More unlearning economics

This is just too good a comment to pass up.

I’ve had to study Public Choice Theory as part of my economics degree, and it really is the biggest load of rubbish I’ve ever read, and sums up how economics is not a science, but simply a pseudoscientific enterprise designed to promote the interests of the wealthy. We’re told by economists that governments are effectively rent seekers, who are not interested in the welfare of society but simply to feather their own nets. Their solution seems to be to privatise government and the let the market rule everything. Funny how neoliberal economists never apply their sceptical public choice theory to look at, for example, executive pay (and the cosy cartel that sets it), or the way businesses through extensive lobbying and funding given governments incentives to pursue policies in the interest of the 1%.

I’m glad there are economics students who also think what we learn is a lot of rubbish, and how biased the subject is towards neoliberalism. I’ve had to sit through 3 years of listening to my lecturers trying to convince me that the welfare system is hugely distortionary, high progressive income taxes are undesirable and should be replaced by flat taxes, privatisation of industry will improve efficiency and that governments shouldn’t do anything about poverty and inequality because it would “distort” their beloved market.

It’s high time people started questioning the pseudoscientific BS we’re expected to swallow. Eventually, with more people starting blogs like this exposing the subject (along with disbelievers like Steve Keen) hopefully funding for economics will dry up, and the discipline will cease to exist as a serious academic endeavour, like astronomy, and therefore will stop influencing policymakers.

Err, no. Public choice theory isn\’t stating that governments are merely predatory rent seekers.

It\’s saying that you can understand a lot about what goes on if you view them as such sometimes. It\’s a very useful explanation of why MPs\’ pensions are better than those of anyone else in the country. Why the PM\’s pension is simp[ly fantabulous.

Really, at heart, all that is being said is that the first thing to learn about economics is that incentives matter. So, look at the incentives of those in government as well as those out of it.

And the welfare system is distortionary: 70-90% (there are some poor souls over 100%) marginal tax and benefit withdrawal rates are distortionary. It might be worth having these distortions to reach your other goals, it might not be, but it\’s very definitely distortionary. High progressive income taxes might be desirable for some reasons….reducing inequality of income perhaps. But they also have other effects: such as reducing future economic growth. Which is the second thing you need to learn about economics. There\’s no such thing as a solution, there are only trade offs.

And you\’d better bloody well understand the trade offs you\’re making when you make decisions: which is what your economics course is trying to train you to do but obviously failing.

BTW, it\’s astrology you mean, not astronomy.

And most amusing is this from our unlearning econ guy:

Yes that sums up many problems with economics pretty well. My lecturers are actually about as moderate as it gets in a mainstream university so I’m lucky, but I still find it hard to write about models that I know are just wrong. It seems you felt similarly.

This is known as \”Doing a Ritchie\”.

Ignoring what you\’re being taught because it\’s obviously wrong, innit?

And you only need to read Ritchie to see where that leads you. About which I think my favourite is his reinvention from first principles of marginal utility as a refutation of neo-classical economics: neo-classical economics being the form of economics which introduced marginal utility, indeed, neo-classical economics being based on the insight of marginal utility. That\’s why we call it all the Marginalist Revolution, see?

66 comments on “More unlearning economics

  1. I don’t ignore what I’m taught I simply adopt a critical perspective on it, and silly partial equilibrium models based on ridiculous assumptions soon fall apart when you do that.

    Also, my commenter – you’ve basically just made his point for him.

  2. You just repeat the problems he listed with economics as if they are facts. It’s amazing how many classical liberal/libertarian arguments are simply based on assertions. Example:

    – And the welfare system is distortionary

    – But they also have other effects: such as reducing future economic growth.

    – There’s no such thing as a solution, there are only trade offs. (you know about land rent, right?)

  3. I’ll start again.

    UE sounds like Arnald after taking NZT (see the movie “Limitless”).

    Goverments ARE preditory scum. The freedom to trade and create has lifted mankind out of the mire (so far as we have got–there are endless wicked morons striving to drag us back).

    You can track gubermints path across history in blood and thieving. And sanctmonious bullshit of course–that is the worst of all since it attempts to cover up the rest.

