Economics and Ideology

by Henry on November 15, 2006

Dan Drezner disagrees with Chris Hayes about whether Econ 101 is a form of right wing indoctrination, saying that his own first micro class waxed rhapsodic about the joys of technocratic intervention, and that he didn’t discover the public choice critique of government until grad school. Now public choice is an unabashedly ideological approach to the world, at least if the co-editor of the flagship journal in the field, Charles Rowley, is to be believed. In his introduction to the Edward Elgar public choice reader, he describes public choice as a “program of scientific endeavor that exposed government failure coupled to a programme of moral philosophy that supported constitutional reform designed to limit government,” and suggests that its opponents are “scholars who had rendered themselves dependent on the subsidies of big government and whose lucrative careers in many instances were linked to advising … agents of the compound republic.”

There is a strong strain in economics more generally that is unabashedly ideological too. Take this effort to figure out a sort of Nicene creed that would allow ‘real economists’ to profess their faith and thus distinguish themselves from bluffers like Kenneth Arrow and Robert Solow. “Real” economists apparently believe that demand curves always slope downwards, even when empirical evidence tells you that they don’t (I’ve always preferred the Apostles’ Creed myself). Now this doesn’t say, contra both some economists and some of their sillier critics, that a commitment to the kinds of models that economists use necessarily makes you predisposed to be right wing (Jack Knight and Jim Johnson, two rational choice lefties, have an interesting forthcoming piece discussing how rhetorical slippage between general equilibrium and partial equilibrium models provides a bogus ideological justification for many pro-market arguments). But it does mean that 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, and perhaps more right wing than the actual theory itself would support, if it were looked at carefully. I think (although I can’t find it using Google, so I may be wrong), that there’s actually empirical evidence supporting the first of these claims – a survey someone did a few years back measuring the political opinions that people had entering graduate programs in economics, and their political opinions after a few semesters of coursework, which found that there was a pronounced and statistically significant shift to the right (if anyone knows where this survey is to be found, feel free to point to it in comments).

Update: I’ve found the survey via Google Scholar, although it isn’t a longitudinal study as I thought it was; the findings are reported in The Making of an Economist Redux in the Journal of Economic Perspectives.

The large majority of [students surveyed in seven top ranked econ grad programs] (80 percent) felt that their political views did not change in graduate schools, although that changed by year, with 10 percent of first-year students reporting a change in their views, but 32 percent of fourth- and higher-year students reporting a change in their views. In particular, 10 percent of first-year students considered themselves conservative; by the fourth and fifth year, this number had risen to 23 percent. There was also a large drop by year in students who considered themselves radical; that percentage fell from 13 percent of first year students to only 1 percent of fourth-year and higher students.

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Elephantstrunk » Unintended consequences of learning economics
11.19.06 at 2:28 pm

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1

John Emerson 11.15.06 at 2:17 pm

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.

2

"Q" the Enchanter 11.15.06 at 2:35 pm

My Econ 101 prof was very smart and very libertarian. It was the first time I’d been confronted with the very powerful arguments that free marketeers bring to the table, and it definitely shifted my fiscal politics to the right (e.g., by making me less reflexively pro-regulation).

An amusing aside. On the exams, whenever I didn’t know the answer, I would choose the answer I thought best expressed _what the professor would want me to believe_. Now, I didn’t _always_ get these answers correct, but, well, let’s just say I did better than chance.

3

leederick 11.15.06 at 2:42 pm

…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?

4

radek 11.15.06 at 3:03 pm

I do think that economic education on average moves students to the right (in terms of economic issues) but I think the effect operates differently then is supposed above. It’s not free market indoctrination.
Economists emphasize trade offs, look at costs and benefits of various policies, emphasize the real world constraints faced by policy makers (sometimes with a bit too much glee). All this leads, as John points out, to a lot of “on the one hand, on the other hand”. But this isn’t indoctrination, it’s a move towards moderation. I understand the arguments for a minimum wage hike (God forgive me for using this as an example). I understand the arguments against them. Whether or not it’s worth it in the end (according to my own criteria) depends on things like elasticities of labor supply and demand – and empirical estimates of these suggest that currently a modest increase in the minimum wage wouldn’t have much of an effect either way but a large one would have a significant negative effect. So I wind up in the slightly center-right position of opposing things like “living wages” which would raise wages to prohibitive levels but being fairly sanguine about modest minimum wage increases.

So how does that square with admitting that economic education DOES move students to the right. If I’m right then a staunchly anti-min wage student would become less so and a staunchly pro-min wage student less so as well. Shouldn’t it wash out?
Not if most students coming up into the econ class are leaning left to begin with, which I do think is the case (not necessarily because of academia being a left wing place, which it is, but also because of factors such as their age). So overall effect is to shift them right.

Oh yeah and as far as getting good grades by guessing the Prof’s preferred ideology and answering accordingly – this is a problem with a bad Prof not with a bad subject. I’ve taken many classes in Sociology, Anthro, and even History where it was possible to show up only on test dates and ace the suckers by answering every question by going as far left as you could stomach.

5

Functional 11.15.06 at 3:11 pm

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.

6

Ivan 11.15.06 at 3:13 pm

Henry:

[A] survey someone did a few years back measuring the political opinions that people had entering graduate programs in economics, and their political opinions after a few semesters of coursework, which found that there was a pronounced and statistically significant shift to the right […]

This was definitely the case with me when I took Micro 101 during my engineering undergrad. At the time, I also observed a similar phenomenon among my classmates. (I should add that this happened several years ago in a post-socialist Eastern European country, where people’s beliefs about economics are generally much more leftist than in Western Europe, let alone North America.)

However, I vehemently disagree with the conclusion that this constitutes evidence of indoctrination. You seem to a priori refuse to consider the possibility that people ignorant of economics might indeed often harbor leftist beliefs based on clearly false folkish economic theories, which might be rectified by taking an elementary economics course. My shift in the pro-market direction caused by attending Micro 101 mostly consisted of reversing such beliefs.

The commenter above writes that there’s no such thing as a body of uncontroversial economics, and a similar assumption seems to underly your post too. But there are clear counterexamples to such claims. For example, I am not an economicst, but my understanding is that the link between price controls and shortages is an entirely uncontroversial corollary of simple microeconomics. However, before I took Micro 101, I had believed that it was entirely right that the government should employ severe price controls of essential goods and I saw no bad consequences whatsoever in such policies. It had never occurred to me that price controls directly cause shortages and long lines. When I saw actual shortages and lines caused by such policies, I would blame them — just like most of my countrymen — on some entirely vague notion of general corruption and incompetence of the government.

One could find many such examples where people’s folkish leftist beliefs can be refuted by entirely positive and universally accepted economic theories. If this constitutes indoctrination, then what doesn’t?

7

radek 11.15.06 at 3:19 pm

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.

8

John Emerson 11.15.06 at 3:22 pm

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.

Replacing adolescent cliches with Econ 101 cliches is not progress, especially if the Econ 101 cliches are false. Minimum wage is one of the issues on which erroneous Econ 101 thinking seems most common. 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.

Starting with Drezner and continuing here, the defenders of the econ profession seem to be taking the tack that the fine econ courses they took were much better than the crappy, tacky econ courses taken by less wonderful people. Sort of like the Republicans who would never listen to Rush Limbaugh and therefore feel that he has nothing to do with them, even though he’s functionally one of the most important Republicans of all.

9

John Quiggin 11.15.06 at 3:23 pm

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.

10

jasper emmering 11.15.06 at 3:23 pm

I never was taught basic economics (Latin and Greek were thought to be much more useful), but the logic of a rightward shift seems pretty straightforward to me.

First, you are taught how to conjugate a verb. That would be Latin 101.

Metella est mater. Quintis est filius et ambulat in hortum. Hic, haec, hoc. (This is all I can remember)

Then you spend the next 5 years learning all the 20,000 exceptions to the rule. That would be real Latin.

Similarly, Econ 101 is for libertarians, while economy is for, huh, real economists. The libertarians never get past the Esperanto-like first grade version of Latin.

They only learn the first bit: how markets work. They never get round to the second, far more frustrating bit: markets don’t work all the time, and can indeed fail disastrously. The invisible hand often needs guidance.

11

Ken Houghton 11.15.06 at 3:30 pm

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.

12

Brad DeLong 11.15.06 at 3:34 pm

Say, rather, that neoclassical economics is a very useful set of disciplinary tools for somebody whose instincts and intuitions are on the left. They sharpen your arguments and clarify your thought. By contrast, I think that most people whose instincts and intuitions are on the right find their arguments dulled and muddied by too much exposure to neoclassical economics…

13

Seth Finkelstein 11.15.06 at 3:40 pm

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.

14

John Emerson 11.15.06 at 3:49 pm

Perhaps academic economists are more liberal than the average econ PhD, since econ PhDs can make more money elsewhere, and economic conservatives follow the money.

My perception of the econ profession is that it ranges from very conservative to neoliberal, with neoliberals in the minority. People always assure me that my perception is wrong, and that economists are really nice decent people. But the university is a sheltered and artificial environment.

This still wouldn’t account for why econ 101 is so bad, however. Maybe it’s a split-the-difference compromise.

P.S. Ivan: Econ classes in the ex-USSR and its satellites may have moved Komsomol kids to the right, but that’s not what we’re talking about here.

15

Henry 11.15.06 at 3:50 pm

You seem to a priori refuse to consider the possibility that people ignorant of economics might indeed often harbor leftist beliefs based on clearly false folkish economic theories, which might be rectified by taking an elementary economics course.

Now where exactly do I do this? I suggest two things above. (1) That grad students who study economics have a tendency to move to the right. (2) That economics as it’s taught today frequently does have a pronounced ideological bias. What I don’t do at all is to say, or hint, that the first is completely a product of the second. Indeed, I’m quite careful to distinguish them noting that I think that there’s “actually empirical evidence supporting the first of these claims” (emphasis added). I believe, but can’t prove, that the ideological content of economics education (as opposed to the clarification of folk-beliefs)does account for some of the observed rightward shift. But I don’t know of any good way of figuring out how much it actually accounts for.

So I’m not at all claiming that economics is a valueless exercise in ideological indoctrination. Not at all – I’m a happy possessor of a B.A. degree in the subject meself. 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, which doesn’t at all necessarily flow from its technical apparatus, but which very plausibly has consequences for the political beliefs of students (and of those members of the general public who follow these debates).

16

Rhadamanthus 11.15.06 at 4:12 pm

I wonder if it’s also the case that other academic fields create similar shifts in other directions. For instance, does biology tend to make its students more atheistic? Does sociology tend to make its students more socialist? Does literature tend to make people its students more post-modern?

It seems to me that all of the academic fields – in virtue of their unique perspectives – have a quasi-indoctrination effect. Perhaps Henry didn’t mean to single out economics, although that’s all he mentioned.

It seems to me from my undergraduate experience [at a top 20 private university] that the largest ideological shifts happened in the humanities, like sociology, women’s studies, and literature.

On the other hand, the most *boring* people I met were the economics students, who were distracted with weighing data and doing regression analysis. Economics graduate students are some of the most *boring* people in the world. Have you ever *met* any of them? Just be honest with yourselves. Take the honest, partly true stereotypes. Which fields do you think make people more ideological? Economics? Or sociology? Women’s studies? Race studies? Critical Legal Theory? Etc.?

I think all honest persons can admit that, for good or for ill, the non-economics parts of the non-natural sciences are the worst. I think we can also admit that environmental sciences and biological sciences have obvious effects as well. For instance: Richard Dawkins and Paul Ehrlich.

I have to say, Henry, perhaps it’s just my own market liberal perspective, but the lack of mention of these other fields seems to darken my perception of the fairness of this dispute. If you know any economists, and then you see people at CT going on and on about economics being ideological were the only biasing field in the academy, you realize that the leftish folk of CT are looking at things pretty myopically.

C’mon! Economists are dull. Their students are dull. Their subject matter is DULL, DULL, DULL. Are these really people who are guilty of deep ideological biases? It seems so psychologically implausible to me, just based on their personalities.

Note: I’d like to distinguish some of the Austrians. Their methodology is distinct enough to make their conclusions sound more ideological. I don’t think the Austrian approach has to be, myself. However, many of the people attracted to it are more ideological because, well, you kind of have to be inspired by it to bother working on it. That’s why you get strong reactions out of good guys like Don Beaudreax. For the Austrian, an upward sloping demand curve sounds an awful lot like the breaking of a law of physics.

17

radek 11.15.06 at 4:13 pm

“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.

18

dearieme 11.15.06 at 4:21 pm

“the presentation of economics as a science like physics is something of a fraud”: well, that’s probably true if you mean experimental physics. Some economics does bear some resemblance to spin-a-yarn physics.

19

radek 11.15.06 at 4:21 pm

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.

20

Russell Arben Fox 11.15.06 at 4:22 pm

For what it’s worth, I came out of my Econ 101 class, way back in 1987, more liberal/progressive/socialist/what-have-you than when I went it. But then, really the only thing I enjoyed about the class was Polanyi’s “The Great Transformation,” which think we were supposed to read in order to be challenged by a “contrary” opinion.

Regarding economics in general, I like Michael Kazin’s comment from his recent bio of William Jennings Bryan: “Over the past century, economics has become a highly specialized profession that repels those who question its authority.”

21

John Emerson 11.15.06 at 4:27 pm

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.”

22

radek 11.15.06 at 4:30 pm

Fair enough Henry but your #2 still has to contend with the fact that folks like Arrow and Solow are mainstream (and Stiglitz and Krugman and Samuelson) but “Cafe Hayek dudes” (I like saying that) are not. I mean unless you think that those “600 economists including 4 Nobel winners” are willfully teaching their students things they don’t believe themselves.

23

Mark 11.15.06 at 4:31 pm

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.

24

radek 11.15.06 at 4:44 pm

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?

Yes, yes and I wouldn’t call you crazy if you said it. To answer the implicit question of the first two, yes, those things should be taught. And at least in my experience they often are.
That’s pure assertion, and highly implausible. Cut the crap.

Uh, which part? That it is not a convenient real life example of a price floor? That that is not the reason it’s taught? Since we’re speaking of unobservable motives here we both can assert away. But see the Caplan article linked to above;

“The paper first tests and decisively rejects the hypothesis that the differences (between Economists’ views and that of the public) solely reflect economists’ self serving bias. Then it examines whether economists’ political ideology and party loyalties explain the disagreement; if anything, this slightly increases their magnitude.”

always outside econ classes,

Maybe, but we’re talking about economic education here.

25

Tracy W 11.15.06 at 4:49 pm

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.

26

radek 11.15.06 at 4:53 pm

The problem with the discussion of how minimum wages are taught is that everyone’s just bringing their own experience to the table and it’s hard to say anything about what happens on average. I learned about monopsony and Card and Krueger from a GM grad who, outside the classroom, was proudly liberterian. Others have had other experiences.

And I concur that most intro textbooks are horrible. Just got back my student evaluations and more than half complained, very understandably, about the textbook (not gonna name names). But for some reason the econ textbook publishing industry is a Hotelling game where everyone moves to the same point on the line with no product differentiation. It’s like having four gas stations at an intersection all selling diluted petrol at inflated prices.

27

John Emerson 11.15.06 at 4:59 pm

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.)

28

Barry 11.15.06 at 4:59 pm

jasper: “Similarly, Econ 101 is for libertarians, while economy is for, huh, real economists. The libertarians never get past the Esperanto-like first grade version of Latin.”

Back in the 1990’s, I read a 400-level micro textbook. Not seriously studied, just casually read. And I was still able to mess with the heads of a bunch of self-professed libertarians, on economics (on USENET, not in real life). It really shocked me – I had assumed that these guys knew their stuff.

