE UNEMPLOYMENT IN THE REAL FREAKIN’ WORLD means that the extent to which the other effects are important are second order.

The reason why this is so frustratin’ is because it’s the typical game of bait and switch that is being played here.
“The model is too simple”
– But it makes accurate predictions
“But economics is ideological”
– Maybe, but it explains the data
“Economists can’t agree on anything and anyway, it’s not like it’s physics”
– Well, they do mostly agree on this
“I had an econ teacher that made us genuflect to Reagan”
– Sorry, don’t know the guy. You don’t have to do that in my class.
“But economic models are needlessly complicated”
– I thought you said they were too simple
“But it’s all ideology anyway”
– But remember, the data…

ad freakin’ naseum…

“But economists are assholes”
– Yeah you’d be too if you had to deal with otherwise smart people who have some kind of lycanthropy which turns them into wereidiots the moment the word “economics” is mentioned.

Radek, in a bounded, well-defined system at equilibrium, increasing the minimum wage with no other changes would increase unemployment. That’s formally true.

Does this lead to the conclusion that you should not increase the real-world minimum wage because it would increase unemployment? No, becuae the real-world system is not a bounded system, and because it may not be at equilibrium. Empirically does raising the minimum wage increase unemployment when it’s done? The evidence is pretty mixed, isn’t it?

Do Econ 101 students who have no other sources of information often or usually leave the class thinking that it’s bad to increase the minimum wage because it will throw people out of work? Yes. Are they right? I say no.

Are schematic truths being prsented as real-world truths for ideological purposes? Yes. Do most economists really care much what happens to low paid workers and the unemployed? Only when seeming care it helps them make some other point which is important to them. Do they care about the effect of recessions or free trade on low-paid workers? Absolutely not.

Well Henry, if public choice economics is an unabashedly ideological approach to the world, then it strikes me that the assumption that governments always act in the public good (which is what public choice eocnomics replaced), is also an unabashedly ideological approach the world. That the earlier researchers may not have realised that they were adopting a very biased view of governments does not make it any less ideological. Any economics course that covered market failure but did not consider government failure would certainly be open to accusations of being ideological.

So, I guess what I’m saying is that if public choice economics is unabashedly ideological, that’s not a sensible criticism of it. Theories should be judged on their accuracy and usefulness, not on the views of their proponents and developers.

Economics isn’t half way to the `science’ some economists & wonks seem to think it is, let alone approaching something with a solid theoretical background like, say, physics. It’s one thing to say that you expect anyone after a study of physics to believe that they are on to something deep with quantum physics (even without agreeing that the standard model is all that), quite another to say you expect students of economics to come out in agreement with policy driven by neoclassical economics.

Actually yes, I would. Neoclassical economics is dated back to the insight that a things’ value depends on its marginal utility. It’s one of those insights that are completely obvious once someone else has articulated it. I suspect every single reader of this blog has at some time in their life experienced being very hungry, and at another time experienced being too full to eat another bite. I do not know of any economist, Marxist, Austrian, Keynesian, etc, since this idea was developed in the 1870s who disagrees with it.

And given the close connection between ones view of the economy and voting, or policy prescriptions, I’d expect therefore anyone who understands this to have their opinions on policy adjusted accordingly.

What impact the basic theory of neoclassical economics has for policy prescriptions has been debated. And of course neoclassical economics has developed further after the orginal insight, and at least some of its theories are far more debatable than marginal utility, and their impact on policy prescriptions is also debatable.

But there are some things in economics that are as undisputable as the existance of, say, rocks. Marginal utility is one of them. It may not have a solid theoretical underpinning, but it has an extremely solid empiricial underpinning.

Other things that have extremely solid empirical underpinnings are:
– market economies have out-performed socialist economies (the Russians did not manage to “bury you”).
– the hypothesis that there is a consistent trade-off between inflation and unemployment is wrong.

The underpinning empirical work on these topics is not quite as rock solid as marginal utility, but it’s pretty darn good. The theoretical work underpinning these two results is also pretty good, though it’s the empirical results that are convincing (just as Einstein’s theories being confirmed by experimental evidence is far more convincing to me than the theoretical underpinnings).

Of course there are a lot of theories in economics that do not have such strong empirical underpinnings. The economy is a far harder area to study than physics, in part at least because you mostly can’t do controlled experiments. And I think that in part because of this difficulty in doing controlled experiments, personal biases have far greater chances to affect research and the results and interpretations than in physics.

But the idea that there are no firm results in economics, and particularly in neoclassical economics, is wrong. And to the extent that policy prescriptions are affected by those clear results, then we would expect students’ political views to alter as a result of studying them.

And, on the other side, history is probably even further away from being like physics than economics is, but it seems 100% likely that a students’ political views would be affected by the study of history. For example, would anyone be surprised by a survey showing that students after studying the religious wars in Europe changed their views to be more in favour of tolerance of different religions? Even though history definitely is not a science like physics?

radek: Keep in mind, before you go over to the dark side, that you are arguing with multiple people, each of whom has a _different_ argument against economics.

I think what’s bad about Econ 101 is that in general it doesn’t do a good enough job of inculcating the idea that each thing is an _empirical_ question. (I’m sure that this varies by teacher, of course.) I’ve seriously seen people who’ve only taken undergraduate economics make arguments that begin “let’s start from first principles”, like that can really settle the question. You really see this on the minimum-wage argument. The simple supply/demand model suggests that increasing minimum wage will increase unemployment, which is nice, but it’s always possible that the assumptions needed are so wrong as to be misleading. That’s why we _must_ look at the data. So, for example, your assertion that the data suggests that minimum wage increases unemployment (which I haven’t checked, so I’m taking your word for it) is an argument about one hundred times more powerful than any “first principles” argument. Most people who’ve only had a smattering of economics will rely on the first principles argument, and use it ideologically. That’s what you see on the Cafe Hayek post that Henry linked to way back at the beginning. _That_, I think, is what John is criticizing.

Henry, could you tell me the name of the paper by Jack Knight and Jim Johnson? thanx

walt: That’s my sense also. The problem with the S/D price floor argument usually presented in econ 101 is that the assumptions are flawed, the math is flawed (at least in the (Marshall?) development I’ve seen) and the students come away with the impression that `science has proven it from first principles’. Which is a best balderdash.

As you note, economics has to be based on empirical results to be taken seriously at all, but this message doesn’t seem to be passed out in econ 101. I’ve also heard claims that the empirical data for minimum wage isn’t nearly as clear as radek claims, but like you haven’t checked so willing to take his word for it).

My *impression* is that the statement `the model gives accurate predictions’ really needs `if you squint just right’ added to it much of the time. However, this may be a function of having seen too much out of date nonsense like exchange predictions which for all I know has been thoroughly abandoned so I won’t claim to hold the field as it currently stands to task for it. I really should probably bow out of further discussions of this type before catching up a bit.

In response to Harry – You call public choice theory unabashedly ideological. So what? An economics course that assumes that the government always acts in the public good is also ideological, that the ideology is not made explicit by its practitioners does not make it any less biased.

If economics professors are meant to judge the inclusion of a theory in their work on the basis of its proponents’ motivations and biases, as opposed to its accuracy, usefulness, and (for appropriate courses) relevance to economic debate, then economics would definitely not be a science but something postmodern.

Comment 58: Watson:
Economics isn’t half way to the `science’ some economists & wonks seem to think it is, let alone approaching something with a solid theoretical background like, say, physics. It’s one thing to say that you expect anyone after a study of physics to believe that they are on to something deep with quantum physics (even without agreeing that the standard model is all that), quite another to say you expect students of economics to come out in agreement with policy driven by neoclassical economics.

Well, yes, I would. Neoclassical economics dates back to the insight that the value of a good is determined by the marginal utility of that good. It is one of those matters which once someone points it out is so blindingly obvious. I do not know any economist trained since the 1870s (when this was developed), regardless of political views, who disputes this basic insight. It is obvious to anyone who can ever remember being both very hungry, and, at another time in their life, being too full to eat another bite, that the value of goods is affected by how much of that good you already have. (Of course, when it comes to goods such as knowledge, the value can go up as you gain more, marginal utiltiy is not always declining as quantity increases).