  4. Mr Ecks,

    The funny thing is that in some ways we are on the same page. The problem with libertarians is that they effectively have two analytical ‘classes’, if you like: governments and markets.

    I find a marxist class perspective a far better tool for analysis as governments versus markets runs into a lot of problems – right now, for example, would you say financial institutions are ‘government’ or ‘market’? Really they are neither and both.

    I’m aware libertarians have an aversion to marxist terminology but it makes a lot more sense to look at history and divide things into class, so that the actions of states can be considered in their historical context and which particular class they are in bed with at the time.

  5. The most amusing thing is that UE and others like him seem to be saying that the people in powerful positions in government are all nice and only thinking of the good of people whereas people in powerful positions in the private sector are evil scums only thinking about enriching themselves. In practice this would often mean that the same people would completely change perspectives when moving between goverment and the private sector (e.g. Romney). If they were to claim that this theory would not hold when people like Romney are in charge they would actually have proven the validity of the public choice theory

  6. UnlearningEcon-

    From the quoted comment, you seem to have missed the central point of Public Choice Theory, which is that one should apply the same criteria to everyone. Businesses leaders are selfih and try to distort the system in their favour? Damn right they are, and damn right they do. The whole point of PCT is that so does everyone else; trades unions, activists, pressure groups, bureaucracies, demographic lobbies, academics and so on.

    Statists are always looking for some group of trustworthy “philosopher kings” who can be trusted to run things in an unbiased, selfless way. Public Choice Theory simply tells us, correctly, that no such group exists. The result is that however well-meaning you start off with your government, it will simply become the plaything of those special interests who can gain power over it, including those within the government structure itself. That isn’t hard to understand.

    So I can only presume that like one Richard Murphy, you started the course with a bunch of preconceived notions and have spent the whole of it sitting at the back with your ears stopped up refusing to even consider you might be wrong, like a Creationist on an Evolution course. “Descended from monkeys? Poppycock!”

    That’s not a good way to learn, really.

  7. Emil that is simply your projection due to your governments versus markets mentality. I literally *just* wrote a post about the state forcing peasants to work in factories.

  8. You lot have made a lot of presumptions about me that are just completely wrong. Ian B’s comment is a case in point. You know nothing about my studying habits and you also know nothing about my political beliefs.

  9. It is hard to think of any other university course that has occasioned so many revolts against one-sided tecahing as Economics: from the Sorbonne (and Cambridge)in 2000 to Prof Mankiw getting walked out on in the States recently.Why does n’t this happen in History ?Or Philosophy?
    As someone who extols the wisdom of crowds ( putting up house prices so the younger generation cannot afford them,crashing whole economies Japan Ireland Spain China?as a result, then taking on too much personal debt) you really should take it on the chin when the customers/students start picking holes in what’s being foisted on them momopolistically.

  10. I’m curious- did “unlearningEcon” pass his exams? and if so did he do so by giving the answers he believed correct, or by giving answers he believed false?

  11. I didn’t claim to know anything about your “studying habits”. Your description of PCT means you haven’t understood it, so either you refused to consider it, as I suggested (“you seem to…”) or you’re not very bright.

    *shrugs*

  12. And the welfare system is distortionary

    This isn’t simply an “assertion”. The whole point of welfare is to intervene in the price system. The whole point of it is to distort. The question is whether that distortion is a Good Thing or a Bad Thing. It would be a complete waste of time if it didn’t distort anything.

  13. You’re right, I meant Astrology not Astronomy.

    However, you’re doing the same thing economists do, which is make empty statements and treat them as if they are obvious scientific facts. For example, you say progressive income taxes reduce future economic growth, but you don’t provide any empirical evidence for this. In any case, doing a regression to test this is fraught with difficulties, especially because you have no idea from which period this so called “distortionary” effect on economic growth will kick in. Moreover, there is a multitude of factors that may have affected the future growth of the economy, and this sort of regression will inevitably be affected by omitted variable bias, misspecification etc.