29

asg 11.15.06 at 5:11 pm

>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.

30

John Emerson 11.15.06 at 5:12 pm

Someone who takes economic rationality to be normative will end up being pretty heartless. And I meet people who do.

I personally think that rationality should be a normative concept, and that “economic rationality” should be renamed or junked. Gintis and Sen have even made some progress in bringing economic rationality into the real world, though I think that in doing so they ruined for use as theory-building conceptual fiction.

31

John Emerson 11.15.06 at 5:15 pm

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.

32

radek 11.15.06 at 5:20 pm

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

If you can’t find it, how do you know what it looks like? Apparantly just cause you disagree with the conclusion. Why argue about minimum wages? The arguments in favor of higher minimum wages, whatever these may be, just don’t look convincing.

33

John Emerson 11.15.06 at 5:23 pm

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.

34

radek 11.15.06 at 5:27 pm

re: 25
Yeah and it’s worth remembering that any offer in the ultimatum/dictator game can be a Nash equilibrium.
I guess a better test of the effect of economic education on altruism would involve looking at how much econ grads contribute to charity compared to others with similar income, controlling for differences in how contributions are treated by states’ tax systems and other effects.

Man. Look at me giving away free research paper topics. I must…be…being…altruistic…Nooooooooooo!!!!! What happened to all my economic education???

On the other hand, if data was available and that paper was writable then that 20$ wouldn’t be laying there on the sidewalk.

35

John Emerson 11.15.06 at 5:27 pm

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

36

Bob B 11.15.06 at 5:29 pm

Henry: “’Real’ economists apparently believe that demand curves always slope downwards . . “

Try (Nobel laureate and Chicago economist) Gary Becker: A Note on Resturant Pricing and Other Examples of Social Influence on Price (JPE 1991):
http://pages.stern.nyu.edu/~wgreene/entertainmentandmedia/Noteoninterdependentdemand.pdf

And Harvey Leibenstein: Bandwagon, Snob and Veblin Effects in the Theory of Consumers’ Demand (QJE 1950).

The old charge was that economists were all pinko interventists, early notable examples being Maynard Keynes, Abba Lerner and (Noble laureate) James Meade.

Meade’s Planning and the Price Mechanism (1948), The Theory of Economic Externalities (1973), The Intelligent Radical’s Guide to Economic Policy (1975) and Principles of Political Economy: The Just Economy (1976), are classics of their kind.

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Watson Aname 11.15.06 at 5:38 pm

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.

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radek 11.15.06 at 5:49 pm

http://wip.blackwellpublishing.com/specialarticles/ecoj716.pdf

Sorry, I included it originally but then my connection broke. And description is from the abstract. Table I does a good job of showing whether or not economists are more “right wing” then the public too.

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abb1 11.15.06 at 5:52 pm

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.

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CJColucci 11.15.06 at 5:53 pm

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?

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Seth Edenbaum 11.15.06 at 5:58 pm

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?

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Leonard 11.15.06 at 6:19 pm

The parsimonious explanation is that microeconomics is basically correct, yet quite nonobvious to the average person. Thus it is right wing “indoctrination”, in a sense, because it suggests different ideas than what most people are born with or pick up from society.

Basically I’m just dittoing #4.

The situation of people whose education does not include microeconomics, trying to function in everyday life, is akin to that of naturalists who lived before Darwin. Theory is a powerful tool for guiding observation.

As for the minimum wage, well, what other state-enforced price floor does the average student have any experience of? It’s a perfect example of a real-life policy with real effects, so, presumably something that most students will be much more interested in than an exactly analogous example using widgets. Teachers generally try to interest students by trying to relate the subject material to the students’ lives if possible. This is not exceptional.

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John Emerson 11.15.06 at 6:27 pm

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.

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radek 11.15.06 at 6:38 pm

abb1, in PPP terms which would be more relevant here, that 22 francs would be closer to 10$ or 11$ (I’m gonna hedge here by saying that I don’t have the most up to date number under my nose – few years back real exchange rate was 2 rather then 1.25). In general Switzerland does not have min wages except for butchers (don’t ask me why). Add to that the fact that Geneva is just a bunch of watchmakers and bankers, rents are high – unskilled labor is relatively scarce – and that 22 francs/hr doesn’t look so crazy anymore. Just like I’m willing to bet the McDonalds in Palo Alto pays above US min wages, unlike the McDonalds in Jackson, Mississippi. This isn’t even to address the “Meticulously observed”.

And most demand curves DO slope downward (Veblen goods and so on are exceptions to the rule). What empirical evidence are we talking about here?

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Mark 11.15.06 at 7:14 pm

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?

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bob mcmanus 11.15.06 at 7:19 pm

“because it suggests different ideas than what most people are born with or pick up from society.”

Brrrrrng! Do Marxists get to play now? As soon as we stop laughing? Umm, at the Manifestoon above, of course.

Brad, at 12, was pithy, insightful, and useful.

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Roy Bland 11.15.06 at 7:31 pm

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).

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Tracy W 11.15.06 at 7:43 pm

Now public choice is an unabashedly ideological approach to the world,

It is an unabashedly ideological approach to the world to study how governments make the choices they do and not just assume that they get everything right?

Charles Rowley appears to be explaining his own motives, and conducting an ad homimen attack on his opponents. If every area of study where participants have resorted to ad homimen attacks on their opponents is ideological then the post-modernists are right and nearly all of science is ideological. Certainly all of economics – I can’t be bothered digging up quotes but I’ve heard all sorts of ad homimen attacks from economists all over the spectrum – and a lot of ad homin attacks.

The interesting question is whether public choices theories are right, or more accurate than alternative approaches.

Anyway, this is case where ideology is in the eye of the beholder. What you see as ideology the speaker probably sees as the honest truth, and vice-versa. This is because ones’ view of the economy has so much impact on ones’ political views. When you talk about “perhaps more right wing than the actual theory itself would support, if it were looked at carefully.” – I suspect any conclusion drawn on this would depend on who was looking at the theory carefully, and what theory and evidence they looked it.

I find it an impressive piece of ideological bias that comment 10 talks about market failures, but never mentions government failures, though there is a lot of evidence that government also sometimes fails disastrously. Jasper probably doesn’t think himself ideologically biased though.

I would be deeply surprised if many people, on entering a study of the economy, did not find their views changing. For views not to change, it would mean either that by sheer coincidence their ignorant views all happened to concord with the new evidence and arguments they encountered, or that their views were impervious to argument or evidence.

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Bob B 11.15.06 at 7:49 pm

“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.

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Jonathan Goldberg 11.15.06 at 8:03 pm

My nonexpert view is that economics is quite complex methodologically. It move between being an emperical science, a branch of philosophy (concerned with defining rationality, or sometimes ethics), a branch of mathematics, and perhaps sometimes a religion. I believe a lot of dissatisfaction with economics comes from this mixture and the equivocations to which it sometimes leads.

Above, John Emerson commented:

“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).”

Take heart; all Quine proved is that is impossible to do it uniquely. As far as I’m concerned the result any reasonable attempt would be a laudable contribution.

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John Emerson 11.15.06 at 8:03 pm

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.

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Seth Edenbaum 11.15.06 at 8:09 pm

Left undisturbed or unopposed any form of thought will tend to distill itself down to a pure form, and purity is solipsism: it recognizes only itself. So philosophy becomes the philosophy of self-description as opposed to the attempted description of the world, and art becomes ‘art for art’s sake,’ as opposed to the description of perception and to the degree that it is possible, of the perceived.
‘Economic’ logic, in daily life, comes into conflict with other forms of obligation. It only makes sense that left on it’s own, opposed by nothing in an academic bubble, ‘economics’ would become what it has: the Greenbergian Formalism of the study of human behavior.

Okay. I promise, I’m done now.

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radek 11.15.06 at 8:11 pm

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.

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John Emerson 11.15.06 at 8:13 pm

Is there any other science that works that way?

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Watson Aname 11.15.06 at 8:14 pm

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.

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radek 11.15.06 at 8:21 pm

Hmm, the fact that people actually argue about whether economics is a “science like physics” or even just feel compelled to pronounce the fact that “economics is not a science like physics” probably means it’s helluva closer to physics then other social sciences like Soc, Anthro etc. that don’t even get the privilaged of being compared to physics.

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terence 11.15.06 at 8:24 pm

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.

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John Emerson 11.15.06 at 8:26 pm

It means that economists have often tacitly or explicitly claimed that economics is a science like physics, but people don’t believe them because it isn’t. Economists sometimes seem to think that if you use enough math you become scientific eventually. They also use that as a screen to hide behind — “Obviously you don’t understand the math.”

One problem is that there are a lot of useless or detrimental artifacts in economics deriving from attempt to seem like physics. Physicists occasionally laugh at economists’ math.

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Henry 11.15.06 at 8:28 pm

Brad – I agree and would even go a little further. Starting from assumptions of rationality, narrow self interest and so on is an excellent way of assaying the worth of left wing arguments under unfavorable conditions. Lots of lefty arguments assume that humans are more or less benign and sociable. They may sometimes be right – but making assumptions of this sort also allows lefties to load the dice. If, in contrast, lefty arguments still work when the dice are loaded against them, say, by assuming the kinds of stark clashes of interest that are often modelled in game theory, it suggests that these arguments are likely to be robust under a variety of assumptions and conditions.

John – I have an anecdote along these lines myself. I took my grad game theory class in the econ dept, b/c no-one in pol-sci taught it. It was given by a professor who left shortly afterwards to become a minister in the Conservative Spanish government. In the early weeks of the course, he tried to get us to understand the concept of equilibrium by making us “play” (i.e. suggest moves in) a variety of two person games with equilibria that implied that people wouldn’t want to cooperate etc. When he tried this with the centipede game, everyone except me and my partner played Defect, Defect on the first move, because that was clearly what the professor expected us to do. But in fact he’d accidentally misspecified the payoffs on the blackboard, and the actual equilibrium was Cooperate, Cooperate. Because everyone else _assumed_ that the lesson was that cooperation was irrational, nobody (except me and my mate, I’m proud to say) had done the bloody backward induction.

Rhadamanthus – I’ve complained occasionally about the ideological bias in political science before, as best as I can remember, and certainly about the politics that certain varieties of literary theory tend towards.

Radek – I have an idea that someone may have run this experiment with econ students and dictator games somewhere. I’ll try to look it up. Jean Ensminger does fascinating anthropological research on how these games play out in different cultures. On the Arrow-Solow thing – my understanding of the history of econ teaching is that there has been a pretty radical shift over the last thirty years, from elite economists subscribing to vaguely liberal or sometimes left wing views with a strong dose of technocracy to a much more unambiguously pro-market perspective; Paul Samuelson giving way to Martin Feldstein. I also perceive a bit of a push back against this in the last few years, but only a bit. This isn’t to say that the previous set of attitudes wasn’t equally as ideological as the current set, but that in neither instance does the ideology inevitably flow from the basic toolkit of economics (both Samuelson and Feldstein are committed to mathematical modelling).

Tracy W – nice try but no cigar. Rowley isn’t setting out his idiosyncratic prejudices – he’s explicitly defining a field, and doing so in unabashedly ideological terms. Look it up. Nor is he a minor figure in that field – he’s one of the major institution builders (his intellectual contribution isn’t on the level of Buchanan and Tullock imo, but he is clearly a very important gatekeeper). The Edward Elgar series also counts plays a major role in defining subfields within economics – they collect together classic articles in those fields and are pretty widely used in my experience. If you _really_ want to make the claim that public choice isn’t a strongly ideological program of endeavour, you’ll have your work cut out for you. Again – I don’t think that public choice is without value or insight by any means – but it is clearly and explicitly bound up with a set of political priorities, as Rowley happily acknowledges.

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radek 11.15.06 at 8:36 pm

terence – Mankiw is a Keynesian. A New Keynesian but when it comes down to it differences are slight. Active monetary policy rather than active fiscal policy. Emphasize sticky prices rather than fixed nominal wages (counter-freakin-cyclical wages again). So you probably wouldn’t have noticed any difference.

JE – show me an economist that claims that economics is like physics. Most of the time you rather get something like “because controlled experiments are impossible/unethical in economics, it is not a science in the same way as physics”. If physicists laugh at economists’ math then that’s their problem – it’s not like we get the math wrong. It may not be as fancy (most of the time) but neither does it need to be.

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John Emerson 11.15.06 at 8:39 pm

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.

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John Emerson 11.15.06 at 8:40 pm

“as they can cram in”.

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Michael Sullivan 11.15.06 at 8:42 pm

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?

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Michael Sullivan 11.15.06 at 8:44 pm

My apologies. In my post above, I said “Harry” when I meant “Henry.” No offense was meant.

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John Emerson 11.15.06 at 9:01 pm

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.

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radek 11.15.06 at 9:15 pm

“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)

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radek 11.15.06 at 9:17 pm

“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?

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Brett Bellmore 11.15.06 at 9:20 pm

“Is there any other science in which students are normally started off on stuff that they have to unlearn later?”

Physics. Every heard of Newtonian and Einsteinian mechanics?

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Brandon Berg 11.15.06 at 9:23 pm

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.

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Michael Sullivan 11.15.06 at 9:25 pm

John:

Of course I’ve heard of the “Liberal University.” It’s maddening when conservatives carry on about it, too. I’m personally not a fan of, “the other side is being annoying, so we must be annoying in exactly the same way” as a philosophy of life.

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Martin James 11.15.06 at 9:26 pm

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.

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Watson Aname 11.15.06 at 9:28 pm

Radek, Oh economists get the math wrong too sometimes, but that’s ok, so do the physicists on occasion. That isn’t the reason that anyone is laughing. The laughter comes from a feeling that economists are sometimes going about things backwards. Sometimes physicists will start with an idea of the physics and end up with a model they can’t handle. Then they’ll simplify the model, or create new math, until they can handle it. All the while keeping something sensible to say about the error invovled. Fair or not, there is a perception that economists sometimes start with a model they think they can handle, and attempt to make economics fit it.

The reason for the physics comparisons is simple. Economists bring it upon themselves by being prickly about the claims about science. Experimental physics, at least, is the canonical example of a physical science with a strong theoretical underpinning and good empirical data. Both these aspects are weak in economics, so the comparison between physics and economics are stark.

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John Emerson 11.15.06 at 9:28 pm

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.

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Matt McIrvin 11.15.06 at 9:31 pm

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.

It does, but not most egregiously by right-wing pundits (though religionists do sometimes use arguments from cosmology). Instead, quantum mechanics in particular is abused by New Ageish self-help writers to “prove” that your consciousness has quantum effects on the world that will let you change things by wishing.

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John Emerson 11.15.06 at 9:34 pm

“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.

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Matt McIrvin 11.15.06 at 9:36 pm

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

Physicists’ use of math drives mathematicians crazy: how, they wonder, do physicists ever get anything right when they’re so atrociously sloppy? Part of it is that (some) physicists have the real world to test things against; another is that the anomalous corner cases that mathematicians love most are the things that the physicists handwave away as a subset of measure zero.

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John Emerson 11.15.06 at 9:37 pm

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.

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radek 11.15.06 at 9:40 pm

Watson – give me a concrete example of where the economists are doing what you say what they’re doing because my sense is that the process works essentially the same as in physics. And note that now we’re arguing two somewhat opposite things – on one hand (yes, that hand) economists are being accused of too much math, and on the other (yup) of simplifying things too much in their undergrad courses.