Given the reliability of marginal utility, I would expect anyone who learns this to have their political opinions affected accordingly.

Of course the impact of neoclassical economics on policy prescriptions is much more debatable, and there are numerous other economic theories that have built on the original neoclassical economic insight that are much less theoretically or empiricially well-supported. But when it comes to neoclassical economics’ core, I expect every student to agree with it.

There are other results in economics that are also pretty darn solid. Two are:
– socialist economics are not necessarily more efficient than market economies – the Soviet Union did not bury the USA.
– there is not a consistent trade-off between inflation and unemployment.

These results have solid theoretical underpinnings, but it is the solid empirical underpinnings that are convincing. Just as the confirmation of Einstein’s theories by experiment is far more convincing than the theoretical underpinnings.

Of course economics is not remotely as advanced in its understanding of the subject matter as physics is. There are a lot more theories and results that are highly debatable. This is probably due to the extreme difficulty of doing controlled experiments. And, in part because of this difficulty in testing theories, I think economics includes a lot more room for personal biasis to affect research and interpretation of results than in physics.

But there are some clear results, and we should see students’ beliefs shifting accordingly. An economics student may manage to remain being a socialist. But if they come out believing in national ownership of production without any recognition of the knowledge problem as a barrier to this then either their economics’ professors have done a bad job or they’re impervious to evidence. (Or to put it in other words, if you’re going to believe that governmental control of the economy is superior to markets after studying the relevant bits of economics, you are going to have to have some theory about how government can avoid the coordination problems that plagued the Soviet Union. Which was not understood by the economics profession back in the 1920s.)

And, on the other side, a subject does not have to be a science for the study of it to change people’s views. History is less of a science than economics, yet would you be surprised to learn that a class of students studying Europe’s religious wars became more in favour of religious toleration by governments?

‘The tragedy of this is that there is, within the bloated corpus of economics, a perfectly nice slimmed-down little science struggling to get out’

Well me and Hodgson think we should all go back to the Institutional School (http://www.geoffrey-hodgson.info/p13.htm).

Although I do really like the (implicit) idea of economics being a branch of cybernetics.

Marx and Veblen and Sraffa and various others also have a lot to say.

What I think everyone can agree on is that modern, mainstream economics is a lot of crap.

D-squared, I didn’t say non-mathematical (that’s the Austrians, not me). But people tell me that a lot of the math is unnecessary windowdressing used to score internal points within the profession, and to intimidate outsiders. I only know what I’m told.

Far from everyone, Brendan.

To add to what dsquared said, economics also needs to do what a lot of science does more seriously-use empiricism as a basis for theoretical modeling rather than some pointless mathematical constructs. I think Deidre McCloskey makes these points very nicely in her “secret sins of economics”. Physicists always try to make as minimal mathematical models as possible based on empirical reasoning and data, and are rarely concerned with proofs and rigorous mathematical justification of their models. Economists on the other hand seem to spend a lot of time proving theorems about models which are pretty crude and probably wrong in the first place.

“MINIMUM WAGES INCREASE UNEMPLOYMENT IN THE REAL FREAKIN’ WORLD.”

Someone needs a hug. ;>

radek, despite your claims, the empirical evidence FAILS to show that the employment loss of a minimum wage increase (to the extent it exists) is large enough to be an obvious argument against a minimum wage increase.

Perhaps you are just not as well aquainted with the empirical literature on this subject as you claim.

But, in any case, the simple S/D model of the perfectly competitive labor market is bizzare and misleading in important ways.

Walt — you say that implying that one needs to understand calc and stats to have a reasonable chance of understanding economics is akin to saying that ec is a kind of gnosticism. This is a difficult position to understand

Almost everbody in this thread (except maybe John Emerson) seems to agree more-or-less that the problem with intro ec is that students don’t understand that the models they learn are theoretical models that are meant to provide the identify relevant parameters and the relationship between them. What I am would add is, if you don’t understand the relationship between your pretty graphs and the systems of equations that they (inadequately) represent, and if you don’t understand how statistically we can try to calculate the size of different parameters and possibly evaluate the validity of different models, you are likely to have a somewhat superficial view of economics.

Good examples are, as we’ve noted, the minimum wage and rent control. If your economics are divorced from the underlying math, you are probably going to distill the pragmatic expectations “the minimum wage causes unemployment, and disproportionately among the unskilled,” or “rent control vastly decreases both housing stock and, due to misallocation, the consumer surplus.” If you understand the nature of the mathematical model, you can understand that…

— The magnitude of these effects (and whether they are swamped by other effects) depends on parameters that we can measure.
— Whether the models are (partially) correct models can be determined by comparing the correlations the model preditcts with what actually happened.

Can one grasp the latter two points without being able to understand the relevant math oneself? Sure. Is it likely? No, probably not. If this position is equivalent to saying that economics is a form of gnosticism, so be it.

Ivan’s comment at #6 is fascinating.

I always divide intro classes up into two sections: before the midterm, demonstrate the welfare theorem and in general the wonders of free markets. After the midterm, try as hard as possible to take it all apart. Market power is ubiquitous (especially in the labor market), demand and supply curves to the individual firm are *never* perfectly horizontal, externalities are everywhere, etc. Also, all discussion of the effects of regulations like the minimum wage needs to emphasize that the *size* of such effects depends on elasticities, and any negative impacts can be very small.

I also agree strongly with Brad Delong’s comments above that people with left-wing instincts can get great analytic help from understanding economics. I rarely encounter a left-wing proposition that couldn’t be supported by rigorous economic reasoning, *given the proper assumptions*. Taking econ forces liberals to unpack their assumptions.

I’m an ignoramus on economics, but I found John Q’s comparison interesting at #9:
In addition to changing views on positive political issues, as discussed above, many Econ 101 courses cultivate a cynical attitude that appeals to a strong strain in 18-year-old thinking. The same is true, in a different way, of exposure to some brands of Marxism.

Maybe the way is not so different. Give an impressionable person a relatively simple tool that promises to explain the entire world, and it’s very seductive. Maybe there’s something to be said for spending one’s 19th year reading medieval and early-modern poetry instead.

All this reminds me too that, in the finely honed vocabulary of the Economist, “labour-market reform” means cutting welfare and pensions.

Derrida D, I feel fine about labor economists and many of the heterodox economists, including you (if you want me to do so), but where is the center of gravity of your profession? In my fairly extensive anecdotal experience the standard average economist stands somewhere in the range from raving loony Randian to neoliberal (inclusive). Krugman and DeLong count as radicals but to me they are centrists.

What has the overall effect of the economics profession been in the world since 1970 or so? What has the effect of Econ 110 been in the US during that period? My potchots are not aimed at you.

A special thank-you to John Emerson, who in his acceptance speech, once again demonstrates how little he knows about economists, with his claim that “Krugman is at the left end of non-Marxist economics spectrum.” And now, a reading assignment for John! Check out what liberals said about Krugman, before Bush was elected.

Ragu,
The Bush’s idiots are so off the deep end, conservatives are liberal these days. I remember Krugman being wolloped on Mozambique the world bank and cashews. He made an ass of himself.

Joe (Slovoj) Chavez,

That’s my point exactly. Explain it to John, please.

radek,
I think we’re still waiting for some data from you, aren’t we?

Ragout, I already knew that Krugman was far to my right. If that was the deep wisdom you are trying to communicate, your efforts were unnecessary. What I was saying was that Krugman is on the left of the economics profession, with a few exceptions which he calls “pseudo-economists.” Thus, the left wing of the economics profession is far to my right.

As slovoj points out, Krugman is a strong free trader, a view he shares with probably 90% of the economics profession. On macro, which is what we were discussing, Krugman is a New Keynesian, a view which has been described as much like what used to be called “monetarism.” Krugman shares his New Keynesianism views with Greg Mankiw, Bush’s first CEA chair. The article I linked to made exactly these points.

Further, Krugman himself has argued at length that there is tremendous consensus among economists. In sum, Krugman is in the broad mainstream of economics.