    The model that we were taught showing how high rates of progressive income taxes reduce long run growth was to simply show how it shifts the LRAS line to the left, and therefore reducing “potential” growth. Yet there’s no reason why the LRAS should shift to the left. Apparently it’s because these “captains of industry” and entrepreneurs would no longer want to invest in a country with a high tax rate, yet again our lecturer just made this comment without justifying it with evidence.

    There are many more examples where economists let value judgements masquerade as science. You claim that economists tell us there is no solution, that there are trade offs and opportunity costs etc, but listening to most economists, you’d think that the economy would be sorted simply by letting the market rip. Can you really claim they’re doing simply “positive” analysis and not trying to further the interests of the ruling class? Look at the film “Inside Job” to get an idea of what’s actually happening.

    Tim adds: income taxes and growth. OECD empirical evidence good enough for you?

    http://freethinkingeconomist.com/2010/03/25/while-i-do-hate-the-argument-from-authority/

  14. On progressive taxation and growth – evidence, naturally, contradicts economic theory:

    http://www.angrybearblog.com/2011/11/peter-diamond-emmanuel-saez-paul.html

    Tim adds: You want to use a discussion of where the peak of the Laffer Curve is, where revenue is maximised, to show that progressive income taxes do not reduce future growth?

    Or is it Mike Kimmel’s calculations you want to point to? The ones where increasing the taxation on returns to capital increases capital investment?

    Snigger.

  15. Funny how certain journal articles seem to be swept under the carpet. For example, that paper by Diamond was never mentioned during my lectures, and the minimum wage studies by Card, Kreuger, Katz, Manning etc were totally ignored as if they didn’t exist. Can you imagine the Physics discipline doing something similar, by simply ignoring academic papers that go against the mainstream, even though the methodology and technical aspects of that paper is robust?

    There’s actually evidence of publication bias in economics, according to Kreuger and Card’s book on the minimum wage. Many journals kept publishing studies apparently showing a statistically significant effect of the minimum wage on unemployment, and not publishing those that don’t show a link.

    Tim adds: The Diamond paper. Publication date Fall 2011. You seriously expect an undergraduate degree to be teaching you papers that have only been published a month or two? Research papers at the edge of the current knowledge base?

    Blimey.

    And even I know what was wrong with the Card and Krueger min wage paper. They looked at only the capital intensive part of the fast food industry, not both the capital and labour intensive parts.

    So, here’s a nice undergraduate exercise for you. As a purely theoretical exercise (no need to go get new data) construct a model in which an increase in the price of labour increases labour demand in the capital intensive half of an industry. A hint: you get to it by a much larger reduction for the demand for labour in the labour intensive part of the industry.

  16. Erm, yes , you compared me to a creationist on an evolution course.

    Well, because that appears to be your attitude. You just don’t like what you’re hearing so you dismiss it.

    This is a very common error. It’s not unique to the Left. What people do is confuse economic analysis with their personal moral goals. When economics tells them something they find immoral, they conclude that it “must be wrong”. For instance, an analysis of slavery. You can analyse it economically (is it an efficient productive system?) or you can analyse it morally (is it a just and decent system?).

    So what people do is, because they find slavery repugnant, they presume that if the economics says it is efficient, there must be something wrong with the economic analysis, and that’s what you appear to be doing. But they are actually separate issues.

    Suppose you do your economic analysis and find that slavery is more efficient than wage labour. You are still at liberty to say, “but let’s not have that system, because it is morally repugnant”. That is fine and laudable. But instead you say, “I refuse to accept that this economics is correct because I find it morally repugnant”. From a scientific analytical perspective, you’re not allowed to do that. You’re just making shit up.

  17. SR819-

    That’s why the Austrian School correctly entirely rejects econometric analysis. The widepread belief that causations can be deduced reliably from correlations is one of the great intellectual errors of our age.

  18. I was reminded this morning of my favourite quote from “Freakonomics”:

    “Morality, it could be argued, represents the way that people would like the world to work, wheareas economics represents how it actually does work.”

    Reality is neither fair, nor simple. Children find both of these very difficult to accept. Some adults have never learned to accept them.

  19. Can you imagine the Physics discipline doing something similar, by simply ignoring academic papers that go against the mainstream, even though the methodology and technical aspects of that paper is robust?