The part of Keen where he talks about Friedman’s views on methadology is the only part where he’s half making sense or getting things sort-of, well-maybe, if-I-squint-really-hard-I-can-see-it, right. I wouldn’t call it convincing though.

(Somebody in charge please delete that accidental, much regretted, double post)

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Matt McIrvin 11.15.06 at 9:40 pm

I’ve seen some threaten to.

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John Emerson 11.15.06 at 9:45 pm

McI, I have some polarized organic water that will protect you from cancer rays. I wish I could give it to you for free, but it costs me money to make it.

Radek, those two criticisms are not mutually contradictory. The “simplifications” of Econ 101 mostly consist of presenting an elegant model that doesn’t usually work as the standard, without qualifying it.

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

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radek 11.15.06 at 10:21 pm

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.

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Daniel Nexon 11.15.06 at 10:28 pm

Re: 56

“Hmm, the fact that people actually argue about whether [astrology] is a “science like physics” or even just feel compelled to pronounce the fact that “economics is not a science like [astrology] probably means it’s helluva closer to physics then other [pretend] sciences like [numerology], [divination], [tarot reading], etc. that don’t even get the privilaged of being compared to physics.”

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Daniel Nexon 11.15.06 at 10:29 pm

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

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radek 11.15.06 at 10:37 pm

Dude, people DON’T argue about whether astrology is like physics. Try harder.

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will u. 11.15.06 at 10:42 pm

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.

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Watson Aname 11.15.06 at 10:51 pm

Radek, I think econ more than a bit short of of even the evolutionary biology analogy, not because of the nature of the subject but because I’m not at all convinced that you have a overall theory that hangs together nearly as well as evolution does. Not being an expert in either though, I’m willing to be convinced it is closer than I think.

You’re quite correct that there are two things being argued. I think the main contention of the econ 101 argument is that it is presented as is there were such a both solid and deep overarching theory to pin everything too. Of course nobody denies the problems of introductory courses — the claims seem to be that econ 101 is often done less honestly in this way than, say intro physics, and there are not pedagogical reasons for it. This matches my experience, but I don’t have any particular stake and a wary of sample bias.

As far as the modeling question goes. Matt is quite right that many physicists drive mathematicians nuts with sloppy mathematics, even moreso that economists drive physicists nuts, I’d say. No point in digressing further into a discussion of mathematical rigour. John is quite right that the two claims are not incompatable. Further, you misread one of them, at least as I understand it. It isn’t that economists use too much math but that they use math for the sake of using it. I’ve read a couple commentaries on this that I found reasonable; but can’t produce a careful analysis immediately. I’m just as happy to look at it when I have some time, or to leave it in the interest of not arguing those seperable points in this one thread. It is a bit wandering already.

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Alois Fahyling 11.15.06 at 11:00 pm

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.

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marcel 11.15.06 at 11:16 pm

16 above says, On the other hand, the most boring people I met were the economics students, who were distracted with weighing data and doing regression analysis. Economics graduate students are some of the most boring people in the world. Have you ever met any of them? Just be honest with yourselves. Take the honest, partly true stereotypes. … C’mon! Economists are dull. Their students are dull. Their subject matter is DULL, DULL, DULL. Are these really people who are guilty of deep ideological biases? It seems so psychologically implausible to me, just based on their personalities.

Well, according to one old saw, economists have good enough math skills to be actuaries, but lack the social skills.

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Epitome23 11.16.06 at 12:09 am

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.

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Daniel Nexon 11.16.06 at 12:29 am

84: “Dude,” try a google search.

But I think you’re missing the point.

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Walt 11.16.06 at 12:41 am

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.

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John Emerson 11.16.06 at 12:44 am

What people say is that the models use more math than the data needs, and seem to say more than they really do. I can’t jusdge it hands-on, but I frequently hear people saying that the relationship between the model and reality is unclear or unimportant. It reminds me of analytic philosophy.

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riddle 11.16.06 at 12:48 am

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.)

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Walt 11.16.06 at 12:57 am

Funnily enough, I sometimes think that neoclassical economics is really a branch of analytic philosophy. The purpose of most economic models is not to test against data, but to organize an argument. To the extent that you accept the premises, you can make a more convincing argument with a model than you can with just words. Most models involve quantities that are not actually observable, which makes them hard to test. As far as I can tell, economists use the models to extract qualitative predictions of the directions of effects, which is something they _can_ test.

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aaron 11.16.06 at 1:14 am

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.

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abb1 11.16.06 at 2:17 am

Radek, yes – naturally the prices are generally higher – especially where local manual labor is involved – but still the resulting equilibrium is such that any full time job provides pretty much middle-class standard of living.

And yes, of course there are special circumstances (not so much watchmakers and bankers, but rather tens of thousands of well-paid internationals), but nevertheless, it definitely proves something.

I can easily imagine how it could’ve been different here, with the minimum wage of 5chf/hour – accompanied, naturally, by higher crime level, poverty and so on – and the economists saying that raising minimum wage to 10chf/hr would ruin everything and 20chf/hr is just a completely ludicrous idea.

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terence 11.16.06 at 2:19 am

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.

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Ragout 11.16.06 at 2:37 am

Most of this discussion is about micro (e.g., supply & demand & minimum wages). But I think the implicit message of undergraduate macro is much more liberal. It’s all about Keynesian models of how the government can fight recessions.

Personally, I think that economists’ greatest contribution to humanity is the idea of measuring the unemployment rate, which basically happened after WWII. Before that, the idea that the government should step in to reduce unemployment was much less accepted, particularly among the elites who might have taken college econ classes.

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stostosto 11.16.06 at 4:05 am

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.

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trane 11.16.06 at 5:32 am

In support of leederick (#3), Jean Ensminger (in her “Making a Market”, p. 12, n15) notes:

”Experimental economics has demonstrated… that economics majors show the lowest level of cooperation… It remains to be seen whether this reflects the fact that more self-interested people are drawn to economics or that those who have internaliazed the ideology of homo economicus consider it legitimate to practice what they preach and avoid at all costs the “sucker” designation”

This is the Ensminger, Henry refers to ((#59). Link to the book:
http://www.cambridge.org/us/catalogue/catalogue.asp?isbn=0521574269

The reference she cites for this finding is Marwell/Ames: “Economists free ride, does anyone else? Experiments on the provision of public good, IV” Journal of Public Economics 15, 1981.

I have not read the original article, so I do not know how they designed the experiment, but I think Radek (#34) is onto something: A proper ‘real-life test’ (as opposed to the setting up of a game whose results have no consequences outside of the laboratory) would focus on how much is contributed by groups with different types of education. Such a test would then have to distinguish between different scales of contributions.

Besides this, the best discussion of this that I am familiar with is a paper by Jack Knight and James Johnson, “On the Priority of Democracy”. Their discussion departs from one of the most used textbooks in economics and attempts (succeeds, on my view) to show how economic theory (and political science theory inspired by this) confuses analytic and explanatory tasks which results in an overly optimistic view of the functioning of markets. I don’t know if this is the paper Henry writes about, but it is very, very good indeed. Radek, you in particular would be interested in it.

Link: http://www.nyu.edu/gsas/dept/politics/seminars/knight_s05.pdf

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Brendan 11.16.06 at 6:00 am

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).

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Brendan 11.16.06 at 6:09 am

Just thought I would add another note to get vaguely back on topic….I think the ‘left wing’ critique of economics can be summed up with the phrase: ‘the markets ain’t free’, with the rider that they never have been, they never will be, and to argue whether or not ‘free markets’ would or would not be a good thing is like arguing whether or not the Invisible Pink Unicorn would or would not be a good thing. This is also why libertarianism, fundamentally, makes no sense.

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Tim Worstall 11.16.06 at 6:38 am

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.”

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John Emerson 11.16.06 at 6:45 am

Brendan, I’m just reading Hodgson right now, but I’m even less of an economist than you are.

For him the comparison with evolutionary biology made by Radek above (or with other historical, non-conservative, non-equilibrium systems) would be useful, but this has negative consequences for neoclassical and most other forms of orthodox economics. Mirowski and Georgescu-Roegen have written of this too.

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albert 11.16.06 at 8:20 am

#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.

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Robert Vienneau 11.16.06 at 8:40 am

Of course they ignore you, Brendan. Remember, this is a matter of ignorant outsiders challenging their betters. One cannot have competent insiders challenging neoclassicals.

I’m actually published demonstrating that wages cannot be determined by supply and demand, given perfect competition, no transactions costs, no information assymetries, etc. The model is incoherent. What’s novel about my contribution is a neat graph I thought up, not the argument itself which has been ignored for decades.

At least one of the articles on experiments in which economic students fail to cooperate also contains data on charitable contributions.

(Re: #13) Larry Summers trots out the simplistic argument about how sexual discrimination does not occur in everybody’s favorite recent silliness from him. Is he a “libertarian”? Was he teaching intro?

On intro teaching and public discourse: lots of pop science books and SF have made it part of the culture that intro Newtonian mechanics doesn’t apply somewhere or other. Contrast to neoclassical economics.

I already have a few comments on my blog.

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se 11.16.06 at 10:35 am

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

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Justin 11.16.06 at 10:46 am

RE #40, I would recommend two books: ‘Basic Economics’ by Thomas Sowell is a well-written book that takes a conservative view, and ‘Peddling Prosperity’ by Paul Krugman from the liberal side. And in keeping with Brad DeLong’s point, I think that if you just read one book, you should read from the other side. This should provide the layman a reasonably nuanced view for relatively little investment in time and money.

I am an economic conservative, but I have to admit that Europe’s economy is surprisingly robust despite seemingly breaking every economic law in the books. However, there are two areas that really stand out as problems: the high unemployment rate overall (and don’t give me the bogus hidden unemployment defense), and the concentrated unemployment among the young and immigrants. See also: 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.

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Josh 11.16.06 at 11:15 am

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).

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Michael Sullivan 11.16.06 at 11:38 am

Another (small) example of learning something which is frankly wrong in physics that you have to unlearn later: structure of the atom. The “electrons are little balls wizzing around in circular orbits about the nucleas” deal. This drove me crazy in high school, because I already knew about electron cloud orbitals, and I tried to get the teacher to at least say in class, “By the way, the thing I’m currently teaching is a simplification, not really up-to-date,” even if he wouldn’t go into details about the quantum-mechanical model. But he wouldn’t.

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abb1 11.16.06 at 11:47 am

#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.

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Watson Aname 11.16.06 at 12:20 pm

#109: You have to be a little easy on high school teachers — sometimes they know not what they teach.

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Watson Aname 11.16.06 at 12:31 pm

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.

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Aidan 11.16.06 at 12:37 pm

I agree with John Emerson’s take on economics-as-science.

It’s pushing it to attribute any type of scientific credibility to economics. It’s a game, and the rules of the game depend on the ideological perspective of the players. Aside from horse racing and online gambling, few games involve such artful deployment of smoke-and-mirrors as economics.

The models of science derive from tangibles that are separate from the personal convictions and prejudices of the actors. While there are certain givens in economics i.e. market forces, we are still dealing with abstracts that are then determined by the ideological slant or wishful thinking of the analysts. Even if there is such a thing as a politically neutral and dispassionate economist, he or she will still have a pet personal theory that might serve as a good tool for interpretation, but that in no way can be dignified as science.

The really annoying tendency that I’ve noticed about economists with Republican colors, is that even as Bush fucks up in every way imaginable, they coolly point to the figures as though the deeper truths enshrined in economic theory can somehow give a shine to a turd.

Economics is a slimy business, and most good economists are some variety of reptile.

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Josh 11.16.06 at 12:46 pm

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.

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Michael Sullivan 11.16.06 at 12:49 pm

#112/watson aname: I assume that was directed at my comment (now #110), as #109 seems not to be directed at high school stuff.

In this case, he did know all about orbitals — I talked with him about it after class. But, while it kind of upset me at the time, I don’t really have a problem with it today. I’m just pointing out that there are plenty of places where new students get taught things that simply aren’t true, or are simplified to the point where you can draw lots of incorrect conclusions.

Evolutionary biology is another one that’s particularly bad that way, or at least was for me. You get basically no sense of any of the changes to the theory since Darwin, and also nothing about the ways in which “evolutionarily advantageous” differs from “behaviour which would benefit the animal or its pack or species.” Which has, in my experience, led to some pretty silly ideas.

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C. L. Ball 11.16.06 at 1:04 pm

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.

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Watson Aname 11.16.06 at 1:14 pm

115: Yes, my mistake… it was your comment I was replying to, not Josh’s.

You are right, of course. A lot of incorrect things are taught in elementary physics too. One difference though, is even the electrons-as-balls model is a pretty good model, and useful. But I take your broader point, and it is a pedagogically difficult issue. The original post here is about questioning the motivation behind how simplifications are presented, not the presence of such simplifications.

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John Emerson 11.16.06 at 1:31 pm

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?

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Michael Sullivan 11.16.06 at 1:46 pm

I think I had a pretty average teacher. But this was in, what… 1990 or so, and I can’t disregard the possibility that educational standards had simply fallen since 1963.

At any rate, to get past electrons:

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

Let us grant that there is an ideological component to at least some econ profs handling of minimum wage in intro econ.

Is it your argument that there is more of an ideological component to this particular simplification than the countless other ideologies imparted by teachers/professors/other authority figures throughout college, secondary schools, and, basically childhood? Or is it simply that it’s an ideology that you particularly don’t like?

If you posit that this is something other than just “I’m a biased prof, I tend to give examples which support my worldview,” what, exactly, are you positing? Some kind of conspiracy of economics professors? Payoffs from conservative politicians or McDonald’s or something?

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John Emerson 11.16.06 at 2:01 pm

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.

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abb1 11.16.06 at 2:29 pm

C. L. Ball,
it doesn’t matter how they arrive at the number. Here, this wikipedia entry says that the minimum annual income in Switzerland is $28,911; apparently the highest in the world (comapre to $10,712 in the US), and this is probably the average; gotta be higher in more civilized cantons like Zurich and Geneva.

Annual hours worked? Naturally it’s going to be lower where the minimum wage (per hour) is much higher, and that’s a good thing, isn’t it? Also, I know that at least in Geneva there are very strict regulations on the overtime pay and maximum number of hours of overtime. Also, typically, people have 6 vacation weeks, maternity leave is much longer than in the US and so on. So, what is it about the annual hours worked, what’s the point?

Now, you say that Swiss “long-term unemployment rate is almost 2.5 times the US rate”. I find it hard to believe. I think the overall unemployment rate in Switzerland is now something like 3.5%, and it has been like this for a long time. Can’t be higher than in the US, let alone 2.5 times. Could you provide the link, please. Thanks.

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dsquared 11.16.06 at 2:37 pm

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.

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Eric 11.16.06 at 2:39 pm

Econ 101 is NOTHING BUT ideology.

We learn:
As long as you have “perfect markets” then everything in the economy is “efficient” and, indeed, fair (not explicitly stated but implied).

Profit is a reward for productivity and is, so it is implied, “deserved.”

Labor markets, as long as unions are kept away, are efficient. Those earning lower income are less productivity (at the margin) than other folks. Don’t complain about unequal distribution of income, build up that human capital!

If anything is wrong in the economy it can be solved by moving it toward perfect competition.

Governments should only mess with the economy in a few limited situations of imperfection.

What of the above ISN’T ideological?

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abb1 11.16.06 at 2:42 pm

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

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abb1 11.16.06 at 2:44 pm

Sorry, the less-then character broke my comment. Again:

OK, according to this, since the end of the WWII until 1990 the unemployment rate in Switzerland was less 1%. Then it went up and for a few years between 92 and 97 it was 4-5% and now it’s down to 3.4%. Either long-term or short-term it’s still way-way lower than the US.