P.S., please stop mispelling my name, slovoj. I am not a jar of tomato sauce.

re:187

You’re changing the goal posts. I started out this whole thing by saying that because I think normally in US the employment effects of min wages are small I wasn’t really against them. I was against significant increases in them, as say, exemplified by the “living wage” movement. Then folks denied that there are ANY effects of min wages on employment. I never said that a completly sane, rational person could never support min wages. Opponents, such as yourself, however did pretty much argue that just stating that higher min wages might increase unemployment was just crazy ideological bias.

A main point we’ve been making is that undergrads in Econ 101 should not be taught that the minimum wage is a bad thing because it will increase unemployment. One premise behind this is that in fact undergraduates are taught that far too often, and that it’s political indoctrination. It isn’t about you.

On MW in the US at this point, go here. Read the comments too if you like.

Data is good: On Mozambique Krugman was loyal to his abstractions and chose to ignore the data which contradicted them.
Here’s some fun with Richard Epstein.

If any of us were arguing against mathematics itself, you’d have a right to call us hippies.

John Emerson, Delong and Krugman are definitely not radicals within the economics profession.

John, yes, most of the economic profession is to the right of you.
Most of airline pilot profession, the bricklayer profession, the storybook writer profession, the broom maker profession, the dentistry profession, the librarian profession, the widget maker profession, the life guard profession, the ukelele players profession, the taekwando subumnim profession, the the bummin-for-change-at-the-bus-stop profession as well as kayak quality control profession is also to the right of you.
Well, I’m not really sure about the librarians. Can’t trust those commie bastards.

Ragout: I already made your point, but without the dickheadedness. Admittedly, this thread has been below the Minimum Daily Allowance of Dickheadness for Comment Threads, but I think no permanent harm would have been done if we’d failed to hit the mark just this once.

Radek: I’ve frequently noticed how polite and fact-based your arguments are. Good god, man, what are you doing on the internet?

re:
“You’re changing the goal posts.”
Perhaps your goal posts are not my goal posts.

Presenting the standard mainstream argument against minimum wage in an Econ 101 classroom (the one based on S/D) is misleading. It is also out of date given the theoretical advances made in labor economics in the past couple of decades.

The free trade argument made to undergraduates is also misleading if, indeed, not dishonest. No valid economic argument exists within the mainstream in favor of free trade (that is, an argument that is consistent with the welfare notions of the mainstream theory.)

Yet almost all economists are in favor of free trade (despite no theoretical justification existing for it in their own theory). Sounds like ideology to me. Krugman, as far as I can tell, agrees that the argument for free trade is not economic but, perhaps, political.

The free trade argument made to undergraduates is also misleading if, indeed, not dishonest. No valid economic argument exists within the mainstream in favor of free trade

Huh????????????

That is, the argument that going from no trade to trade is good (within a social welfare perspective).

I await your answer.

Eric, man, don’t try to set up a trap and ask me to walk into it. I’m too lazy for that. Just say what you want to say.
I mean, yeah, there’s distributional issues. The Kaldor-Hicks criteria isn’t necessairly a criteria that everyone can agree on, particularly if its prescriptives aren’t implemented in practice (and they are, more often then most think). There’s increasing returns or possibility of capital reswitching (well, that’s not neoclassical, but it roughly corresponds to factor intensity reversals). But overall average income does go up and the same problems that one runs into with the “social welfare” perspective apply to pretty much any policy change where some are hurt and others benefit. Be more specific because I don’t know exactly what you mean and it looks like you’re trying to play games.

Walt,

Yes I noticed that you had made the same point. But mine was funnier and had a link.

Did *you* notice the tone of those I was criticizing? Some quotes are below, showing that the thread would have been far from dickhead-free without me. So maybe I’m a dickhead, but compared to those I was criticizing, I’m a little 3-inch dickhead.

Economics is full of “arseholes” and “a lot of needy f-type personalities.” (dsquared)

“Do most economists really care much what happens to low paid workers and the unemployed? … Do they care about the effect of recessions or free trade on low-paid workers? Absolutely not.” (Emerson)

Leading economics departments are “a branch of the Pentagon,” and Arrow and Debreu are also military pawns. “What I think everyone can agree on is that modern, mainstream economics is a lot of crap.” (Brendan)

In my experience almost ALL economists (and in particular right wing economists) care very much about workers, etc.

The problem is they use the wrong theory and so offer policies that won’t help those they really really want to help. Their motives, however, are generally 100% pure.

I once hung around with a true believer Chicago economist so I have some first hand experience in this.

Eric, no, going from autarky to free trade is not a Pareto improvement (if you wanna get technical it would be in “Transferable Utility Economy” but let’s not) just like forcing a monopoly to charge lower prices, or taxing a polluting firm, or a significant technological discovery is not a Pareto improvement (monopoly or polluting firm or horse buggy drivers loose) – but neither is it a Pareto worsening. That’s why I mentioned the Kaldor-Hicks criteria.
The argument for free trade is that average income rise. If you’re willing to accept Marshallian surplus as a measure of social welfare then it does go up.
But this just says that Pareto Optimality as a measure of efficiency (not as a measure of inequality) is a very weak criteria.
And your point is?

“…but neither is it a Pareto worsening.”

As long as there are losers to the opening up of trade then (from standard mainstream theory) trade WORSENS the welfare situation. Period. Full stop.

The compensation story (well they COULD be compensated although they are not) is intellectually bankrupt. Only someone who is committed to proving “free trade is good” would ever consider accepting this standard.

“The argument for free trade is that average income rise.” Indeed it is. But this is the worse sort of theory: an ad hoc theory that contradicts the core of mainstream theory.

If uncompensated losers appear, then the neoclassical story SHOULD BE that the theory is not able to say that free trade is good.

But economists still say free trade is good.

“And your point is?”
I hope it’s pretty plain: mainstream economists’ own theory of trade fails to show that free trade is good, but they claim it is good. They can only argue for free trade by invoking the ad hoc “average incomes increase” claim. By making this ad hoc claim economists show they are not serious about their own theory that asserts interpersonal utility/preference comparisons are not valid.

But economist all say free trade is good.

Ideology anyone?

Well then, someone shut you up. I honor them.

“It’s a freakin’ criteria….You might not buy into it but there’s no fraud in it.”

No. It is a fraud.

No serious philospher (outside mindless utilitarians) would accept the HK criteria as anything but morally suspect. The HK standard says “we don’t care how the pain and benefit is distributed we only care about the average welfare/utility.” If the “average” is better off “the group” is better off.

Accepting this would be easier if mainstream economists hadn’t REJECTED suchy interpersonal welfare comparisons and summations many years ago. But the HK criteria is based on interpersonal welfare comparisions and summation.

Somewhat contradictory, no?

For what it’s worth, the HK criteria brings us back to Pigou and his welfare theory (which isn’t necessarily a bad thing in some ways). But Pigou’s theory was rejected by mainstream economists many decades ago.

So that’s part of the fraud: you accept an ad hoc theory that violates what you believe in order to justify free trade.

Yes. Fraud.

The HK is a perfect example of “moving the goalposts” that you disapprove of. The thinking behind it is: “well free trade fails our main standard for a good economic outsome. What to do? What to do? Oh, I know, let’s make up a new ad hoc standard and give it name HK. Merely by invoking this ad hoc standard we’ll claim we have turned free trade into something good!”

Did I say intellectual fraud?

As long as there are losers to the opening up of trade then (from standard mainstream theory) trade WORSENS the welfare situation. Period. Full stop.

No. You seem to not understand the Pareto Criteria which you brought up yourself. Evaluations of Social Welfare (via some Social Welfare function) are more or less independent from evaluations of Pareto Efficiency. Of course Arrow tells us that, more or less, you can’t have evaluations of Social Welfare which satisfy the Pareto Criteria, are non-dictatorial and don’t mess with the Independence of Irrelevant Alternatives.