    Yup. It has happened many times. Particularly if the authors are not well known. Equally, papers that are not robust, but come from significant individuals in the field, get published.

    Admittedly it wasn’t physics but wasn’t this one of the more repugnant bits of Climategate? Attempting to surpress “heresy”?

  20. “you also know nothing about my political beliefs.”

    Frequent use of “neoliberal” – bit of a giveaway.

  21. That OECD paper again cannot really be used to justify any policy like cutting the top rate of income tax or corporation tax. There are a huge number of factors that affect per capita GDP growth, and this regression only focuses on capital, population growth and tax structure. Look at the regression estimates of the new growth theories by Barro etc, their regressions include all sorts of factors like political stability, investment/gdp ratio etc.

    Now, I happen to think that these regressions are quite useless because of the huge subjectivity when measuring something like “political stability”, but they at least show that when trying to understand the determinants of growth, you can’t do a simplistic regression like the one the OECD have done and expect it to stick.

    Tim adds: That’s fascinating. So you, an undergraduate in economics, one learning the tools to do these sorts of regression estimates, already know before you’re competent in the techniques that using such techniques is valueless.

    Why are you bothering with hte degree then given that you already know everything?

  22. I didn’t say these techniques are valueless, I was referring specifically to estimating the determinants of GDP per capita growth. Like I said before, there’s a huge number of factors that affect GDP growth, and that also interact with the tax system. If you don’t include these in a regression, the coefficient estimates are going to be biased and inconsistent.

    And the paper’s author adds this caveat at the end:

    “Secondly, any empirical insight generated from cross-country macro data only reveals a picture that is true on average. Under specific circumstances in specific country cases, there may be reasons to expect deviations from the general patterns presented here, and to assume different effects of certain tax instruments.”

    This is a huge problem with cross country macro data analysis. Each country is likely to have extremely specific circumstances that you cannot model econometrically. So, you could have a small number of countries where income taxes affect GDP growth in a significant negative way, while for a lot of countries, GDP growth is barely affected by income taxes. This heterogeneity isn’t captured by the regression.

    A more interesting study would be if there was a change of economic policy between two neighbouring countries, that share much of the same characteristics, and while one raises the top rate of income tax, the other keeps it at the same level. This sort of natural experiment is, IMO, more likely to yield policy relevant results, however obviously it’s difficult to find ideal conditions like this.

  23. SR819

    The problem is, there is just no way to do that objective analysis. Your chocies are so subjective that it is a hopeless undertaking. There are no natural experiments you can do. It really is as simple as that.

    That, and there is no “macro-economics” anyway, but that’s another issue.

  24. Clear case of Second Year Syndrome. When I was teaching undergraduates, knocking that out of them was the primary goal of the second year lab course. Fortunately physics has an advantage, you can demonstrate to their face that their preconceptions are wrong. Not so easy I’m economics.

  25. “Funny how neoliberal economists never apply their sceptical public choice theory to look at, for example, executive pay ”

    Surely the point of public choice theory is that it treats politicians just like big company executives, and says that both are likely to be self-interested weasels?

    Hence, for example, all the studies of the principal-agent problem between shareholders and directors.

    It’s only the supporters of widespread State intervention who seem to believe that the two should be treated differently, with politicians portrayed as selfless paragons.

  26. Oh Lord. If the models ‘soon fall apart’ when you look at them, you might want to analyse the differences in what you must be assuming w.r.t the initial author. Any model is simplified to reality, and has to be considered while understadning its weaknesses. To simply throw them out because they are imperfect looks like wilful refusal to address what their suggestions.

    “Funny how neoliberal economists never apply their sceptical public choice theory to look at, for example, executive pay (and the cosy cartel that sets it), or the way businesses through extensive lobbying and funding given governments incentives to pursue policies in the interest of the 1%.”

    Except they do. They can assume everyone in a position of power over something has an incentive to take personal advantage of it, and historically often have. The jumble of government regulations (often conflicting), quangos, licensing, and the ever-expanding tax code create a huge web of possibilities of various shades of grey. Lord Taylor on Experian: “I’ve been working with them on amending a statute that’s coming out, or was coming out, because I’ve got it delayed now, whereby it was going to be difficult for them to get certain information and so on” come to mind.