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Aidan 11.16.06 at 2:45 pm

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

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John Emerson 11.16.06 at 2:48 pm

Abb1 brings up something not often discussed. I know a moderate number of people working 60 hours at low-paid jobs. To an economist that’s good, and a reason why the low minimum wage is good. To me, and the guy working 60 hours and his family, it’s bad. To an economist, anything that increases production is good.

129

Eric 11.16.06 at 2:48 pm

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.”

130

abb1 11.16.06 at 2:54 pm

Oops, Milton Friedman died.

131

radek 11.16.06 at 3:05 pm

“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.

132

radek 11.16.06 at 3:12 pm

“fact that there are even fewer women in economics than in electrical engineering”

Twenty years ago, yes. Now I hear it’s 1/3:2/3 and going up quick. When I was leaving grad school the incoming cohort was 2/3:1/3.

And speaking of arseholes, that was a very arsehole post. But then finance folks always’ve had a chip on their shoulders vis a vis their better looking cousins.

133

Eric 11.16.06 at 3:13 pm

“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.

134

Brendan 11.16.06 at 3:17 pm

‘ 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’.

Ahem…er…well I could think of a few. What this thread seems to be edging nervously towards is (and I know that some people will stop reading now) is really…the Sociology of Science. Whatever one thinks about their commitment to relativism (as far as I’m concerned, it’s nonsense, and they shouldn’t have said it) the Edinburgh School have been tireless in pointing out the non-‘rational’ non-’empirical’ aspects of even the ‘hard sciences’. But what Bloor et al don’t point out, (but should) is that at least in the world of physics there are common sense issues that mean that, ultimately, even the most woolly minded physicist has to deal with reality in some shape or form. It should be added as a caveat that when these ‘checks’ and balances’ do NOT exist, physicists are just as likely to vanish into their own black holes as anyboyd….cf superstring theory (It’s interesting that Woit’s new book ‘Not Even Wrong’ posits primarily sociological reasons for the ‘success’ of the incomprehensible and meaningless ‘theory’ of ‘superstrings’).

This goes doubly, or triply, for economics. Once economics jettisoned reality, and chose to concentrate instead on non-predictive mathematical models, there then remained, really, no limits to their nonsense and so it has remained. Paradoxically, the average sociology paper is probably better than the average economics paper (same goes for anthropology, even). Oh I know all the postmodern stuff gets all the publicity, but if you look at a standard journal you will quickly see that most sociology is not like that. Instead most sociology is statistical in nature (or at least uses ’empirical’ qualitative methods) and therefore touches base with reality here and there which, to repeat, economics never (or extremely rarely) does.

Or what about philosophy? From John Emerson’s site I got this link (http://www.malone.edu/media/1/38/85/Conformism_in_Analytic_Philosophy-Plato_material_included.pdf) which indicates that, again, the ‘triumph’ of analytical philosophy is best explained in sociological, not ‘rational’ terms. And one could go through psychology (‘evolutionary psychology’) anthropology, literary theory (etc. etc.) in a similar way.

135

radek 11.16.06 at 3:23 pm

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.

136

Eric 11.16.06 at 3:25 pm

“Once economics jettisoned reality, and chose to concentrate instead on non-predictive mathematical models, there then remained, really, no limits to their nonsense and so it has remained….most sociology is statistical in nature (or at least uses ‘empirical’ qualitative methods) and therefore touches base with reality here and there which, to repeat, economics never (or extremely rarely) does.”

Whether economics SHOULD be predictive is a major issue related to the Philo of science.

But, in any case, the use of statistics need not imply more linkage with “reality” than non-statistical work. It is nice, rhetorical, to claim that it does (that is, nice for number crunchers) but many folks who have crunched a lot know that what you can “say” with statistical analysis is limited only by your creativity!

137

Eric 11.16.06 at 3:28 pm

“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.

138

John Emerson 11.16.06 at 3:31 pm

Radek, give counterexamples. What are the circumstances in which a decrease of production would be regarded as good by an economist?

139

Eric 11.16.06 at 3:32 pm

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

140

Brendan 11.16.06 at 3:33 pm

‘But, in any case, the use of statistics need not imply more linkage with “reality” than non-statistical work.’

Yes of course you are right, but what I meant to stress is that the actual data used by sociologists (on which the statistics are ‘done’) is usually based on or taken from reality…i.e. it’s data about unemployment, census data, the results of questionnaires, opinion polls etc. etc. etc.

The question of whether economics should be predictive or not is of course an important one. But most sciences are either predictive or they are observational (in some shape or form). Economics is unique in that it is neither.

The key point about prediction and empirical data is that they put a brake on the wild theorising of academics, most of whom have little grasp of the real world to begin with (which is why they became academics). Economics has (until incredibly recently with the rise of experimentation, and a renewal of interested in institutionalism and even, gulp, the historical school) no ‘boundaries’ or ‘brakes’ or ‘restraints’ on its theorising, which encourages ‘castles in the sky’ type thinking.

Incidentally, talking about sociology, I got this great quote about the reasons for the otherwise incomprehensible rise of ‘neo-classicism’.

‘Following WWII, the United States increasingly came to determine (one might say dictate) the shape of economics worldwide, while within the United States the sources of influence became concentrated and circumscribed to an absurd degree. This state of affairs, which persists to the present day, was engineered in significant part by the US Department of Defense, especially its Navy and Air Force.3 Beginning in the 1950s it lavishly funded university research in mathematical economics. Military planners believed that game theory and linear programming had potential use for national defense. And although now it seems ridiculous, they held out the same hope for mathematical solutions of “general equilibrium”, the theoretical core of Neoclassical economics. In 1954 Kenneth Arrow and Gerard Debreu achieved for this mathematical puzzle a solution of sorts that has been the central show piece of academic economics ever since. Arrow’s early research had been partly, in his words, “carried on at the RAND Corporation, a project of the United States Air Force.”4 In the 1960s, official publications of the Department of Defense praised the Arrow-Debreu project for its “modeling of conflict and cooperation whether if be [for] combat or procurement contracts or exchange of information among dispersed decision nodes.” In 1965, RAND created a fellowship program for economics graduate students at the Universities of California, Harvard, Stanford, Yale, Chicago, Columbia and Princeton, and in addition provided postdoctoral funds for those who best fitted the mold. These seven economics departments along with MIT’s, an institution long regarded by many as a branch of the Pentagon, have come to dominate economics globally to an astonishing extent. ‘

http://www.paecon.net/StrangeHistory.htm

But of course it’s all non-ideological…….

141

John Emerson 11.16.06 at 3:34 pm

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?

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radek 11.16.06 at 3:34 pm

And if we’re talking logical fallacies here, let’s at least realize that this whole “is Econ 101 ideology or not” thing (I think it’s less ideological than some on here claim) is a red herring (a red red herring)
As I said on Robert’s blog (and you should read his blog even though I disagree with almost everything he writes on there) teaching evolution in biology class is ideology. But so what?

If there was pretty good empirical evidence that minimum wages increase unemployment shouldn’t the students be taught that? Shouldn’t you be able to offer them some kind, say diagramatic, explanation for why this is so?

Well, most evidence does indeed show that increases in minimum wage increase unemployment – Card and Krueger got so much attention precisely because their results were such an outlier. And there is a general consensus on this – though not whether raising it would be a good thing. You might not like that, just like some yokels don’t like to be told about our Glorious Monkey Ancestors, but tough shit, them’s the facts. Or at least as best as we can tell given our imperfect knowledge of the world.

As Schumpeter said (I think in the context of Marxism too) “Just because it’s ideology doesn’t mean it’s wrong”.

And yeah, of course, after telling students about empirical facts it’s useful to point out possible counter examples and to enoucrage them to think about it more.

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John Emerson 11.16.06 at 3:37 pm

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!!

144

Eric 11.16.06 at 3:40 pm

“But most sciences are either predictive or they are observational (in some shape or form). Economics is unique in that it is neither.”
But you miss the point: in economic math, is tenture generating and, well, economists respond to incentives. ;>

145

radek 11.16.06 at 3:42 pm

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.

146

John Emerson 11.16.06 at 3:43 pm

As long as I rememebr I’ve been hearing the canned minimum-wage / unemployment argument stated as an irrefutable proof that the minimum wage is a bad thing, amen, end of story. I was told this by people at various levels of economic expertise, ranging from one undergrad class to top-rank economists (in writing).

But when people looked at what actually happens with a minimum wage, it turned out that the bad effects were less than had been claimed and were probably less than the good effects.

So yes, I don’t think that this should be taught to freshman, unless you’re trying to indoctrinate them. In general, you should not teach controversial issues as if they were uncontroversial.

147

Eric 11.16.06 at 3:44 pm

“…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.

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radek 11.16.06 at 3:45 pm

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!!

Define ideology then. Here’s wiki out of laziness = “An ideology is an organized collection of ideas…An ideology can be thought of as a comprehensive vision, as a way of looking at things”.
Even on narrower criteria of ideology=politics, evolutionary theory is definetly ideology.
But like I said, so what? Still need to teach it.
And you conveniently ignore the context of the post here. Which makes you about 85% of an ID proponent.

149

John Emerson 11.16.06 at 3:47 pm

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.

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radek 11.16.06 at 3:49 pm

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.

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radek 11.16.06 at 3:49 pm

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.

152

Eric 11.16.06 at 3:51 pm

“As long as I rememebr I’ve been hearing the canned minimum-wage / unemployment argument stated as an irrefutable proof that the minimum wage is a bad thing, amen, end of story.”
The mainstream argument against the minimum wage has a number of problems:
(1) wage setting is much more complex than they admit (or know?)
(2) the potential macroeconomic effects of more income might counteract the unemployment effect
(3) higher paid min-wage workers might become more productive and get more training which might have good long-run effects. And turnover should fall.
(4) most businesses have lots of slack and fat. Any well-motivated business person should be able to adapt to higher minimum wages.
(5) US businesses in the 1960s faced much higher (real) min wages and they survived. Maybe business people in the 1960s were just better at business than the current crop of slackers.
and more.

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.

153

radek 11.16.06 at 3:53 pm

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.

154

Michael Sullivan 11.16.06 at 3:53 pm

John: I’m sorry that I offended you with my questions, but they weren’t rhetorical. They’re kind of out there, but I seriously do not get what it is you’re trying to say, and as I thrashed around for some understanding of it, I eventually thought “maybe I’m not understanding because he’s got some basic suppositions that I don’t share.”

I still don’t get it. You say that you think that econ 101 is more ideological than other subjects, and that this is despite the fact that the professors (who presumeably do understand the field on a fairly nuanced level) are in a field which is not (as) ideological on the more advanced level.

Why do you think this is? There has to be a reason. Ideology does not spring from nowhere. You’ve written off the idea that it’s just a fundamental fact of introduction to economics, so it’s not systematic there. You’ve written off payoffs or an intentional conspiracy of econ profs. What else could possibly explain systematic ideologicalization of a field? The only other thing I can think of is that econ professors are, as human beings, either naturally perfidious or naturally bad at examining and correcting for their own biases. And I think that those explanations just beg the question.

155

dsquared 11.16.06 at 3:54 pm

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.

156

John Emerson 11.16.06 at 3:55 pm

Economists don’t worry about the effect of recessions on workers, and claim that they’re voluntarily not working so as to make things seem OK. Economists believe that recessions are short-term productivity decreases which will, in the long run, lead to a productivity increase (by driving out inefficient forms, etc.) In the long run, the more production the better.

157

tebbitt 11.16.06 at 3:59 pm

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.

158

dsquared 11.16.06 at 4:04 pm

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. It’s a branch of control engineering; specifically it’s the branch of control engineering that deals with the control of recursive systems that can change their outputs in response to their local state. The trouble is that at some stage in its development, this harmless and beneficial branch of engineering got caught up in 18th and 19th century politics and philosophy and developed all manner of strange idiosyncracies (including a lot of fundamental assumptions about human psychology which clearly don’t belong there), coupled with a wildly inflated idea of its station in life.

It’s rather as if physicists believed in an actual, physical (or metaphysical) Maxwell’s Demon and furthermore thought that the Demon most likely voted Republican. If Fritjof Capra had the status of Albert Einstein, physics would be in about the shape that economics is in fact in.

(Radek misunderstands me btw; the distinction I am making is not actually a result of my finance background – it comes from reading an excellent essay about the Soviet Academy of Economic Mathematical Sciences, where Kolmogorov invented linear programming, and where they made a distinction on the curriculum between “economic cybernetics” and “Political economy” which really ought to have been copied in the West).

159

John Emerson 11.16.06 at 4:05 pm

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.

160

Eric 11.16.06 at 4:07 pm

I think it could be said that mainstream economists are to capitalism what Jesuits are to the Pope.

Mainstream economics is a sophisticated activity performed by really smart people. But this doesn’t mean that there is any there there. The emperor has no clothes.

161

John Emerson 11.16.06 at 4:11 pm

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.

162

Eric 11.16.06 at 4:24 pm

“…within the bloated corpus of economics…”

But that bloated corpus IS the emperor’s clothes.

Once you take that away you don’t have much except the claim that markets work and they work better than other forms of economic organization.

How do we know this about markets? I remember at an ASSA conference many years ago a striking large woman in a red dress–Deirdre was her name–asserted that the claim about markets working well was a MATTER OF FAITH. She, and no economist, could really prove it. So she said. They would only believe it and tell other people about their faith.

She said this while participating on a panel with Ken Arrow and Arrow is an economics God (so she must have been right!)

163

John Emerson 11.16.06 at 4:26 pm

Must have been McClosky.

164

Michael Sullivan 11.16.06 at 4:30 pm

Quotes are from John Emerson, and are in italics.

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).

Okay, let’s stipulate that this is true.

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.

I think that this is a troublesome assertion. What does it mean for something to be “harder to teach”? Let’s contrast it with an idea that you disavow: that introductory economics is by the nature of the material conservative in nature.

I don’t see how one of those things can be true without the other. If the nature of a broad overview of economics (the mandate of econ 101) is, without touching on the professor, to bias the students rightward, I can certainly see how it would be harder for a professor to counter that tendancy. But if the nature of the subject is not so, I don’t understand what it is that you think that economics professors aren’t trying hard enough to do.

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.)

So let me rephrase you to see if I understand properly: you are saying that economics professors are more strongly ideologically biased than other professors, because they are incentivized to be so by their side jobs. Is that correct?

This seems reasonable on the face of it. It’s also fairly falsifiable — one could imagine a survey given to, say, economics professors versus history professors or sociology professors or political science professors (to name some other departments which, I feel, very directly influence the thinking of students on immediate policy questions) that attempted to quantify the degree away from center that each was.

One could also attempt to quantify the extent to which differing amounts of rightward ideology affect students. For example, you could identify two groups of econ profs: moderate right and extreme right. Then survey their students after econ 101 and see if there was a difference in amount that the students moved rightwards.

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

I apologize that it came across that way. My intent was more to convey bewilderment than contempt.

165

jason 11.16.06 at 4:34 pm

“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.

166

John Emerson 11.16.06 at 4:51 pm

Econ 101 as taught is neat and tidy with lots of fun equations. Actual hands-on economics is messy and hard to teach.

“Conservativism about teaching” was the wrong phrase in this context. What I meant is that effective methods have been developed to teach the old (marginalist neoclassical) economics, and they are still used because new developments are harder to teach, because messier.

As far as I know, economists as a group are more conservative than any other group of social scientists, and as far as I know they also get more outside consulting than any other group. But I don’t claim that differences in amount of consulting can differentiate between more- and less-conservative economists, and I don’t claim that every conservative economist is pigging out on consulting fees.