Let’s play your game. Suppose I take a dollar away from Bill Gates and give it to an impoverished poor person with cancer and that extra dollar enables them to get treatment which saves their life. You’re saying this is a Social Welfare Loss. I’m saying that it’s neither Pareto Improving or Worsening but Social Welfare overall probably rises. Or are you going to argue here that Social Welfare decreases when we tax polluting firms or regulate monopolies because there’s someone somewhere that is worse off? You’ve picked this example – trade – because it fits your ideological prejudices but failed to actually think what you’re saying through. Come on man, a bit of coherence please.

well they COULD be compensated although they are not

Actually NAFTA and some WTO resolved disputes do provide for compensations for those who are hurt by trade.

“No. You seem to not understand the Pareto Criteria which you brought up yourself.”

Quite the opposite. I know exactly what I’m saying. Everything I’ve said about trade theory is correct. Everything I’ve said about the various Pareto notions is correct.

What have I said that is wrong? Nothing is the answer. You can’t point out anything that I’ve said that is wrong.

“Let’s play your game.”

It’s not a game. I know mainstream economics–hey, I seem to know it better than you!–and what I’ve said about it is true: the only way the mainstream can save free trade is by ad hoc justifications that are an intellectual frauds. HK is a fraud. The “it increases average income” argument is a fraud.

“Suppose I take a dollar away from Bill Gates and give it to an impoverished poor person…”

I didn’t say or imply the above at all. So I have no reason to address your scenario or the one that follows. In fact your scenarios seem to show that you could use a bit of brush up on mainstream welfare economics as they don’t seem well framed.

“You’ve picked this example – trade – because it fits your ideological prejudices…”

I’ve not indicated any ideological prejudices but, merely, that I know what is wrong with mainstream trade theory. But good ad hominem rhetorical move!

“…but failed to actually think what you’re saying through. Come on man, a bit of coherence please.”

Shocking observation: you’ve not been able to address my attacks on mainstream free trade justificiations. Your only way out is to change the subject and provoke me by saying that I haven’t thought out what I’ve said.

Good try. But no dice.

I’ve pointed out how HK is an intellectual fraud. I’ve given reasons. I’ve pointed out how the average income argument is a fraud. I’ve given reasons. You’ve been unable to respond. You’ve only been able to change the subject.

I’m afraid by standard criteria of debate it’s game, set, match to me.

You see the problem is that most economists live in a world in which no one ever challenges what they believe and are taught. Therefore, while they can repeat what they’ve been taught they are unable to actually provide any justification for it other than “this is what economists believe.”

;>

There was a lot in my econ 101 class that most crooked timberites seem to use in their arguments.

1. Capital tries to minimize its cost of labor subject to quality constraints.

2. That people with less resources have fewer options than people with more.

Where’s the big disagreement?

“The K-H idea is that the gains to the winners are “greater” than the losses to the losers, if the winners could compensate the losers, making everyone better off (even if the compensation never actually happens).”

I know that’s what is says. It requires interpersonal utility comparisons.

“Kaldor, by the way, was certainly a leftist.”
Perhaps, but he didn’t brush his teeth often enough.

“Next, you’ll be talking about the importance of Sraffan reswitching.”
Unlikely. I find the Sraffan stuff uninteresting. ;>

“The real issue with trade is empirical. For example, all the poor countries that have done spectacularly well in the past…”

Perhaps but this is just operationalizing the HK criteria: average income has increased and, so, cool things have happened.

I’m more of a Sen guy.

Eric should get some sort of Oscar for scenery-chewing-performance in a Crooked Timber thread. You have to actually win the argument to announce game-set-and-match, I think.

Eric:

I don’t have a strong opinion on the goodness of free trade, so I don’t care if you win or lose. But your arguing style is just weird. Outside of Karl Rove and the World Wresting Federation, who announces their own victory?

Anyway, it’s important that I continue to procrastinate, so I will take your side and argue with Ragout.

Ragout: Adopting Kaldor-Hicks gains is tantamount to adopting a social welfare function, which is tantamount to adopting a rule for interpersonal comparisons of utility. QED. (This is my best guess as to Eric’s argument.)

oh for christ’s sake. It is possible to talk about labour-power and production without talking about Marx. I actually specifically pointed out that my point could be made independently of “commodity fetishism and all that”. You actually embarrass yourself by then trying to come over all didactic:

“But since the same could be said of a steel beam, or a sack of fertilizer”

this is exactly my point, unless you believe that there is a simple demand schedule for capital goods which can be dervied from axioms about preferences. Try to get it right before you start handing out twatty little awards, please.

btw, using the title “Das Kapital” unless you are referring to the German edition, is generally regarded as the mark of a blagger.

Brendan,

My point was that saying economics should be less mathematical and more institutional and relevant just isn’t consistent with saying we should adopt Sraffa’s very mathematical, very abstract insights. These criticisms just amount to throwing jelly against a wall, hoping some will stick.

Perhaps you can tell me just what Sraffa’s important message is? As I understand it, Sraffa’s main point is something like: the interest rate and wages aren’t uniquely determined in a multi-commodity model, nor is is the there even a well-defined concept of capital.

I understand that economic theorists think this is an important technical point (or used to think so, anyway). And I suppose that this is a mathemetician’s way of saying “the distribution of income isn’t fair.” Maybe highbrow theorists get excited about proving this mathematically. But why exactly should the average Joe, or the average economist, care one bit?

John Emerson,

The Caplan paper shows that economists are a little more likely to describe themselves as liberal than the general public.

In general, I think there’s substantial agreement among economists about many economic issues. It’s something like 10% on the left, 80% in the middle, and 10% on the right. On macro, maybe it’s 25% on the right, while on labor econ it’s maybe 25% on the left. Delong and Krugman are in the 80% in the middle.

At the same time, economists’ left-right spectrum doesn’t line up very well with the general public’s. Caplan shows that on some economic issues, economists are way to the left of people who describe themselves as “very liberal,” while on others, they way to the right of the “very conservative.”

Asked whether high taxes, affirmative action, or welfare are hurting the economy, economists are way to the left of the general public, saying “not at all.” Asked whether high business profits or jobs being sent overseas, are hurting the economy, economists also say “not at all” and are way to the right. My favorite question is whether tax cuts hurt or help the economy: economists line up almost exactly with the very liberal, saying that it doesn’t make much difference.

i had to do a mico economics course for work, which was taught by a pretty senior level economist from a reputable university. The course was full of bright mid-career civil servants with largely arts backgrounds. He was a paid up, and not too broad-minded member of the classical economics club, and had a tough time fielding questions from some of us about his assumptions and conclusions. Some of them actually corrected his sweeping and erroneous conclusions about the consquences of current government policy. In other cases where we raised questions, he was reduced to saying things like, well deviations from the standard normal behavioural cases are complications that we deal with in advanced classes, not this one!

Questions I still have: is there a split between Econ 101 teaching and the actual theories of the profession? If so, is this an esoteric-exoteric split? What proportion of the economics profession voted for Bush in 2004?

I wonder, do physicists ever have arguments like this?

To clarify: some country-club Reublicans do have the possibility of being hurt by downsizing or free trade, but economists don’t. Economists’ optimisim about the market seems to have something to do with the fact that they are off the market and invulnerable.

What exactly does it mean for a production function to be transitive?

The analogue of transitivity for a (family of) production function(s) would be an absence of reswitchings; that it is possible to produce a unique ordering of production functions with respect to their intensity in the use of any particular factor so that isoquants did not cross, in the same way in which the transitivity axiom in preference theory ensures that indifference curves do not cross. Though I was speaking loosely and rhetorically at this point.

At every point means? Points in what space?

The space of wages versus labour demand. What possible other spaces could there be for a labour demand schedule? “Does not exist at every point” means that when you try to draw up a labour demand schedule, you may find that there are some wage rates at which labour demand is indeterminate.

Can you give a reference for this “known result”?

Since the “known result” in question is that production functions are not continuous, I don’t propose to give a citation. On the general question of problems relating to production functions, I cite the entire literature on the capital controversy.

I doubt that you know what you are talking about.

oh just bloody well try me laddie.

I was just waiting for that.