    The libertarian ‘thing’ is to try and reduce those opportunities for unjust self-enrichment. Of course, we need public servants to perform some government, but by having simple and transparent regulation that makes it easier to expose any who choose corruption, those in positions of power are incentivised to serve the public by the (more credible) threat of prosecution and their desire to retain social standing.

  27. ‘“Morality, it could be argued, represents the way that people would like the world to work, wheareas economics represents how it actually does work.”’

    This is a hilarious quote that demonstrates economist’s delusion the their ‘science’ is value free. Jonathan Aldred does a great job on the beginning of Freakonomics in his book ‘The Skeptical Economist’ and destroys the idea of value free economics.

    In the mean time, here’s this:
    http://crookedtimber.org/2012/01/13/sanjay-reddy-on-economics/

    Ian B,

    I am certainly not objecting to economics purely on moral grounds. I am objecting to it on empirical and theoretical grounds. That much would be clear if you did even a small amount of background reading.

  28. To use my previous example, Creationists present many empirical and theoretical criticisms of evolution. But their motive is moral. It seems clear to me from what you write that that is the case with you.

  29. The amount of conclusions you guys have about your opponents before you’ve even engaged them is hilarious:

    – He’s criticising capitalism! He’s an evil statist who thinks politicians are angels!

    – He’s criticising economics! He’s just a moralising leftist who doesn’t understand the difference between science and ethics!

    – He’s an undergraduate! He has preconceived notions/must be in second year/doesn’t understand economics blah blah blah

    Heard it all before. Classic libertarianism.

  30. Actually my main doubts in economics are instilled in the wake of the 2008 crisis which neoclassicism can’t even model correctly. So it was empirical falsification more than anything, though of course my concern for people who are living in a world largely governed by models that don’t represent it properly of course plays a role.

  31. Sigh. The Austrian School- the most Libertarian free market school in economics- not only “models” the Credit Crunch but predicted it. It also explains why current attempts to fix it aren’t working. Do you know the Austrain Businsess Cycle Theory at all?

    And, you haven’t answered any criticisms. You’re just blustering. Let’s start with something basic. Imagine one man is producing something (corn, furniture, porn) and another man is not producing anything. So now, you transfer some of Man A’s production to Man B. Is that going to improve or harm the economy? Without ethical considerations.

  32. I see Austrian economics as a massive shift in the goalposts for libertarians post-crisis. Before, many would have called themselves neoclassical but now they’re all too ready to jump in with the Austrians because ‘government is bad!!!’ But the two theories are completely different, of course.

    Austrians claims to have predicted the crisis are questionable – at best, they called a housing bubble, no more:

    http://socialdemocracy21stcentury.blogspot.com/2011/12/austrians-predicted-housing-bubble-but.html

    Austrians have also historically failed to address Sraffa’s demolition of Hayek’s ABCT. The Rothbardian position against FRB makes little sense as they aren’t against capital controls and ignore the Dutch Tulip Mania, which occurred under 100% reserve.

    The Melbourne Land Crisis occurred under ideal gold standard, private banking conditions advocated by many Miseans and Hayekians.

    Even more than that, ABCT has trouble explaining the recent crisis because it is based around capital misallocation rather than consumer durables. At the peak of the crisis, people were simply buying and selling the same houses to each other at ever increasing prices rather than investing in new ones – there is currently an under supply of housing in the US, for example. This shatters their idea of allowing everything to liquidate (though I do agree with some of their prescriptions for financial institutions failing).

    That blog I linked to is a great source for criticisms of Austrian economics, as is Robert Vienneau.

    In that example I’d say it would harm the economy. Of course in the real world progressive taxation is far more nuanced.

  33. UE, it is not about shifting goalposts. Most libertarians I know had been concerned about the credit balloon for some time prior to 2008.

    Your remarks on pubic choice economics also make no sense: you don’t like it because it shows how supposedly high minded plans are undermined by the realities of incentives. Well tough.