167

radek 11.16.06 at 4:54 pm

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

=a bunch 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.

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radek 11.16.06 at 5:03 pm

But when people looked at what actually happens with a minimum wage, it turned out that the bad effects were less than had been claimed and were probably less than the good effects.

Bad effects is higher unemployment which fits the model. Good effects is higher wages for those get to keep their jobs which also fits the model. Some other goods effects is less work and work sucks, and this also can fit the model if you’d like. Some more bad effects is less producer surplus which fits the model. But whether you think it worth it or not in the end depends on how you weight the various gains and losses. You might not care about lower profits. You might figure that those who loose their jobs will be compensated for most part by unemployment insurance. You might think that most of those who keep their jobs are single mothers who really could use a wage boost. So you might support minimum wages. But it’s stupid to pretend that the bad parts – the higher unemployment doesn’t happen.

“In general, you should not teach controversial issues as if they were uncontroversial.”

And it’s not taught that way.

169

John Emerson 11.16.06 at 5:09 pm

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.

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LizardBreath 11.16.06 at 5:19 pm

But the freakin’ data sayz that when minimum wages go up usually unemployment freakin’ goes up as well.

Radek: I’m really interested by this, because I’ve seen this issue discussed a fair amount over the last year or two online, and in that time I’ve seen links to data showing no particular relationship between a raise in the minimum wage and unemployment in a couple of different particular situations. While I’ve also seen a lot of argument about the meaning of those data sets, I haven’t seen links to other data showing a relationship between a raise in the minimum wage and unemployment in other real world situations. You’re clearly talking about something specific — is there some classic study of the relationship that I haven’t seen?

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Tracy W 11.16.06 at 5:20 pm

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?

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radek 11.16.06 at 5:23 pm

It’s also fairly falsifiable—one could imagine a survey given to, say, economics professors versus history professors or sociology professors or political science professors (to name some other departments which, I feel, very directly influence the thinking of students on immediate policy questions) that attempted to quantify the degree away from center that each was.

This is the Caplan article linked to at the beginning of this thread. He finds that no, it’s not self interest that accounts for differences in opinion between general public and economists.

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Walt 11.16.06 at 5:25 pm

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.

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radek 11.16.06 at 5:29 pm

Do they care about the effect of recessions or free trade on low-paid workers? Absolutely not.

This is more Ethereal Strawmen Unicorn Yetis.
How the f would you know?

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Michael Greinecker 11.16.06 at 5:30 pm

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

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John Emerson 11.16.06 at 5:37 pm

When do economists ever care about effects on propertyless labor?

One of the guys we’re talking about here on this thread just blandly stated that he didn’t concern himself with distribution. The bottom end of the distribution curve is people who get nothing (the unemployed propertyless). Unemployment is bad to the extent that it reduces productivity, but during a recession readjustment unemployment is good, and free-trade unemployment is good too.

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Watson Aname 11.16.06 at 5:39 pm

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.

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Walt 11.16.06 at 5:42 pm

John, I don’t think that’s Mankiw’s position. As a New Keynesian, he advocates government intervention to ameliorate the effect of the recession. I’m not sure anyone exactly takes the position that you describe, these days. (It was the dominant position before the Great Depression, but I don’t think it’s made a comeback. I think it’s the Austrian position, but I don’t know much about them.) The Real Business Cycle view is probably the closest: it doesn’t exactly say that unemployment during recessions is good, but it doesn’t think it’s particularly bad, either.

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Tracy W 11.16.06 at 5:50 pm

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?

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dsquared 11.16.06 at 6:02 pm

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

It will still be pretty mathematical. If you have inputs and you want outputs, then you are going to have to quantify things at some point down the line, and you are going to have to do some sort of modelling of how the conversion takes place. What economics needs to lose is a lot of metaphysical baggage, plus a lot of needy f-type personalities.

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Brendan 11.16.06 at 6:07 pm

‘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.

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John Emerson 11.16.06 at 6:09 pm

Walt, in truth I can’t keep them straight. Over the decades, though, I’ve just found that if you’re primarily concerned with labor issues (from the labor point of view), or poverty issues, or distribution issues, you should not hope for much interest or sympathy from professional economists, although from time to time you should expect to see them dressing up all kinds of miscellaneous proposals as ways to end poverty.

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John Emerson 11.16.06 at 6:13 pm

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.

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dsquared 11.16.06 at 6:14 pm

btw …

“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.

to be honest, I think that “otherwise smart people who have some kind of lycanthropy which turns them into wereidiots the moment the word “economics” is mentioned” is probably a fairer description of what I think is wrong with economists than “arseholes”, but it is a bit wordy.

In general, anyone treating the labour market in a supply/demand context is doing something very bad and very misleading, which intentionally or not has ideological consequences.

Commodity fetishism and all that, but the absolute fact is that the supply/demand curve approach to the labour market implies that labour is a good like any other, with its demand function implied by a set of indifference curves.

In fact, as any fule kno, labour is not demanded for itself but rather for its labour-power input to a production process. This matters because while there is at least some reason to believe in the existence of preferences that are sufficiently continuous, transitive, monotonic, etc to ensure the existence of a demand schedule, the one thing we certainly do know about production functions is that they never have any of those characteristics. The bad thing about a downward sloping labour demand curve isn’t the slope, it’s the curve.

Of course, the fallacy that labour is a commodity demanded like any other is not at all ideologically neutral, and its currency in really bad economics textbooks is entirely due to its ideological convenience.

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vkri 11.16.06 at 6:17 pm

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.

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dsquared 11.16.06 at 6:19 pm

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

the historic development is of course screwed up by the fact that while it is only very recently that there have been interesting problems with respect to the control of machines, the control of people has been a very important research project pretty much from day one.

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Eric 11.16.06 at 7:05 pm

“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.

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Joe (Slovoj) Chavez 11.16.06 at 7:29 pm

#41 “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.”

#52 “Left undisturbed or unopposed any form of thought will tend to distill itself down to a pure form, and purity is solipsism: it recognizes only itself. So philosophy becomes the philosophy of self-description as opposed to the attempted description of the world, and art becomes ‘art for art’s sake,’ as opposed to the description of perception and to the degree that it is possible, of the perceived.
‘Economic’ logic, in daily life, comes into conflict with other forms of obligation. It only makes sense that left on it’s own, opposed by nothing in an academic bubble, ‘economics’ would become what it has: the Greenbergian Formalism of the study of human behavior.”

#87″ 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.”

#107 “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”

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riddle 11.16.06 at 7:38 pm

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.

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John Emerson 11.16.06 at 7:47 pm

Riddle, I don’t quite understand that. Analytic geometry is math, and graphs are analytic geometry. As far as I know, knowing the equations behind graphs wouldn’t change much.

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MQ 11.16.06 at 7:53 pm

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.

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derrida derider 11.16.06 at 7:56 pm

Given the description and policy position, eric, it was undoubtedly Deidre McCloskey – google her. She’s well known and much respected in the profession as a leading iconoclast in methodology matters (BTW the fact that she can be an iconclast but also well respected suggests that there’s a lot less certainty amongst professionals than you assume. And of course Arrow is no narrow freemarket fundamentalist himself).

And john, I’m a labour economist whose choice of profession was heavily influenced by the poverty I saw when I was growing up. I resent your last smear of all (or even most) economists.

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Steven Poole 11.16.06 at 8:18 pm

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.

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Ragout 11.16.06 at 8:37 pm

Now that this discussion has degenerated into silliness, I think it’s time to recognize those who made exceptional contributions.

In 3rd place: Dsquared. While many contributors demonstrated their misunderstanding of neoclassical economics, only D^2 demonstrated any misunderstanding of Marxist economics, writing “as any fule kno, labour is not demanded for itself but rather for its labour-power input to a production process.” But since the same could be said of a steel beam, or a sack of fertilizer, Dsquared seems to have entirely missed Marx’s point (a hint: it has something to do with human agency, not intransitive production functions).

2nd place. John Emerson made many vigorous assertions about economists’ foolish and evil beliefs, every one of which attributed to economists the exact opposite of what economic theory says. I’m especially fond of his claim that economists still believe in pre-Keynesian liquidationist theories: “Economists believe that recessions are short-term productivity decreases which will, in the long run, lead to a productivity increase (by driving out inefficient forms, etc.)” Paul Krugman, an impeccably mainstream economist, presents a more typical view when he compared these theories to the phlogiston theory of heat.

1st place. It was a tough decision, but top honors go to Brendan! He thinks “we should all go back to the Institutional School,” while at the same time claiming that “Sraffa and various others also have a lot to say.” While D^2 is rereading Das Kapital, I hope Brendan will turn his attention to Sraffa’s masterwork, the not-so-institutional “Production of Commodities by Means of Commodities.”

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John Emerson 11.16.06 at 8:37 pm

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.

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John Emerson 11.16.06 at 8:43 pm

As far as I know, Krugman is at the left end of non-Marxist economics spectrum, and whether he’s theoretically orthodox or not, he’s not very characteristic. Over the last decades I have frequently read economists saying, in effect, that unemployment is too low, and these have often been economists in influential positions.

Ragout, I hope you’re as smart as you pretend to be, because if you aren’t you will be subject to ridicule and contumely.

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Ragout 11.16.06 at 9:01 pm

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.

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John Emerson 11.16.06 at 9:15 pm

You mean the “pseudo-economists and mere policy entrepreneurs” said bad things about krugman? If you’re to Krugman’s left you’re apparently a non-economist. Point not taken.

To elucidate, Krugman and DeLong are at the right end of the Democratic Party, and at the left end of the economics profession (not counting the few surviving Marxists and a few labor economists.)

I’m starting to suspect that you’re not as smart as you think you are.

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Joe (Slovoj) Chavez 11.16.06 at 9:16 pm

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.

200

radek 11.16.06 at 9:16 pm

to be honest, I think that “otherwise smart people who have some kind of lycanthropy which turns them into wereidiots the moment the word “economics” is mentioned” is probably a fairer description of what I think is wrong with economists than “arseholes”, but it is a bit wordy.

You can’t steal my joke! I had to engage in some faux-frustration to put that in there. Now you have me engaging in faux-outrage. Get your own joke. This isn’t Joke Is Free.

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Ragout 11.16.06 at 9:25 pm

Joe (Slovoj) Chavez,

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

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radek 11.16.06 at 9:25 pm

Cool, I got post 200.

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Joe (Slovoj) Chavez 11.16.06 at 9:26 pm

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

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Joe (Slovoj) Chavez 11.16.06 at 9:30 pm

Ragu: “That’s my point exactly”

You don’t read very carefully: left and right are not absolute terms.
But then, perhaps absolute terms are all you understand.

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John Emerson 11.16.06 at 9:36 pm

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.

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radek 11.16.06 at 9:42 pm

Lizardbreath (far above) – the data that you saw linked to was probably Card and Krueger or Katz and Krueger study, or some description of these (like by folks at EPI). But like I said these studies do not represent the majority findings.
I’m lazy right now and neither at home nor office (no access to jstor!) but here’s some older references;
Brown, Journal of Economic Perspectives, 1988
– looks at impact of min wages on teenage employment. 10% increase results in employment lower by 3%.
Freeman and Freeman in “Immigration and the Work Force” edited by Borjas (the anti-immigration Borjas) and Freeman – show that imposing US level min wages in Puerto Rico increased unemployment dramatically
Katz and Loveman (same Katz, presenting evidence on both side of the issue) – NBER WP, 93, look at effect of min wages in France (about 15% of French workers are covered by min wage laws, much higher then US) and find that yes it does lead to lower employment.
Neumark and Waschler, American Economic Review, Volume 90 – there was a survey by Neumark linked to above. Here’s the link again (pdf):
http://showmeinstitute.org/smi_study_2.pdf

Also according to Wikipedia some study found that about 75% of economists agree with the statement that higher minimum wages reduce employment among teenagers and low skilled workers.

Just for the record for folks who have a hard time grasping this; these studies do not say that minimum wagers are “bad”. What they say is that, as one would expect from a simple S/D model of a labor market, minimum wages do decrease employment and or hours worked.

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Ragout 11.16.06 at 9:48 pm

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.

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radek 11.16.06 at 9:49 pm

j(s)c – there you have some. Man, people are getting brusque around here. Lizardbreath asked for that data at 5:20. I had to eat some dinner.

Please note also that in the Neumark survey above he gives quite a fair treatment to both sides of the issue in the “Employment Effects: Evidence” section.

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radek 11.16.06 at 10:03 pm

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.

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John Emerson 11.16.06 at 10:06 pm

Ragout: Yeah, and he has argued in the link you gave us that people who don’t share the consensus are fake economists. A bit of a circular argument, no?

In the Democratic Party Krugman is on the right, on questions of economic theory he’s pretty much orthodox, and within the economics profession he’s politically on the left. This is what I knew before you started explaining things to me so nicely. Was I wrong about something? because if I was, I still am.

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John Emerson 11.16.06 at 10:09 pm

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.

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Ragout 11.16.06 at 10:17 pm

Sigh. Let’s recap.

John claimed that most economists support some absurd liquidationist view of macro. I pointed out that Krugman has ridiculed this economic theory. John now acknowledges that “on questions of economic theory, [Krugman’s] pretty much orthodox.” QED.

So, John, I think I’ve proven that your claim about the mainstream views of most economists was, let’s say, uninformed. I’ll tell you what, I’ll rescind my silliness award if you can provide evidence for even one of your claims about economists’ views.

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Joe (Slovoj) Chavez 11.16.06 at 10:34 pm

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.

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John Emerson 11.16.06 at 10:34 pm

Ragout, could you reference what specifically you are referring to?

Most economists seem far too benign about unemployment and other troubles that especially afflict the propertyless, or about distribution and poverty generally (either a lifestyle choice, or else they deserve it). Krugman strikes me as an exception. (As far as Krugman’s orthodoxy goes, I only meant methodologically — he’s not one of the heterodox weirdos).

As far as I can tell, unemployable propertyless people disappear from economists’ equations. Is that not true? Whatever their political positions about welfare, don’t economists think they are dead weight? And don’t economists generally privilege economic aspects of society over all others? It’s true that only the right Libertarians, Randians, and hard rightwing freemarketers take the liquidationist point of view, I gues you’re right about that.

Am I wrong in thinking that Krugman is politically on the left wing of the economics profession?

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MQ 11.16.06 at 10:36 pm

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

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John Emerson 11.16.06 at 10:38 pm

what proportion of the profession is to their left? 10%? 30%? 50%?

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radek 11.16.06 at 10:48 pm

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.

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John Emerson 11.16.06 at 10:57 pm

Learn to read, Radek. What proportion of the economics profession is to the left of Krugman and deLong?

My guess is that about 20-30% of the American ppulation is to their left, depending on how the issues are defined.

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Walt 11.16.06 at 11:00 pm

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?

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Joe (Slovoj) Chavez 11.16.06 at 11:00 pm

I think radek, that you should add the caveat “in the united states” to everyone on that list of yours.

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Eric 11.16.06 at 11:38 pm

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.

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radek 11.16.06 at 11:40 pm

Walt, after 200+ comments I think I’ve lost my ability to pick up on sarcasm so let me just say that I thought everything you said in this discussion was pretty reasonable.

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radek 11.16.06 at 11:47 pm

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????????????

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Eric 11.16.06 at 11:49 pm

That’s right: give me the argument for free trade within the neoclassical model.

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Eric 11.16.06 at 11:50 pm

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

I await your answer.