“The analogue of transitivity for a (family of) production function(s) would be an absence of reswitchings; that it is possible to produce a unique ordering of production functions with respect to their intensity in the use of any particular factor so that isoquants did not cross, in the same way in which the transitivity axiom in preference theory ensures that indifference curves do not cross.”

What does it mean that indifference curves “do not cross”? Indifference curves are equivalence classes, of course they partition the commodity space.

“The space of wages versus labour demand. What possible other spaces could there be for a labour demand schedule?”

The price system?

““Does not exist at every point” means that when you try to draw up a labour demand schedule, you may find that there are some wage rates at which labour demand is indeterminate.”

There´s a difference between “does not exist” and “is not neccessarily unique”.

“Since the “known result” in question is that production functions are not continuous, I don’t propose to give a citation.”

In what kind of model are production functions a “result”.

“oh just bloody well try me laddie.”

I don´t think I have to change my opinion.

Coming in really late, could I respond to John E at #264. I agree that you had to be really right wing (or badly mistaken about Iraq, or something) to support Bush in 2004. But the fact is that more than 50 per cent of US voters did so.

The fact that six Nobel prizewinning economists (out of a potential pool of maybe 40 US-based Nobelists) and 300 others (out of a population of thousands) publicly backed Bush doesn’t tell us much one way or the other.

I’ve pointed out how HK is an intellectual fraud. I’ve given reasons. I’ve pointed out how the average income argument is a fraud. I’ve given reasons. You’ve been unable to respond. You’ve only been able to change the subject.

No you’ve asserted that it’s an intellectual fraud. The standard of fraud doesn’t even apply here shmucko (I’m following walt’s advice). It’s a freakin CRITERIA. If you think it’s a useful criteria to judge policy by then fine. If not then fine too, but don’t go telling me that regulating monopolies or taxing polluting firms is socially beneficial.
Either way, free trade satisfies the HK criteria.

I’m afraid by standard criteria of debate it’s game, set, match to me.
I didn’t respond earlier because this is blindingly obvious to anyone without an ideological axe to grind, your empty statements about me not being up on social choice theory not withstanding. That and I had to sleep.

Re: 270 and daniel’s “The Physicist”

No one ever said Economics is like Physics. At most I claimed that the fact that people are even willing to make that comparison tells us something about the position of economics in the social sciences. This is just another instance where you guys, the Jemersonians, are claiming that us, the good guys, said something we didn’t actually said and then proceed to fight the Yeti. Have fun with that, let me know how it works out for you.

It is not true that no on ever said economics is like physics. Probably most of them have stopped by now, but there are verious fairly recent criticisms of economics in that regard from Mirowski, Hodgson, and Georgescu-Roegen. “Like physics” is a flexible term, and these three authors all focus on the usiversalist theoreticism of physics.

The fact that people make the comparison with physics is mostly because economists were inviting that comparison, and their use of lots of math was thought (except by physicists) to give their claims plausibility.

I’m an outsider looking in, not an economist. You know this and basically tell me that I have to accept your expertise over that of the other authors I read (add Keen, add the PAE people). But why should I?

I’ll have to keep working on Caplan’s paper. He says he showed that, and you say he showed that. He did control for wealth and subjectively reported feelings of insecurity, but there are few people in the world as absolutely isolated from markets as academics.

add Keen

Don’t. That stuff IS all nonsense. I still wonder why smart critics of mainstream economics (won’t mention names) continue to associate themselves with this guy who really is a hack. It certainly gives us mainstream economists a good excuse not to take the criticisms seriously.

“…this guy who really is a hack.”
Don’t know who the hack is here.

But you’ve been unable to defend free trade against my argument about HK. I’ve made arguments; you’ve insulted and gone ad hominem.

You’re not doing a good job defending mainstream economics.

Let me make this simple: explain how the satisfaction of HK implies that free trade is good?

Radek, once again you ask me to take your word for something. But on the internet no one knows if you’re a dog.

“Unless you admit it that by the “Eric Criteria” government shouldn’t tax polluters, then this discussion is over.”
Gee. When did I argue that? Are you saying that I need to defend statements that I’ve never made?

The statement “taxing polluting firms is socially good” or the statement “government regulation of monopolies” can only be made on the basis of the HK criteria. Just like a similar statement for free trade. Are you really having trouble understanding this or are just fakin’?

“Are you really having trouble understanding this or are just fakin’?”
Continue the insults….

I’ll bite…I might, or might not, be in favor of regulating gross polluters. But mainstream economics provides not theoretical argument that it is good to regulate such polluters except to the extent that, within mainstream logic, such policies internalize externalities.

But, be that as it may, are you not confusing arguments for expanding markets with an argument to internalize externalities. Seem to be very different things, no?

Are you saying that mainstream economists argue for taxing polluters beyond that needed to interalize an externality?

So, how about that argument (from within mainstream economics that does not violate interpersonal utility comparisons) that if something is HK it is good.

Can’t do it, can you.

In what kind of model are production functions a “result”?

Samuelson, Solow, and Dorfman (1958). Linear Programming and Economic Analysis

Garegnani (1970). “Heterogeneous Capital, the Production Function and the Theory of DIstribution”, Review of Economic Studies, V. 37, N. 3 (Jul.): 470-436

“But, as economic theory has learned since the 1930s, the pattern of activities adopted in the face of long-run factor-price changes can be complicated and counterintuitive. Consequently, the long-run demand for factors can be badly behaved functions of factor prices. Worse still, both Hicks and Robertson, again following J. B. Clark, applied the long-run principle of variation to changes in the interest rate: they claimed that a fall in r causes production to shift to more ‘capital-intensive’ intermediate inputs… The principle of variation works as an argument for long-run determinancy insofar as the set of zero-profit activities shift in response to factor price changes; it is not necessary that newly adopted activities use cheaper factors more intensively or that production is more capital intensive when r falls.” — Michael Mandler (1999). Dilemmas In Economic Theory: Persisting Foundational Problems Of Microeconomics, Oxford: 34.

John, Slovoj,

I think there’s a right-wing bias in the Econ Nobel prize, so I don’t agree that counting prizewinners is the best metric.

Nonetheless, here’s the statement signed by 10 Nobel prize winners endorsing Kerry. And here’s a Supreme Court Amicus brief signed by 5 Nobel economists calling for shorter copyright periods. Interestingly enough, two of the copyright economists also endorsed Bush.

“At most I claimed that the fact that people are even willing to make that comparison tells us something about the position of economics in the social sciences.”
You’re making the comparison and then getting bogged down in an argument over two god damn days and 300 comments back and forth with people who know as much as or more than you. Maybe you should say it’s closer to string theory. But I had my say on this subject in #87.

Who is closer to being a physicist: an automobile mechanic or an anthropologist? I’d be happy to accept the claim that economics is closer to physics than are other social sciences if you’d accept the downgrading of economics, and economists, to the position and the prestige (give or take) of statisticians.

In other words, do your job and crunch the numbers like any other accountant and leave the intellectualization to adults who are less in love with determinism. And if you want to know what happens when a little mind trys to play with big ideas read Tyler Cowen.

“And are you suggesting that we don’t crunch the numbers?”

No I’m suggesting that perhaps the big decisions should be handled by economic historians who hire economists like you to do the grunt work.

Dan Klein’s work shows that most academic economists are Democrats…and that almost all academics in every other field are Democrats.

http://swopec.hhs.se/ratioi/abs/ratioi0053.htm

#300!

Robert,

No, it certainly is not of any importance whether or not I understand why isoquants end up crossing in certain general equilibrium models. But you and Dsquared are offering this as a serious critique of economics as a whole. So yeah, I’d think you would want to make some argument about why anyone should care.

“But no, he’s not really an economist, and it’s wrong of me to think that he tells me something about economics.”

His writings are cerainly not up to par with contemporary standards of rigor and collapse when viewed from that standard.

OK, between 1992 and the present Becker went from being a top economist to “don’t know the guy”?

I’m having trouble getting a grip on what’s going on here. A lot of what I think about the profession is based on the prominence of the Chicago school, “Law and Economics”, and the libertarians (at George Mason?) in American life, but somehow it’s dirty pool if I use those guys in an argument.