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radek 11.16.06 at 11:53 pm

Most economists seem far too benign about unemployment

Etheral Strawmen Unicorn Yeti Fairy Dragon Belgians!

Seriously, let me know the names of the economists you hang out with and I’ll be happy to go their houses and slap them a few times personally.

What do you think the last 70+ years of Macro has been mostly about?

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radek 11.17.06 at 12:00 am

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.

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Eric 11.17.06 at 12:05 am

Nothing so complex as you note above. Going from no trade to trade is not PO. All you can say within the neoclassical social welfare logic is that trade causes winners and losers. You can’t compare preferences/utilities so you’re stuck: no social welfare function can save the day.

That’s what your theory says. It does not say free trade is good. Therefore, one can say that neoclassical trade theory fails to support free trade.

So when economists say that free trade is good they do NOT have the support of their own theory.

It’s pretty simple: either most economists are motivated by ideology or (worse!) they are poorly trained in economics.

Your choice!

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Ragout 11.17.06 at 12:06 am

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)

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Eric 11.17.06 at 12:07 am

And, for what it is worth, the Kaldor-Hicks criteria is intellectual fraud and not supported by any logic at all. It is merely stated.

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Eric 11.17.06 at 12:12 am

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.

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Joe (Slovoj) Chavez 11.17.06 at 12:16 am

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radek 11.17.06 at 12:17 am

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?

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Walt 11.17.06 at 12:18 am

Radek: I was not being sarcastic. (Well, the “good God, man” part was sarcastic, of course.)

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Eric 11.17.06 at 12:33 am

“…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?

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radek 11.17.06 at 12:38 am

Kaldor-Hicks criteria is intellectual fraud”

It’s a freakin’ criteria, just like saying that that if x>4 then y, and if x=3 then not y, and if x=5 then y is a criteria. You might not buy into it but there’s no fraud in it.

The fun’s here now kids

Ay, that thread is still trying to find itself, I don’t think I have the energy, and the relationship between happiness and income is almost tautologically amorphous. If I was a John Emerson Economist and a d-squared arsehole I’d stumble in there like a three legged elephant on xanex and rollerblades, proclaiming that income and consumption is all that matters. Time with family and leisure be damned! But a good portion of what I’ve been arguing here is that such creatures (the JEE+d2A 3LX!ooElephant) belong in the realm of cryptozoology (http://en.wikipedia.org/wiki/Cryptozoology) so I ain’t gonna touch it (for now).
Anyway, World Values Survey says that happiest people are in Ghana and least happy are in Romania, both somewhat poor, and having friends from both of those countries I’m struck by the anecdotal empirical evidence in support of that statement enough to feel an eerie uneasiness about making any pronouncements.

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Joe (Slovoj) Chavez 11.17.06 at 12:43 am

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

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Ragout 11.17.06 at 12:46 am

I really find the claim that economists don’t care about unemployment bizarre. I can understand why people would think that micro is right-wing, but macro? Macro is about unemployment, growth, and inflation.

Greg Mankiw’s intro textbook starts with “Mankiw’s 10 principles,” of which 3 are about macro. One is about unemployment and the other two are about growth and inflation. His textbook has 13 chapters on macro, of which 4 are basically about unemployment:

Unemployment and Its Natural Rate
Aggregate Demand and Aggregate Supply
The Influence of Monetary and Fiscal Policy on Aggregate Demand
The Short-Run Tradeoff between Inflation and Unemployment

Three other chapters are also relevant. “Saving, Investment,and the Financial System” isn’t going to be about how Bankers can make the biggest profits and “Five Debates over Macroeconomic Policy” surely discusses unemployment.

Brad Delong’s macro textbook is generally quite similar, although I think he gives slightly more attention to unemployment. It has 17 chapters, of which 5 are pretty much about unemployment and how to fight it, and another 5 are probably relevant. These are the chapters that look most relevant to unemployment.

Chapter 2: Measuring the Macroeconomy
Chapter 9: The Income-Expenditure Framework: Consumption and the Multiplier
Chapter 11: Extending the Sticky-Price Model: IS-LM, International Side and AS-AD
Chapter 12: The Phillips Curve and Expectations
Chapter 13: Stabilization Policy

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Eric 11.17.06 at 12:53 am

“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?

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Joe (Slovoj) Chavez 11.17.06 at 12:56 am

I think the claim was that economists don’t care about the unemployed.

Not the same thing.

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radek 11.17.06 at 12:58 am

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.

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Ragout 11.17.06 at 1:09 am

Eric,

You’re misunderstanding the Kaldor-Hicks criteria. The whole point is that it’s a clever way to say something very close to “on average, the country is better off,” *without* making interpersonal comparisons of utility.

Anyway, I think the argument for free trade is really more empirical than theoretical. The big benefits have to do with somewhat amorphous stuff like knowledge transfers, not Ricardian comparative advantage.

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Eric 11.17.06 at 1:22 am

“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.”

;>

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Eric 11.17.06 at 1:29 am

“You’re misunderstanding the Kaldor-Hicks criteria. The whole point is that it’s a clever way to say something very close to “on average, the country is better off,” without making interpersonal comparisons of utility.”

I’m not misunderstanding it. According to the rules of the game established with neoclassical welfare economics HK is not permitted. But economists accept it to save free trade.

Very odd.

HK is based on the claim that the “gains” to the winners are “greater” than the “losses” to the losers. Such statements require that gains and loses be compared (if one is to be identified as greater). Hence, interpersonal welfare comparisons are made.

This is invalid according to standard mainstream social welfare economics.

But, even if it WAS valid within social welfare economics this does not make it right. Millions of words have been written attacking and defending the utilitarian thinking behind things like HK. On balance, it seems that very strong arguments can be made against exactly what HK proposes.

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Martin James 11.17.06 at 1:39 am

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?

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Ragout 11.17.06 at 1:41 am

Eric,

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). Kaldor, by the way, was certainly a leftist.

Anyway, this is a minor technical point. Next, you’ll be talking about the importance of Sraffan reswitching.

The real issue with trade is empirical. For example, all the poor countries that have done spectacularly well in the past few decades have been very open to trade: China, Taiwan, South Korea, Botswana (except for AIDS), Ireland. India too (although the role of trade is more debateable).

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Eric 11.17.06 at 1:47 am

“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.

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Ragout 11.17.06 at 1:55 am

K-H doesn’t require interpersonal comparisons of utility. You’re just wrong about this, but believe whatever you want: I don’t see this as an important point.

The important point is that all the countries I’ve mentioned have opened to trade and have also seen spectacular gains for the poor. The poor in these countries are eating better, living longer lives, getting more education, etc., etc.

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Walt 11.17.06 at 1:58 am

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.

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Eric 11.17.06 at 2:12 am

“Eric should get some sort of Oscar for scenery-chewing-performance in a Crooked Timber thread.”

I’d like to thank my producer…

“You have to actually win the argument to announce game-set-and-match, I think.”

Not when you are the Brando of comments! Stella!

I’ve not counted radek out yet, but am still waiting for an actual argument to be made defending the claim that free trade is “good.”

If the free trade argument relies on accepting HK then things are really bad for mainstream economists. HK is so bad and provides no justification for saying “trade is good.” All it can do is say, “free trade meets this HK criteria” but this says NOTHING about trade being good for society.

So… the fact that 90% of economists believe that free trade is “good” must depend on something other than what their theory says.

Ideology anyone?

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Walt 11.17.06 at 2:35 am

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.)

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Brendan 11.17.06 at 5:24 am

‘1st place. It was a tough decision, but top honors go to Brendan! He thinks “we should all go back to the Institutional School,” while at the same time claiming that “Sraffa and various others also have a lot to say.” While D^2 is rereading Das Kapital, I hope Brendan will turn his attention to Sraffa’s masterwork, the not-so-institutional “Production of Commodities by Means of Commodities.” ‘

YES!! I win the Prize! Given my total lack of knowledge of economics I demand a the Nobel Prize immediately.

‘Stephen Colbert: “Oh really? Mmhum. Do they give a Nobel prize for throwing your own feces?”

Peter Agre: “……..That’s the Economics prize, I think.” ‘

No but SERIOUSLY guys…yes of course I freakin’ know that Sraffa wasn’t an institutionalist. I also know that Institutionalists weren’t Marxists (on the whole) and that neither was Veblen. My point, which was not too difficult to grasp, I would have thought, is that whereas these ‘non-establishment’ thinkers disagreed with each other, they still have more to say than ‘mainstream’ neo-classicists (and just to demonstrate my non-political bias, I would even stretch this as far as the Austrian school, who, at their most abstract, are actually quite interesting. It’s only when they get down to concrete policy that it all falls apart. And I think everyone knows that the Austrians were hardly Marxists).

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Daniel 11.17.06 at 6:39 am

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.

254

John Emerson 11.17.06 at 6:51 am

Well, the thread didn’t die while I slept.

I’d just repeat my question and add a few:

1. When do DeLong and Krugman stand on the political spectrum of (American) economists? My guess is that they are in the leftmost 10% or 20% of the whole profession, but that within that 10% or 20% they are less marginalized than most of the others, who mostly belong to pariah groups of methodologically unorthodox economists.

2. Where is the political center of gravity of the profession (on economic and policy questions, not abortion. gay marriage or the Ten Commandments)? I have no real idea, but my guess is that the profession is about 40% very conservative and 40% just conservative.

3. Bush is a factor of confusion here, since he combined conservativism on most issues with completely unconservative fiscal irresponsibility — and yet Mankiw works for him. What proportion of economists support Bush even given his gross fiscal irresonsibility?

4. Are the heartless economists I describe simply non-existent yeti, or just not dominant in the profession? Or are they so terribly rare that if I found one I’d find myself in the midst of a crowd of economist-watchers tallying an almost-extinct species?

I’m thinking of things I heard people saying during the free trade debates, especially one guy who, during the question period following his glowing report about how Mexico was going to progress, said “Well, I just don’t see a place for the Indians in the Mexico of the future” — Indians (in the strict sense) being about 20% of the Mexican population.

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Ragout 11.17.06 at 7:43 am

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?

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Ragout 11.17.06 at 7:56 am

Dsquared,

I understood you to say that “the supply/demand curve approach to the labour market implies that labour is a good like any other,” and imply that this is a foolish assumption. Now you tell me that your point is that labor is no different from a sack of fertilizer? I’m afraid I haven’t grasped your argument.

I think I do grasp your real point, though. I think that all your talk of instransitive production functions (and other’s talk about Sraffa) is just the left’s version of bludgeoning folks with “you don’t understand the math.”

BTW, the sentence about Das Kapital flowed better with the extra syllable.

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Ragout 11.17.06 at 8:41 am

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.

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John Emerson 11.17.06 at 8:52 am

Perhaps the economists I run into are uncharacteristic. On the other hand, putting 80% of the economists in the middle, Krugman and DeLong among them, does not show me that Krugman and DeLong are not on the left end of the professional scale — the middle isn’t a single point. And my point also has been that Krugman and DeLong, as Clintonistas, are not politically very far left at all.

A narrow test of the political rightism of economists would be support for Bush in 2004. But economists voting for Kerry might still be fairly conservative guys who just thought Bush was too crazy.

I’ll look again at the Caplan. I can say that it’s not well written from the point of view who wants to get the main idea quickly.

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shwe 11.17.06 at 9:20 am

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!

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John Emerson 11.17.06 at 9:53 am

I’ve heard what Shwe says before. It seems to allow the teaching of a biased rightwing form of economics, while at the same time allowing the profession to have clean hands since the more advanced courses are more reasonable.

At all looks like an esoteric/ exoteric split, as someone else also said somewhere, with a rightwing mass ideology concealing an elite centrist ideology.

This is consistent with the centrist economists seeing their worst enemy as the true left, while remaining confident that they would be able to nullify the hard right at the administrative level. Bush has proved them terribly wrong if thet’s what they were thinking. Even when DeLong and Krugman were pushing free trade, they got it in a Republican form which left out the parts of the plan which softened its worst effects.

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John Emerson 11.17.06 at 9:55 am

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?

262

Daniel 11.17.06 at 10:03 am

I understood you to say that “the supply/demand curve approach to the labour market implies that labour is a good like any other,” and imply that this is a foolish assumption. Now you tell me that your point is that labor is no different from a sack of fertilizer? I’m afraid I haven’t grasped your argument.

Well in that case I award you the “Wankety Wank Award For Not Grasping the Argument” then.

Consumption goods have demand schedules which are derived from preferences. It is reasonable to assume that preferences exist, and not wholly unreasonable to assume that it should be possible to describe preferences with functions that are continuous, monotonic, transitive and so on.

Labour, fertilizer, steel etc are not in general directly consumed. If their demand was determined by people’s preferences for them, the price of most fertilisers would be negative. The demand for inputs to production is determined by the consumption goods market, plus the production function for consumption goods.

Production functions for different kinds of goods are not in general continuous, monotonic or transitive. As a result, the demand schedule for labour, fertiliser, etc will not always exist at every point, may not be unique, may slope in different directions at different points and so on in. This is a known result and it is not “left wing”.

Plenty of empirical models do use continuous downward sloping labour demand schedules, but they are not “demand curves” like the demand curve for spuds or Playstations, because they have to be defined, derived and justified in a completely different way. Teaching kids that there is no difference between the demand for goods and the demand for factors of production is teaching them a really bad fallacy that is often annoyingly difficult to unteach.

263

Joe (Slovo) Zizek 11.17.06 at 10:08 am

I wonder, do physicists ever have arguments like this?

264

John Emerson 11.17.06 at 11:12 am

No idea how the profession as a whole voted, but here’s a letter from 6 Nobelists and 362 others economists supporting Bush. You had to be very, very right wing to support Bush in 2004, enough so to be willing to ignore Bush’s atrocious fiscal policies.

The Caplan piece seemed to show that, as a group, economists are more optimistic / complacent than any non-economist control group, and more affirmative about downsizing and completely affirmative about free trade. To me it was consistent with their being mostly country-club Republicans without any possibility of being hurt by downsizing or free trade. The “left / right” controls didn’t look too well defined; the economics right doesn’t overlap with the nativist right or the Christian right, and libertarians are really right. The right-left polarity I’m thinking of is between country-club Republicans and New Deal / labor Democrats.

Letter

265

John Emerson 11.17.06 at 11:15 am

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.

266

Michael Greinecker 11.17.06 at 11:27 am

247: “I know that’s what is says. It requires interpersonal utility comparisons.”

Uh, no. It is stupid criterion, but it only uses ordinally noncomparable utility data.

As shown here, free trade may not be Pareto better even when we allow transfers, when we restrict the transfers to be domestic.

262: “Production functions for different kinds of goods are not in general continuous, monotonic or transitive.”

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

“As a result, the demand schedule for labour, fertiliser, etc will not always exist at every point, may not be unique, may slope in different directions at different points and so on in.”

At every point means? Points in what space?

“This is a known result and it is not “left wing”.””

Can you give a reference for this “known result”? I doubt that you know what you are talking about.

267

Daniel 11.17.06 at 12:44 pm

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.

268

Joe (Slovo) Zizek 11.17.06 at 12:46 pm

Are intellectual property and copyright law like physics too?

269

John Emerson 11.17.06 at 12:52 pm

I was just waiting for that.

270

Joe (Slovo) Zizek 11.17.06 at 12:59 pm

It took me this long to remember.

271

Michael Greinecker 11.17.06 at 2:06 pm

“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.

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Walt 11.17.06 at 2:40 pm

Must these discussions always devolve into who has the bigger dick? ‘Cause it’s totally me, which seems unfair to everyone else.

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John Quiggin 11.17.06 at 3:38 pm

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.