I am now aware that a lot of the profession wishes these kinds of guys were in some other business, but they’re not.

Has the profession changed? Am I out of date? Are the right-wing public economists I read and see marginal? Or do people just wish the profession had changed?

In Collander, Holt, and Rosser’s collection the conservatives (monetarists, marginalists, neoclassicals, etc.) are classified as mainstream and orthodox, whereas the alternative (often more left) schools are heterodox and non-mainstream.

The introduction to the book goes on at great length about classifications. The purpose of the book seems to be to expand orthodox economics somewhat, without breaking orthodoxy or letting in the unwashed hordes of unorthodox.

As an Economics major, I think I should participate in this dicussion.
I think it should be the job of the instructor to point out that the magnitude of the effect on unemployment caused by the minimum wage might be small. There has been studies that have been conflicting to the famous Card-Kreuger study. So there is no definante answer. Since Economics is a science because it results in hypothesis testing and statistical analysis just like Sociology and other disciplines do. The problem with Economics is that compared to physics, is that its not studying physical phenomenon rather than behavior.
If there is a problem with an instructor only giving one side of the story, ie markets work..than that is the problem with the instructor. The professor I had for my principal of macroecon course was very liberal and actually used keyesian economics to show that government intervention was good for the economy. So it does go both ways. As showed earlier, economists are actually more democratic than republican. But that shouldn’t matter, issues surrounding the world go past ideology. There are defiante market failures but there are failures of the government to provide public goods too.
To John Emerson, you know sense you are trying to study economics, it would help if you actually tried to study the models and look at the evidence, because there has been plent of emperical studies rather than only reading people like keen, mirowski, et al.

“Why is internalizing an externality “good”? I mean the polluter looses, right?”
To the mainstream economist internalizing externalities is considered good as unless that is done the first order conditions for optimality are not obtained.

But, independent of that, you are right: strictly speaking no justification exists within “objective” economic theory to support taxing polluters. Such a thing requires a non-PO move. It can only be justified by invoking an (arbitrary?) social welfare function that weights “utilities” of different people in come way.

The same way that economists sneek in the back door a social welfare function when they attempt to justify trade.

This involves doing EXACTLY what economists criticize: making normative judgments. What economists seeming believe is that normative judgments make by non-economists are bad but normative judgments made by economists (who have been properly socialized to like markets) are GOOD!

Eric, thanks for conceding the broader point.
But no economists don’t think that making normative arguments is bad, just that 1) normative statements are different from positive statements and 2) if you’re going to make normative statements you should be explicit about the criteria you’re using, be it PO, HK or MS.

“This is the thread that never ends, yes, it goes on and on my friend, some people, started posting without knowing what it was, and they’ll continue posting just because this is the thread that never ends…”

“Eric, thanks for conceding the broader point.
But no economists don’t think that making normative arguments is bad, just that 1) normative statements are different from positive statements and 2) if you’re going to make normative statements you should be explicit about the criteria you’re using, be it PO, HK or MS.”

I wasn’t aware of conceding anything ;>.

My point is still the same: there is nothing non-abritrary in economic theory that permits economists to support free trade, etc.

When an economist says, “trade is good” all they are doing is saying “I prefer trade.” There is nothing in the “positive” part of mainstream theory that supports free trade.

Indeed, the “justification” for free trade only was devleoped AFTER is was realized that the standard social welfare component of mainstream theory failed to support free trade. So a new criteria was INVENTED to support free trade. (after the fact).

But this move to a “I prefer trade” and this is justified by picking a criteria that is satisfied in free trade is made in a way that hides the fact that eccnomists have slipped from “science” to “preferences.”

Indeed, by really saying “I perfer trade” economists have no more right to have their opinion given weight than someone on the street who says, “I don’t like trade.”

Importantly, one time economists are intent pointing out the role of normative judgments is when income distribution is discussed. In this case economists want to claim that “it’s all subjective.” But when offering normative statements such as “I perfer trade”–that require just as much subjective preferences as involved in discussions of income distribution–economists are notably silent about the central role of subjective preferences leading them to prefer trade (over, say, no trade).

“if you’re going to make normative statements you should be explicit about the criteria you’re using, be it PO, HK…”

Any criteria you use needs to be explicitly argued for. PO has some reasonable argument for it (as long as one assumed that individual happiness is the goal). HK, however, contradicts the standard assumption of mainstream economics (that you have no valid way to pick one set of weightings of individual welfare over another).

So WITHIN mainstream economics you have two statements: (1) any weighting of individual welfares are subjective and none is “correct” and (2) with HK you have one weighting of individual welfare which is the “correct one” and should be used to judge trade policy (and other policies too).

Now, typically thoughtful people like to avoid such contradictory statements or, if they are going to make them, try to be explicit in how they justify holding to both statements at the same time. But within mainstream economics you don’t find such a thing. You merely find uncritical and unthoughtful acceptance of HK and the PO criteria at the same time.

The problem with HK is that it is a variety of simpleminded utilitarian thinking. Such ways of thinking have been subjected to many criticisms over the last 100+ years. Yet mainstream economists seem to feel confortable in using HK and showing their lack of knowledge of the many criticisms of simple minded utilitarian thinking.

What was it that Louis Pasteur said about science (not that in this specific instance I agree) – that a little bit of it moves man away from God but a lot of it actually moves him closer?

Anyway, that’s not directed at anyone in particular and it probably applies to many within, as well as outside the economics profession who pontificate on matters economic. Just meant to sum up the themes of this thread.

Henry,
So would you agree that the field was ideologically biased toward the left beginning sixty and seventy years ago? Keynesian economics ruled the day. It was only beginning in the seventies that the more pro-market, anti-interventionist ideology started regaiing ground. Why? Becuase of all the damage created by misguided Keynesian (and other) policies and regulations. Is this ideological predisposition or confirmation that information problems and market failures are not normally rectified by self-interested politicians and bureaucrats.

It seems that the real problem to which you are alluding is ideological bias in general, both on the left and the right. I agree wholeheartedly–it’s ubiquitous. That’s the shame of academics. Maybe we all should heed the advice of the most unabashadly right-wing economist today, Thomas Sowell:

“My job was to teach them economics, not teach them what I happen to believe,” says Mr. Sowell, who adds that efforts by some today to counterbalance the prevailing liberalism in academia with more right-wing instructors is not only an exercise in futility but a disservice to students. “Even if you succeed in propagandizing the students while they’re students, it doesn’t tell you much [about how they’ll turn out]. I suspect that over half [of the conservatives at the Hoover Institution] were on the left in their 20s.”

“More important, though, let’s assume for the sake of argument that, whatever you’re propagandizing them with on the left or right, every conclusion you teach them is correct. It’s only a matter of time before all those conclusions are obsolete because entirely different issues are going to arise over the lifetimes of these students. And so, if you haven’t taught them how to weigh one argument against another, you haven’t taught them anything.”

I guess by the time we get over 300+ comments we figure no one’s watching. Like I said, I don’t agree with him in the specific context. I was trying to sort of compromise with you by saying that there’s probably a good bit of people out there who have enough superficial economic knowledge to be annoying but not enough of it to actually understand it at a level that actually matters. Those Yetis (and please, don’t say “Well, fuck Yetis” because then I WILL be offended) you keep bringing up. I’m willing to concede this late in the game that some of them may exist.

John, I think maybe you are going too far with this. If someone’s field of expertise is liberal economics (in abstract), then, naturally, this is what he is studying and teaching and writing about. He may or may not be a proponent of trying these theories in real life (to the extent they may be applicable); I’m sure it can be treated as a purely abstract subject. Just like a nuclear fission scientist is not necessarily a nuclear bomb enthusiast and would not necessarily agree to work on building a nuclear bomb (although most probably would, I suspect).

Now, if their even purely abstract hypotheses are wrong, than that’s a different matter.

Abb1, I will make the case against economics as long as there’s a case to be made. I don’t feel any particular impulsion to moderate the case in order to spare the feelings of people in the biz. They’re all free to become dissident economists if they decide to.

And if I put out a ten-count indictment and only three counts stick, that’s fine with me. No one bats a thousand.

305: “OK, between 1992 and the present Becker went from being a top economist to “don’t know the guy”?”

You receive the Nobel memorial prize for what you have done, not what you are. Gary Becker created several important subfields of economics. One can acknowledge that, without thinking that his contributions to that subfields are very impressive.

There has certaily be a strong bias twards Chicago type economists with respect to the Nobel memorial prize. This prize isn’t awarded by the whole of the profession, so one shouldn’t make too much of it.

311: “But no economists don’t think that making normative arguments is bad, just that 1) normative statements are different from positive statements and 2) if you’re going to make normative statements you should be explicit about the criteria you’re using, be it PO, HK or MS.”

I somewhat disagree. The normative criteria you are talking about are also positive criteria- they only use positive data. I don’t think one always needs to invoke a formal criterium when making value judgements. That impoverishes the abilty to make normative judgeents to a large degree.

312: “Yes, it’s true that you could achieve the same outcome by bribing polluters not to pollute, instead of taxing them. If you did it right, only the distribution of income would be different (the polluters would prefer to be bribed).”

Not completely. If the taxes used to finance the subsidy are distortionary, the subsidy may not be Pareto efficient while the tax might be.

315: “So WITHIN mainstream economics you have two statements: (1) any weighting of individual welfares are subjective and none is “correct” and (2) with HK you have one weighting of individual welfare which is the “correct one” and should be used to judge trade policy (and other policies too).”

That argument is technically wrong. Every social welfare function that is a weighted sum of utilities leads to a transitive ranking. The HK may not, so they are conceptually different.

It really seems that I’m being asked to purge the data. By now, not only are the true-believing free-marketers I meet in everyday life supposed to be atypical, but also Becker, the Chicago school, and the Nobel prizewinners.

Brendan, why can’t a scientist create and analyze simple model with countries A, B, C, products p1, p2, p3, etc., where every participant is a robot programmed to behave according to some simple algorithm? Why not play with this model, see what happens when you change various parameters – what’s wrong with that? Obviously it doesn’t have much to do with real life, though you may hope to get some useful hints, of course.

Unemployment is not leisure.

It seems to me that “commodity” should have a standard definition, and not a variable one for when you want to call children commodities for some reason.

The business about consensus is directed at a thing by Lazear (“Economic Imperialism”) saying “Economics is a true science”, etc. In Lazear it was clear that the whole thing about “being a science” is a way of getting a kind of permanent advantage over historians and other social scientists, but economics isn’t as good as that. (If Becker had been less committed to economics, and more respetful of non-economic ways of thinking, he would have avoided a lot of offensive nonsense.)

I like Sen but most of those other liberal economists worked in the distant past.

Unemployment is when someone needs work and can’t get it. High unemployment is when a lot of people need work and can’t get it. These folk definitions are something which economists should pay attention to.

I’m unemployed more or les voluntarily, but I don’t need work.

I think that what Sen writes about rationality, welfare and social choice is perfectly fine. If I thought that he was typical of the field, I wouldn’t be saying these things — though I would still mention that he came at the end of about a fifty year period when his kind of good sense was increasingly scarce.

On the other hand, neither Sen’s definition of rationality nor what he says about welfar and social choice give results which can be plugged into the kind of arguments and equations which have been characteristic of economics during that period. He seems to bring a mushy, non-loony kind of common sense into the field, but at the cost of moving away from the quantitative exactness, sophisticated mathematical manipulation, and certainty that economists brag about.

327: “That argument is technically wrong. Every social welfare function that is a weighted sum of utilities leads to a transitive ranking. The HK may not, so they are conceptually different.”

Your claim the argument is “technically wrong” seems to be unrelated to the point I am making.

So, perhaps, your point might be technically right but it is not relevant.

My point is that “offically” economics says that all ways of generating social welfare functions are subjective and, indeed, NOT possible as interpersonal utility comparisons are NOT possible.

Then with HK was find that not only CAN we compare utility between people but we CAN select the “best” of these social welfare functions. And whose social welfare function is “correct”?: the one held by economists.

I note some inconsistencies in the above. Don’t you?

[Sen] .. seems to bring a mushy, non-loony kind of common sense – john e

Clearly you’ve only read his popular works. Amartya Sen uses formal mathematical modelling in order to generate and test that ‘common sense’ – just like other good economists. A lot of his earlier work – some of his best- is very mathy indeed.

I get impatient with people who never get beyond the insights that Econ101 gives you. I get even more impatient with those who never even get those insights.

“Nut this rational man is not usable”

should be “Sen’s new improved rational man is not usable”

Actually, all choices can be explained by rational utility maximization. Junkies just have a different demand curve than most people. To them, dying young is a goal.

For about the last fifty years I’ve been seeing all kind of godawful stuff coming out of economics. Most materially, shock therapy. (I’m sure that shock therapy will be disavowed too.) And I’ve never liked it. So one of my hobbies now is flicking shit at economists and seeing how they react.

Oh, other eric. I’m not gonna take you seriously anymore unless you go back and reread this thread twice. Slowly. All of it. Then present me with a summary of main points in the form of a iambic sonnet written in the Wyandot dialect of your choice but with every third word starting with a c, that makes a reference to porcupines and strawberry marmelade.

“As a result, during the early 1990s Sachs recommended to the newly emerging economies of Eastern Europe, the former Soviet Union and Latin America that they too release all price controls, subsidies, sell off state assets and float their currencies in order to shake off the economic lethargy of the communist era. The shocks took the form of sudden radical changes to the structure and incentives within economies.”

What was not done?

Radek, those are the words of an absolute
hack.

Hacktacular dude.
And there were two links in there.

what a fucking joke

“I lasted in that precisely two years and a month, resigning in January 1994.”

Perhaps they should have experimented on a smaller country to get the bugs out.

25 months is awhile.

Thanks Brendan. I don’t know, but perhaps people who become neo-classical economists typically have a similar kind of personality – clear-headed odds-calculating, long-term planning, effort-minimizing and vigorous bargain-hunting – and so they build their models in their own image? Just a thought.

‘Brendan, you’re basically saying that you have no clue whatsoever as to how economists go about their task. The process you describe is EXACTLY how we do it.’

Uh huh…so you are claiming that economic models are based on empirical data? (note: I said ‘based on’). How is this data gathered? And how does it used to create the model? Because I was under the impression that economics models were based on a priori assumptions (i.e. the rational utility maximiser assumption), which were then elaborated in a ‘what if’ stylee.

My other understanding is, whereas I am well aware that economists claim to match their models against reality, they are often very very loathe to do so (cf that quote about the awkward facts torpedoing a beautiful theory). For example, my understanding is that for decades, economists continued to insist that General Equilibrium Theory has been a major contribution to human thought. However:

‘General equilibrium theory, as its name might imply, is concerned with the behaviour of all markets in an economy.
The fundamental proposition of orthodox economic theory is that the price mechanism operates to ensure that demand will equal supply in every single market. Imbalances cannot persist, because they are smoothed away by the negative feedback generated by the price mechanism. In other words, if demand exceeds supply for a particular product or service, the price will rise and the demand fall, bringing it back into line with supply.
Perhaps the most outstanding intellectual achievement of conventional economics has been to formalise general equilibrium theory. A key aspect of this has been to establish the least restrictive set of conditions that must hold for the existence of equilibrium to be guaranteed. In other words, the conditions under which it can be proved there exists a set of prices such that demand and supply will be in balance in every single market.
It is not the purpose of this paper to enter into a critique of general equilibrium theory, and it is sufficient to note that we can state with absolute confidence that the conditions required to prove existence do not apply in reality. It has been proved that, in a multi-period world in which agents hold different beliefs about the future, each agent must have access to an infinite amount of computing power for the existence of general equilibrium to be proved. A non-technical summary of this and other theoretical problems associated with general equilibrium is given in Ormerod (1994).’ (http://www.paulormerod.com/research.html_

Now I don’t know enough about this to comment, although frankly I do know lots of other examples of situations where economists (apparently) have dealt with the problems of data not matching the model by ditching the data. However, for me, this is indicative of the whole problem: which, to repeat, is NOT that economists use a lot of maths (so do physicists and ecologists I have no problem with that) but that economists tend to privilege their models and are reluctant to abandon them when the empirical data contradicts the models.