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John Emerson 11.17.06 at 3:53 pm

What I’ve been asking is whether economists as a group are more right wing than the average American, less right wing, or about the same. That’s the only evidence I found. My guess is that they’re predominantly country-club Republicans (or Libertarians), and are rather disturbed by Bush’s craziness, but not usually enough so to actually vote for a Democrat.

You would rather hope that such well-educated people would be wise to Bush. Of course, if they were, Horowitz’s case would look even better.

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radek 11.17.06 at 5:29 pm

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.

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radek 11.17.06 at 5:42 pm

Economists’ optimisim about the market seems to have something to do with the fact that they are off the market and invulnerable.

But Caplan shows that this is infact not the case.

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radek 11.17.06 at 5:51 pm

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.

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radek 11.17.06 at 6:05 pm

Re: Production functions

Daniel’s sort of right, michael’s right on “There´s a difference between “does not exist” and “is not neccessarily unique”.” but the fact that higher minimum wages lead to increases in unemployment in the real world would suggest that in the real world we get something that looks like a neoclassical downward sloping.

Robert had a link to a paper on his blog which looked empirically at cases of reswitching and found some (forgive me if I don’t remember exactly) evidence for it in like 5% or 10% of cases studied. Robert took that as support for the Sraffian view. I tend to take it to mean that you should worry about it only 5% or 10% of the time.
(Again I’m doing this from memory so I’m perfectly willing to admit I’m wrong on this one).

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John Emerson 11.17.06 at 6:14 pm

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.

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Eric 11.17.06 at 6:32 pm

“Either way, free trade satisfies the HK criteria.”

Yes free trade satisfies HK but that does not mean that free trade is “good” and it does NOT provide any reason to accept free trade. Particularly as acceptance of free trade violates standard mainstream social welfare notions of “the good.”

But in any case, you have once again moved the goal posts from trying to defend free trade to now meekly admiting that all you can say is that free trade fulfills some formal requirement.

Come on, you’re a big tough economist: provide an argument for free trade!

“shmucko…this is blindingly obvious to anyone without an ideological axe to grind…”

Is the above what qualifies as a good argument to a mainstream economist?

What is blindingly obvious that except for your puffing out your chest (and occasionally saying that it would be good to hit people you disagree with) you can’t defend free trade.

Free trade fulfills HK (accepting all the wacko assumptions behind standard trade theory). Yet this “fact” does not imply that free trade is good.

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radek 11.17.06 at 6:39 pm

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.

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radek 11.17.06 at 6:43 pm

Come on, you’re a big tough economist: provide an argument for free trade!

“shmucko…this is blindingly obvious to anyone without an ideological axe to grind…”

Is the above what qualifies as a good argument to a mainstream economist?

No, it’s a normal response the author of the first idiotic sentence oughta reasonably expect.
Unless you admit it that by the “Eric Criteria” government shouldn’t tax polluters, then this discussion is over.

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Eric 11.17.06 at 6:44 pm

“…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?

284

Eric 11.17.06 at 6:45 pm

“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?

Odd way to defend your position.

285

John Emerson 11.17.06 at 6:48 pm

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

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Eric 11.17.06 at 6:48 pm

I’m still waiting for an argument defending free trade. ;>

What makes me think that you’ll came back with an insult?

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radek 11.17.06 at 6:53 pm

“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’?

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radek 11.17.06 at 6:56 pm

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

Yeah alright, let’s save that for another time.

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Eric 11.17.06 at 7:00 pm

“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.

290

radek 11.17.06 at 7:06 pm

Why is internalizing an externality “good”? I mean the polluter looses, right?

291

Robert 11.17.06 at 7:32 pm

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.

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Ragout 11.17.06 at 9:02 pm

Dsquared, Robert,

Yes, I am vaguely aware that you can’t add up factor demand curves and get a well-behaved aggregate demand curve (actually, I thought this was true of demand and supply curves in general). But I’m only vaguely aware of this result, because the only people who really care are mathematical economists (who enjoy such wankery) and a small band of Sraffans (who don’t like the idea of wages being determined by the marginal product of labor). How is what you say important?

I agree that factor demand curves might not be continuous: many employers will only hire full-time workers, and you can’t buy half a dump truck. I’ll grant that this is a mildly important observation, that makes a difference in some cases. But “you can’t take a derivative!” is not a grand critique of economics.

P.S., if you can convince me that an intransitive supply curve makes any sense, you’ll blow my mind.

293

Ragout 11.17.06 at 9:11 pm

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.

294

John Emerson 11.17.06 at 9:39 pm

I can tell you that Becker’s Nobel Prize did nothing to diminish my hostility to the profession. His family book was loony in a toxic, snarky way, and he’s a major figure in the discipline.

295

Joe (Slovo) Zizek 11.17.06 at 10:57 pm

“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.

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radek 11.17.06 at 11:29 pm

joe, I didn’t disagree with your comment #87. In fact, I’d say that that might be an upgrade. And are you suggesting that we don’t crunch the numbers?
I’ll ignore the bunk you wrote at the beginning of the post.

297

Joe (Slovo) Zizek 11.18.06 at 12:02 am

“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.

298

Robert 11.18.06 at 5:27 am

Is it on any importance whatsoever that ragout know what he is talking about? I don’t see why I should have an opinion on that topic.

299

Jason Briggeman 11.18.06 at 7:37 am

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

Michael Greinecker 11.18.06 at 8:23 am

@291: I only know the Samuelson, Solow, Dorfman book. I think deriving demand functions from production set doesn’t quite count as a result. And there are of course conditions for aggregate demand to be continuous (and even Cobb-Douglas)! The nonexistence of production function is of course no problem in general equilibrium theory.

@292: You are right that you get as much indeterminancy with pure consumer demand. I don’t see any point in calling that wankery though.

@294: “I can tell you that Becker’s Nobel Prize did nothing to diminish my hostility to the profession. His family book was loony in a toxic, snarky way, and he’s a major figure in the discipline.”

Is he? As far as I´m familiar with the subdiscipline of family economics, most of his ideas are not taken seriously anymore.

301

Ragout 11.18.06 at 8:24 am

#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.

302

John Emerson 11.18.06 at 8:42 am

They should never have been taken seriously, and he got his Nobel only 16 years ago, primarily for that work. And he’s at Chicago.

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

303

Michael Greinecker 11.18.06 at 8:45 am

“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.

304

Noumenon 11.18.06 at 9:04 am

13, seth finkelstein:

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.

Alliances between who?

305

John Emerson 11.18.06 at 11:44 am

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.

306

John Emerson 11.18.06 at 11:50 am

304: I don’t speak for Seth, but if you look at the various gentleman’s agreements in the post-1965 South, after legal discrimination was ended, you might get an idea of what kinds of alliances he was talking about.

The idea that a pure market society cannot discriminate reminds me of Schumpeter’s idea that a pure capitalist society could not be imperialist. As far as that goes, it reminds me of the idea that a pure communist society cannot be authoritarian. Actual capitalist / market societies do discriminate and do start imperial wars, and there never have been any pure capitalist society..

307

Brian 11.18.06 at 3:52 pm

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.

308

Ragout 11.18.06 at 4:00 pm

Speaking of Becker, back in #108, Justin wrote that “The high minimum wages and the job protection laws are a much better explanation for [high unemployment among French Muslims] than racism.” This is a (perfectly valid) argument straight from Becker, and I don’t think it’s typically presented in Econ 101. It’s not presented even though it’s highly relevant to the subject, unlike Becker’s theory of the family. Liberal bias, perhaps?

BTW, You don’t have to deny that there’s a lot of anti-Muslim racism to come to Becker’s conclusion. The argument is that discrimination will lower wages, but not employment.

309

Eric 11.18.06 at 4:20 pm

“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!

310

John Emerson 11.18.06 at 4:32 pm

The odd thing to me is that so many people claim that functionally normative decisions are best made on the basis of the results of scrupulously non-normative sciences. I can see making efforst to bracket out your bias to a degree in your information gathering, and giving a neutral check to your reasoning process, but consequential decisions should be don on normative grounds.

The myth is that you strictly separate the objective process and the normative judgement, and just plug in the norms at the very end, but seeing that process in operation in practice looks like a dog and pony show, with the normative plugin being purely perfunctory.

And of course, there’s an implicit normativity in what you include in your deliberations, and what you leave out.

311

radek 11.18.06 at 5:00 pm

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…”

312

Ragout 11.18.06 at 5:03 pm

Eric,

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). I don’t really agree with this argument, but Coase won a Nobel Prize for it. So, I think you’re right that economists are slipping in a value judgement when they say “tax the polluters.”

But what you’ve shown is a liberal bias! A lot of economics is driven by the fact that society/government has some problem to solve (reducing pollution or unemployment, regulating monopolies, etc.) and economists jump to work on the best way to do it. As Brad Delong noted early on in this thread, that tends to produce a liberal bias. I can see why this bias would piss off radicals who want to eliminate capitalism rather than make it work better, but it pisses off conservatives too.

313

Eric 11.18.06 at 5:59 pm

“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).

314

TGGP 11.18.06 at 6:54 pm

John Emerson, you’ve talked a lot about where economists stand politically, while very little data (that’s different from anecdotes) has been presented. So here’s a recitification of that defect in this thread, copied wholly from an old post of mine at a differnt blog:
Some studies done on the subject are here (focuses only on social scientists, but clusters responses into progressive, establishment left, conservative and libertarian) and here (percentage of democrats/liberals vs republicans/conservatives across all fields).

315

Eric 11.18.06 at 7:59 pm

“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.

316

Bob Dobalina 11.18.06 at 9:11 pm

And speaking of arseholes, that was a very arsehole post. But then finance folks always’ve had a chip on their shoulders vis a vis their better looking cousins.

Heh. Chip on the shoulder? All the way to the bank.

317

radek 11.18.06 at 9:41 pm

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.

318

John Emerson 11.18.06 at 10:20 pm

Well, fuck God.

319

Mark 11.18.06 at 10:42 pm

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.”

320

Seth Edenbaum 11.18.06 at 11:17 pm

Chill out John, she doesn’t even exist.
Just the invention of mystics like radon and ragu.

321

radek 11.18.06 at 11:30 pm

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.

322

John Emerson 11.19.06 at 7:11 am

Radek, my whole premise is to look at economics from the outside without becoming and economist or learning economics. We all have to do this about lots of things; there are no universal specialists. The alternative would be to take economics as True, based on my own understanding of what the economic consensus is (an understanding which would be as ignorant as my critical understanding is).

An external look at physics and chemistry shows them to be powerful and unpropblematic, with a very strong internal consensus on most things, so I have basically taken them as given. Same for evolutionary biology — I’ve looked in on some of the controversies (Gould vs. Conway Morris, Dennett and Dawkins) and the two sides aren’t fr apart.

When I look at economics, I don’t find that consensus, I find a lot of loose ends and implausible statements, and I also find a lot of credentialed and tenured economists who are quite troubled about the state of the field. Since I am not too friendly to economics for a variety of mostly political reasons, I read their critical books.

I do change my mind about things from time to time, but the only way I can get a response by throwing things out there. But I can’t take everything for given. For example, when I’ve met a law-of-the-jungle social Darwinist, he’s far more often got an economics background than a biological background. And when you look at the economic analyses, where labor is a cost to be minimized and reductions in labor force are always a good thing if productivity remains the same, and where unproductive persons really have no status, you see that economics does enable social Darwinism. So even if everything turns out in the long term and on the whole, behind a veil of ignorance most non-economists find downsizing unattractive. And if economists were riffed occasionally, they might understand what other people were thinking. But economists are never risks, and they just love creative destruction.

323

abb1 11.19.06 at 8:04 am

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.

324

Noumenon 11.19.06 at 8:14 am

306: Thanks for explaining, John.

325

John Emerson 11.19.06 at 9:09 am

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.

326

Brendan 11.19.06 at 9:24 am

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

Hmmm….and what does a ‘purely abstract’ hypothesis mean in this context? Are you implying that an economics hypothesis might be ‘right’ in the world of ‘pure’ mathematics or logic, but ‘wrong’ in the ‘real world’?

If so, this is where we part company. Cos I don’t een think that there can or should be ‘pure’ economics, if the analogy here is to be with ‘pure’ (i.e. non applied) mathematics, or theoretical physics.

327

Michael Greinecker 11.19.06 at 9:36 am

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.

328

John Emerson 11.19.06 at 9:45 am

Becker recieved his Nobel in 1992. His book on the family was published in 1981. The Nobel committee said “Gary Becker’s research contribution consists primarily of having extended the domain of economic theory to aspects of human behavior which had previously been dealt with – if at all – by other social science disciplines such as sociology, demography and criminology…..A basic idea in Becker’s analysis is that a household can be regarded as a “small factory” which produces what he calls basic goods, such as meals, a residence, entertainment, etc., using time and input of ordinary market goods, “semi-manufactures”, which the household purchases on the market.”

I’ve written about this at my URL, but in his own writing Becker included children among the basic goods produced in the family. The Nobel committee wisely left this out of their blurb. But the family book was unquestionably one of the things he got the prize for, and possibly the most important of them.

Nobody seems to be willing to defend Becker.

329

John Emerson 11.19.06 at 10:36 am

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.

330

Eric H 11.19.06 at 10:46 am

I am astounded at how everyone (with the possible exception of michael sullivan) seems to accept that Econ 101 moves students’ ideologies rightward without questioning the degree of movement and where they were before.

Isn’t it well known that professors overall tend to be very left-leaning, and that while economists lean more right than the average college instructor, they still don’t fall anywhere near Rush Limbaugh? As I recall, something like 80-90% of all professors vote Democrat, while only 60% of econ professors do so — that’s hardly “balance”, but it does indicate something. Isn’t it at least a little likely that college students are moving from socialist to centrist or communist to socialist by going through the Econ 101 experience? I had a friend who was getting a PhD in English Lit who told me that his department was a hardcore Marxist redoubt. So after a year with those guys, I can see how an Econ 101, even with its simplistic formulations and widespread assumptions, would be a reality check for most students.

I’m also a little disappointed at the smugness with which people can point out an exception or two to those Econ 101 assumptions as if that were enough to prove that markets don’t work: this is as erroneous as the Econ 101 assumptions, but much more reprehensible since you are now claiming to be aware of more sophisticated arguments, assumptions, and models, but you are still making simplistic conclusions (“market failure exists, therefore markets cannot operate without regulation, taxation, subsidization, and other intervention”). Yes, now we know about asymetrical information. Yet I can still buy a decent used car.

(BTW, I’m not the Eric posting above)

331

abb1 11.19.06 at 11:40 am

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.

332

radek 11.19.06 at 11:43 am

John;
1. There’s a lot more concensus then you think. Too late in the game to go over all of it.
2. Weren’t you arguing awhile ago that leisure is a good that should be accounted for? If more stuff (“stuff” being a very general category here) can be produced using less labor isn’t that a good thing? I mean that’s what that other thread is about.
3.Children are a commodity, traded in the child-markets. dy/dt=d2x/d2t-sigma*x(t). You should learn to think like an economist, Luddite! No, seriously, you’re just getting fixated on the words “commodity”, which here just means “something that for whatever reason people appreciate having” and “ratonal”, which here just means “purposeful, having some goal in mind, capable of being understood”. But yeah, a lot of Becker is fuzzy goofy stuff. Like the whole “psychic income”. But there’s some good insights interspersed among the goofiness.
4. Look at the Nobel prizewinners. You got prolly as many left wingers as right wingers. Sen, Stiglitz, Samuelson, Arrow, Myrdal, Leontief, McFadden, Tobin, Granger, Tinberger and that’s just off the top of my head (I realize that some of these may not be sufficiently left wing for you, but that’s between you and the librarians). Recall that this whole post was prompted by non-mainstream free-market economists critizing mainstream economists, including Nobel winners, for supporting a minimum wage increase.