Incidentally: ‘Yeah well a lot of real world phenomenon can be explained with the use of the rational utility maximizer model.’. Oh yeah? Like what? OK let’s be more specific, I don’t doubt that some behaviour can be. But 90%? Are you SURE about that number?

364: What paper is supposed to show “that, in a multi-period world in which agents hold different beliefs about the future, each agent must have access to an infinite amount of computing power for the existence of general equilibrium to be proved.”
And isn’t the researcher the one doing the proving? Strange, strange.

365: ?!?!?!? The Phillips-curve was initially a empirical finding without any theoretical support.

“Ormerod’s (non academic) bibliography doesn’t make it entirely clear. But it seems to be: Radner, R. ‘Competitive Equilibrium under Uncertainty’ Econometrica, 36, 1968.”

In the model of Radner agents actually have the same a priori beliefs, they differ only in information, which subsequently leads to different a posteriori beliefs. In a Radner equilibrium, all agents take into account these informtion differences which is actually demanding. They have private informatin and information about the kind of information others have. And everyone knows that everyone knows that everyone knows…that. And they use the price information to decode that.

One can assume that people are unable to make these calculations (or simply don’t have the knowledge required in the model) and get the simple usual case. What Ormerod writes is misleading to say the least.

“I have no idea what the phrase: ‘without any theoretical support’ means, but it was certainly inferred from empirical data, although it then went onto to become phrased (as it were) as a statistical model/relationship: i.e. as a theory.”

Exactly that. It went from fact to theory and didn’t start as a a priory theoretical construct.

“In any case this is all irrelevant, as Phillips was wrong. There is no link (of the sort he posited) between inflation and unemployment (insofar as there is one it’s inverse:”

You think that his econometric work was wrong?

Nolo,
All those folks, except Barro, were associated with U of C.
And frictional unemployment (as well as structural unemployment) is alive and well in Principles textbooks. I don’t know who told you that.

Michael,
You’re right that among some theoreticians Hahn’s outlook is common. However only a small subset of economists do pure theory. So you’re talking about a subset of a subset. Most economist approach their work in the way described.
And yes there’s debate within economics on shock therapy with regard to the speed and timing of reforms. Somehow I don’t that’s what John was referring to.

On the Phillips curve. Some people did used to argue for ditching it. Strangely for branden these people tended to be the New Classicals and RBC theories of late 70’s and early 80’s. There was some decent arguments for this position – the damned thing shifted all over the place which made it a poor guide to policy and had shaky theoretical underpinnings. Things have gotten better. The modern PC can generally be derived from assumptions about firm’s behavior and when combined with a monetary policy makers’ objective function (loosely aqnalogous to the old LM curve) and a log linearized version of the consumers Euler equation (an updated version of the old IS curve) can be used quite succesfully to understand the the dynamics of influence of monetary policy on the economy and business cycle. But yeah, this is a strange example to offer as an argument, since it works in the completely opposite direction then suggested by branden.

I think the rationality assumption cuases problems mainly in normative economics, not in positive economics. I mean, what does a intransitive person want?

Dean Baker

“I feel so old. Back when I learned economics, they taught you that in free markets prices adjusted to bring supply and demand into line. But, these days we keep hearing about how there are labor shortages that can only be addressed by finding lower paid workers in other countries to take the jobs. According to the NYT, the latest case is Poland, where apparently all the construction workers have gone to work in Western Europe.

What makes this story especially annoying to those of us who learned the old economics is that the wages of workers in the occupations facing shortages have been falling relative to the wages of workers in occupations not facing shortages. Many economists have sought to explain the relative decline in wages for less-educated workers as the result of skill-biased technical change (i.e. computer technology reduces the relative demand for less educated workers), but how do we reconcile a story of skill-biased technical change with recurring shortages of the workers who we supposedly don’t need any more?”

First, it’s Brendan not Brandon. Second: ‘But yeah, this is a strange example to offer as an argument, since it works in the completely opposite direction then suggested by branden.’

Not really. I was actually perfectly aware that the original Phillips curve was disliked by the neo-classicists: (Ormerod makes this clear). And my first argument was to do with General Equilibrium. And in response to Michael, Ii am no economist. If Paul Ormerod is grossly misrepresenting published economic papers, then you write to him and tell him. I read what I read in good faith. Same goes with the Phillips curve: if Ormerod has published misleading or false data that proves that the Phillips curve is not true then mea culpa, but as I say, I took this in good faith. But either way the choice is clear: either Ormerod’s data is faked or false or misleading, or the Phillips curve is false.

Finally it really wouldn’t matter what example I chose as (as I think I made clear earlier) along with Hodgson and the ‘post-autistic’ ‘school’ I think that modern (i.e. post-war) economics is fundamentally misguided. So it’s not really the truth or falsity of any specific neo-classical position that I’m objecting to. It’s the whole aim of the profession: to create abstract mathemetical models via the analogy of physics (in which ‘rational’ individuals ‘are’ (the equivalent of) atoms, deterministically following abstract mathematical laws.

To repeat, given that I think that the whole aim of economics is misguided (in that it assumes that ‘human nature’ is the same everywhere and in all cultures, because it assumes that ‘markets’ are the same in all cultures and at all times, and because it assumes ‘mathematical models’ predict behaviour in all times and all cultures), I could have used any example for ‘neo-classical’ economics (to repeat for the thousandth time, Austrian school economists, J.K. Galbraith, earlier economists (Adam Smith for example)) are immune from this criticism.

The mysterious thing about economics is that it simply doesn’t answer (doesn’t even try to answer) the basic questions that one might think it should. What is money (or to be more specific, what are the various things ‘we’ call money, and how did they get that way)? What is a firm? What is a corporation? What are (plural) markets? What is the relationship between the law and the ‘markets’ the law and firms, culture and the law, and how does this relate to broader societal issues? (unionisation, religion, ecology, history, imperialism and empire and so forth).

It’s clear that to answer these questions you would have to have a good grasp of history and of the law (for example, the fact that corporations are a relatively modern invention, that they used to be illegal, that they were created via legal actions, and that these were not neutral decisions but that they served very specific interests, and so on). Also you would need a good grasp of anthropology in order to understand how so called ‘hunter gatherer’ societies did things, and how these developed into the way we do things now. Moreover, sociology and psychology would also be of interest. For example, there are literally volumes of raw data in the sociological tradition which deals with work: how people work, why they work, how firms are created, how they fail, how unions are formed, the relationship between unions and management, white collar crime and its impact on the firm and then on society (e.g. enron) and this mountain of data is almost never referred to by economists. Why not?

You would also be interested in the fact that almost every Western (European) power had huge protectionist tendencies (as it were) until their industries had ‘modernised’ and then they went about ‘opening up’ new markets by invading competing powers (i.e. India, China) and anninhilating their infrastructure and forcing them to buy (e.g.) British produce. Again, one could hardly think of anything that should be more of interest to economists, but they seem to find these facts uninteresting, compared to the joy of semi or non predictive modelling.

Why ever not?

‘One of Glyn Davies’s main motives for writing the book was that, as he writes in his preface around the next corner there may be lying in wait apparently quite novel problems which in all probability bear a basic similarity to those that have already been tackled with varying degrees of success or failure in other times and other places. Furthermore he is of the opinion that economists, especially monetarists, tend to overestimate the purely economic, narrow and technical functions of money and have placed insufficient emphasis on its wider social, institutional and psychological aspects.’

‘Money has three functions; Store of Value, Medium of Exchange, Unit of Account.’

Nobody seems to have commented on the two studies I linked to, but to give a quick summary Rothman, Lichter and Nevitte in the second one linked found that 55 percent of those in economics identified as liberal while 39 percent identified as conservatives. Klein and Stern in the first study found a 2.9 ratio of democrats to republicans in economics. They also show that on policy issues, economists have the least consensus.