Michael,
You’re right, they’re also positive. But I think that when wearing the Economist Hat you should invoke a formal criteria, for honesty’s sake. When wearing the Friend, Roman, Blogger Hat then yes, the game’s not that strict.

333

John Emerson 11.19.06 at 12:11 pm

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.

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radek 11.19.06 at 12:28 pm

Which just means “unemployment” is not a clearly defined concept. And Stiglitz and McFadden are definetly recent, in addtion to Sen. And Akerlof and probably Kahneman (though here I really don’t know).

335

John Emerson 11.19.06 at 12:34 pm

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.

336

radek 11.19.06 at 12:56 pm

Eric should read the following:
http://cepa.newschool.edu/het/essays/paretian/paretosocial.htm#swf
Particularly section 2 on New Welfare Economics.
And this is from the New School, not Chicago or whatever.

John, your definitions are more or less the ones used by Keynesians. However, you do realize they’re pretty damn imprecise. What does it mean to “need” work (I mean aside from when you’re starving)? At what wage? I’m not saying you’re wrong, just that there is more to it then that.

337

John Emerson 11.19.06 at 1:07 pm

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.

338

Eric 11.19.06 at 2:30 pm

“Eric should read the following:
http://cepa.newschool.edu/het/essays/paretian/paretosocial.htm#swf
Particularly section 2 on New Welfare Economics.
And this is from the New School, not Chicago or whatever.”
Nothing new there just a recounting of mainstream welfare economics. The difference being that it highlights that HK is a mere preference of economists and does not follow from any basic component of the mainstream theory.

That’s been my point all along: nothing exists in mainstream theory–the “objective” part–that supports free trade or any policy intervention at all. All of these things, including free trade, are a matter of PREFERENCES OF ECONOMISTS and not necessary conclusions of their own “objective” theory.

So when an economists says, “free trade is good” all they are saying is “I like free trade.” But they like to pretend that their preferences are somehow “scientific” when they actually are not.

339

Eric 11.19.06 at 2:38 pm

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?

340

Ragout 11.19.06 at 5:05 pm

Becker’s theory of discrimination is still taken seriously by economists. See for example, recent literature on discrimination in mortgage lending or traffic stops.

But Becker’s views on discrimination (or family economics) aren’t taught in econ 101.

341

Henry 11.19.06 at 5:36 pm

Michael Greinecker – sorry for late reply. It’s the paper mentioned in commment 100, but a later version thereof.

342

Brendan 11.19.06 at 6:23 pm

‘Obviously it doesn’t have much to do with real life, though you may hope to get some useful hints, of course.’

Well…I think you’ve hit the nail on the head, as far as my objections to this go.

I should be clearer. My objection is not to mathematical modelling per se, no matter how complex. For example; the mathematical models of the global climate that have been used to model global warming are infinitely more complex than anything economists play with but these models are based on empirical data. Then what happens is we model the data and then compare the model with what is really happening. Then, if it doesn’t match, we tweak the model until it does. Eventually this can produce extremely complex (but effective) predictive models. The computing power required is somewhat vast, but necessary to deal with something as complex as the weather system.

Of course, in terms of complexity, even the weather system is not as complex as the world economic system. So you would expect the models used by economists to be even more processing intensive, and even more complex. But of course they aren’t. They are far simpler in terms of the total amount of information processed (although the actual equations and maths per se might be more complex).

Economists don’t seem to have noticed (well a few have nowadays, but they are still very much in a minority) that in physics and biology etc, the process goes: first, ‘hunch’, intuition, ‘theory’ , ‘hypothesis’, ‘problem’ whatever you want to call it. Then you collect the data (I am simplifying a bit here……) based on your problem, then model the data, and then,(forgive me ) there is a ‘dialectic’ between the model and the data.

This is all very different from neo-classical modelling, which begins from an assumption: (imagine that people are all rational utility maximisers). But they aren’t (and I can prove this) so who gives a shit what follows from this false premise?

As I pointed out earlier, whatever one thinks about the Austrian school they had a more sophisticated grasp of the problem than the neo-classicists.

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derrida derider 11.19.06 at 6:36 pm

[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.

344

John Emerson 11.19.06 at 8:08 pm

Here’s Sen’s definition of rationality: “The discipline of subjecting one’s choices — of actions as well of objectives, values, and priorities — to reasoned scrutiny”. How are you going to formulate and test that mathematically?

That’s perfectly wonderful but hardly exciting. I don’t see how it could function as an economist’s definition of rationality (as sketched here by Tyler Cowen. The economists “rational man” may be a “rational fool” (Sen’s words) with sociopathic tendencies (mine), but this rational man is not usable as a simplifying heuristic or tautology the way various other definitions of rationality are (e.g. transitivity). Sen reintroduces human aspects that economics bracketed out for at least 50 years, and good for him, but didn’t he make the modeller’s job or the theory builder’s job infinitely more difficult?

I don’t have Sen’s public-choice or welfare economics pieces here, but when I read them I thought the same — Sen is returning economics to reality, but economists are going to have a lot of trouble getting uniqueness theorems and rigorous proofs out of this.

I have never said that Sen never used math or shouldn’t use math. (no one would have listened to him if he hadn’t, and hundreds of non-economists have said things like that for decades when that kind of thinking was absent from the field.

What I say that these three inputs would be hard to mathematize, and that the mathematizations would not have the drop-dead perfection economists claim for most of their proofs.

345

John Emerson 11.19.06 at 8:09 pm

“Nut this rational man is not usable”

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

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radek 11.19.06 at 8:18 pm

but these models are based on empirical data. Then what happens is we model the data and then compare the model with what is really happening. Then, if it doesn’t match, we tweak the model until it does.

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. Of course some may be more theoretically inclined, some more empirical but it’s the same damn process.

imagine that people are all rational utility maximisers). But they aren’t (and I can prove this) so who gives a shit what follows from this false premise?

Yeah well a lot of real world phenomenon can be explained with the use of the rational utility maximizer model. It’s generally a first good past at something like 90% of problems out there. Of course there’s many instances of deviations (10% is still a lot), usually having to do with intertemporal choices or risk and in that case, yeah, we tweak the model. But guess what, most demand curves do slope downward (whether because of rational behavior, resource constraints, or nonrational behavior that can be treated as if generated by some rational preferences) and that’s all we need for most of the theory to go through.

I’m sure you’re a dandy modeler of the global climate, but you have no idea how economics is done.

347

John Emerson 11.19.06 at 8:22 pm

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.

348

radek 11.19.06 at 8:25 pm

Also I agree with eric h that a lot of this whinying-with-a-heavy-dose-of-smugness is of a “how dare economists even give air to non-leftist views! Academia is OUR bastion!” variety. Some people seem to be bothered by just the very fact that markets get a balanced analysis in a social science discipline. Sense of entitlement typical of….

349

John Emerson 11.19.06 at 8:27 pm

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.

350

radek 11.19.06 at 8:28 pm

Actually addiction is one example of nonrational preferences due to intransitivity. So try again.
(and to some junkies dying young is a goal. Or did you miss that whole punk rock thing when you was a kid)

351

radek 11.19.06 at 8:34 pm

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.

352

radek 11.19.06 at 8:39 pm

Shock theory worked in cases where it was applied. Where it was done in a half-ass way it didn’t work. That’s usually things work, you know. You do something right, it works, you do it half-assed and the shit that you throw bounces back at you.

353

John Emerson 11.19.06 at 8:46 pm

“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?

354

radek 11.19.06 at 9:17 pm

In emerging economies of Eastern Europe it was done and it worked. In Soviet Union Sachs wasn’t much listened to and left in disgust.

355

Seth Edenbaum 11.19.06 at 10:56 pm

Radek, those are the words of an absolute
hack.

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radek 11.19.06 at 11:34 pm

You’re quoting The Nation at me? Sorry, that’s like the left’s equivalent of NR with crappier writing. At least Buckley can put a good sounding sentence together.
Anyway. Shock therapy is associated with Sachs to whom I was specifically referring to. Here he is:
INTERVIEWER: Jumping back, is it possible to sum up the kind of economic mess that Russia was in 1989, 1990?

JEFFREY SACHS: Russia was in a mess of every kind. It was at a dead end as a society, as an economic model, as a political model. It was a teetering empire. It was an economy that, basically, at the core, was built for military purposes, could not satisfy human needs, society’s needs, consumer needs. It lived off of cheap energy, which was running out. It lived off of energy exports, which were plummeting. It lived off of heavy foreign borrowing during the Gorbachev era, taking on tens of billions of dollars of foreign debt, which had reached the limit and now creditors were wanting their money back, not wanting to give more. By 1990 this was a society which, while on the surface it looked stable, was more like one of those cartoon characters that’s run off the cliff, is stationary for the moment, doesn’t realize it’s about to reach a free fall, and it did go into that free fall.

and


JEFFREY SACHS: I came to Russia as an advisor in November 1991 informally, where Gaidar’s team was trying to figure out what to do, and then formally as an economic advisor to the Russian government in December 1991 at the invitation of President Yeltsin. I lasted in that precisely two years and a month, resigning in January 1994.

Taken from here:
http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/int_jeffreysachs.html#16

Whatever sketchy things, if any, Schleifer and co. were up to, the kind of reforms usually described as Shock Therapy that Sachs advocated for and helped to implement in Bolivia and Poland were not carried out in Russia, rather the whole enterprise was given the name of “market reforms”, a thin veneer which hid from naive Western eyes the actual corruption and theft that took place.
“Reform” in Russia was to “Shock Therapy” as a doctor who picks a dying patient’s pockets is to a real medic.

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Seth Edenbaum 11.19.06 at 11:53 pm

Hacktacular dude.
And there were two links in there.

what a fucking joke

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nolo commentre 11.20.06 at 12:23 am

332: “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.”

What I’ve been told is that no one in the so-called “Chicago school” (Becker, Lucas, Friedman, Stigler, Barro, et al) had any significant connection to the University of Chicago. They were everywhere. They would have been more accurately called the “MIT-Ivies-Stanford-Cal” school.

156. “Economists don’t worry about the effect of recessions on workers, and claim that they’re voluntarily not working so as to make things seem OK.”

I’ve also heard that there used to be a distinction made in every introductory Macro textbook between “frictional” and “cyclical” unemployment but that it was quietly dropped. Why was that?

Great thread.

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John Emerson 11.20.06 at 12:54 am

“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.

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Ragout 11.20.06 at 2:09 am

OK, I read the Nation article about Sachs, and it was a confusing melange of vague allegations of corruption. It reminded me why I don’t like the Nation. The bottom line is it doesn’t accuse Sachs of doing anything wrong, or even talk very much about Russian economic policy.

The article doesn’t demonstrate that Sachs had much influence over Russian economic policy, or explain what went wrong. It just talked about the corruption of various people involved in the Russian privitization, none of whom were Sachs.

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abb1 11.20.06 at 3:23 am

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.

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Michael Greinecker 11.20.06 at 3:48 am

343: “This is all very different from neo-classical modelling, which begins from an assumption: (imagine that people are all rational utility maximisers). But they aren’t (and I can prove this) so who gives a shit what follows from this false premise?”

Many results are surprisingly robust to lapses from rationaliy. See for example this.

347: “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. Of course some may be more theoretically inclined, some more empirical but it’s the same damn process.”

No. Some theorists have a very different view of economics (one that I share). To Frank Hahn, economic theory is concerned with the grammar of economic argument. That´s a different outlook.

351: “Actually addiction is one example of nonrational preferences due to intransitivity. So try again.”

There are probably some probles with time-consistency, but how do addicts violate transitivity?

I don’t think there is a concensus on the merit of shock therapy. From a theory point of view, one can argue both for and against easily.

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Brendan 11.20.06 at 3:51 am

‘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?

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Brendan 11.20.06 at 5:34 am

Actually ignore what I said about the GET. Much better example: the Phillips curve. And NAIRU. There is very little empirical evidence for either of them (and what there is was ‘cherry picked’ from ‘Western economies’ in the ’50s and ’60s) but economists were incredibly loathe to ditch the model despite the fact that it simply did not make accurate empirical predictions.

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Michael Greinecker 11.20.06 at 8:04 am

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.

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Brendan 11.20.06 at 8:51 am

‘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.”’

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.

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. And then it was integrated into the ‘neoclassical’ framework by Friedman et al, where it was given a specific ideological bent (as one might expect) to ‘prove’ that Keynesian economics didn’t work.

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: a rise in unemployment is correlated (weakly) with a RISE in inflation). (Ormerod, 1994 chapter 4).

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Michael Greinecker 11.20.06 at 10:35 am

“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?

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radek 11.20.06 at 12:05 pm

Seth, my orginal response to your post was a simple “go fuck yourself” as it didn’t seem that you deserved any better. I changed my mind and actually tried to respond seriously. I should have gone with my first response. Go fuck yourself, dude.

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radek 11.20.06 at 12:23 pm

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.

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radek 11.20.06 at 12:27 pm

On rationality – it’s not just Bergstrom. As Ariel Rubinstein points out (free good book on Bounded Rationality on his website!) even when people aren’t strictly speaking “rational” but rather follow various “rules of thumb” in decision making often (not always) you can explain their behavior “as if” it was generated by SOME underlying rational preferences.
For example, suppose there’s two goods. A person always spends share (a) of his income on good 1 and share (1-a) on good 2. There’s nothing about rationality in here – it’s just a rule of thumb. However, one can model this as a rational agent with Cobb Dougles preferences.
There’s some interesting stuff here and the rationality assumption is worth looking at and playing with but just saying “but people aren’t rational!” and feeling smug isn’t much of an argument.

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Michael Greinecker 11.20.06 at 12:48 pm

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

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radek 11.20.06 at 1:01 pm

I mean, what does a intransitive person want?

I know that there is a literature on this, but I’m not familiar with it. I think Mark Machina is the guy.

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s.e. 11.20.06 at 1:08 pm

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?”

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John Emerson 11.20.06 at 1:41 pm

I thought that the specific difference of “shock therapy” was the speed and timing of the reforms — a slower version of shock therapy would be something else. (\

The “Dow 36,000” guys have just explained that they’re absolutely right, but their timing was just off a little.

By a factor of 4 — rather a lot, really.

We’ll know in 18 years whether their new prediction is right.

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Brendan 11.20.06 at 2:32 pm

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?

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radek 11.20.06 at 5:08 pm

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?

An institution which facilitates exchange by solving the problem of “double coincidence of wants”. Money has three functions; Store of Value, Medium of Exchange, Unit of Account. Development of money involved a movemement away from barter to commodity money, primarily but not exclusively specie money towards fiat paper money. In modern economies we can define money as an asset characterized by its liquidity properties – from M1, the most liquid of monetary aggregates, up to M10 or something which apparantly includes things like famous works of art……………… this is principles stuff.
YOU HAVE NO CLUE AS TO WHAT YOU’RE TALKING ABOUT.

And the marginal value of an extra comment on this thread is quickly approaching zero if it hasn’t already turned negative. So see ya’ll next time.

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Brendan 11.20.06 at 5:39 pm

‘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.’

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Ersatz Glée 11.20.06 at 7:36 pm

I always thought money was about invisible as opposed to visible power, and the institutionalization of ambiguity and anxiety into social life.
But that’s just me I know; I’m not a physicist.

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TGGP 11.20.06 at 11:14 pm

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.

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