    Also, it is not true that liberal economics ignores issues around executive pay. So long as there is a genuine competitive market, concerns about such pay are unjustified.

  34. I also am not sure if your point about the Dutch tulip mania. I am sure I read somewhere that there had been a change to banking at the time.

  35. The Mises Institute has a book on the tulip bubble where the role of bad banking changes is a key factor. I will put up a link to this item later for those who are interested.

  36. I’m shocked nobody has really picked up on this part

    ” hopefully funding for economics will dry up, and the discipline will cease to exist”

    Scientific or not, economics ‘exists’ and it is rather important therefore it must be studied. This comment sounds like bitterness that economic reality doesn’t provide the answers this person wants to hear therefore it should be got rid of and replaced presumably with simply their assertion of what works. Like a medieval pope condemning Galileo because his findings subverted their opinion.

  37. Economics is only seen as important because it has a crucial role in justifying the status quo and maintaining the elevated position of the economic elite in our society. Is it important in terms of improving social welfare and making our world a better place to live? Well, the evidence doesn’t look too good does it? Economists have damaged societies in many developing countries, like Chile in South America (i.e. the Chicago boys) and Russia through the post USSR privatisations.

    I think it was Alfred Nobel’s great-great grandson who wanted to issue a legal challenge to stop the awarding of the “Nobel” prize in economic “sciences” on the same premises as the real Nobel awards, because he felt (rightly) that Alfred Nobel’s original intention was for the Nobel to be awarded to people who’ve made a positive contribution to humanity, and economists’ record in promoting mass inequality, environmental degradation, increased poverty etc doesn’t exactly satisfy this criteria.

    And you’re likening my comment about abolishing economics with the Medieval Pope’s reaction to Galileo’s theories. However, what you fail to point out is that Galileo’s theories didn’t lead to increased human suffering, and that the experiments validated his theories. Barely any economic theory actually produces non conflicting evidence empirically, so the comparison is spurious. Another obvious point is that Galileo was looking at natural phenomena, while Economists study social structures and treat individuals as if their actions can be predicted the same way the motion of an object can be predicted, even though this is simply wrong.

    So yes, I do think Economics should be exposed as being a pseudoscientific discipline, and given that Astrology is no longer taught at universities, neither should Economics. Too many young minds have been brainwashed into believing garbage that has damaged humanity, it’s about time this stopped.

    Tim adds “Economics is only seen as important because it has a crucial role in justifying the status quo and maintaining the elevated position of the economic elite in our society. Is it important in terms of improving social welfare and making our world a better place to live?”

    Son, love, my apologies, I don’t know which patronising moniker to use. So forgive me the gender inspecificity.

    Erm, economics is all about how to improve social welfare. That is it, tout de court. We can argue, within economics, about whether greater leisure hours makes people happier, whether they increase social welfare. We can similarly argue about whether greater monetary incomes do so, even about whether the trade off between consumption through money, or consumption through leisure, improve or do not improve social welfare.

    That’s actually what we’re trying to do within economics. That’s actually the stated aim of the social science: what increases utility?

    I agree, you can look at the subject as being about who gets to keep what. But that view would mark you out as being simply an ignorant cunt. And the aim of an economics degree is to move one from being a stupid, ignorant, cunt, to being a similarly opinionated, discussant on moral values, argumentative, I desire the world to be as I wish it to be but I’ve got a clue about getting there, not ignorant cunt.

  38. Having co-habited with economics for 50 years, I have some sympathy for UnlearnEcon/SR819.
    There always seems to be a left-wing theory and a right-wing theory for almost everything. Usually, one’s political leanings turn out to be fully justified by the theories that emerge from one’s studies.
    In the example cited above, for instance, if you knew anything about Hayek and Sraffa’s political views, you would guess that they would come up with opposing theories. Likewise, at the time when the UK was the most successful economic power, its theories unsurprisingly favoured entirely free markets whereas in Germany, which was trying to catch up, lo and behold, economists created theories favouring protectionism.
    The underlying problem is that free markets deliver the most output, in theory and practice, but serve no useful function in determining the distribution of income and wealth.
    As Tim says, it is all about trade-offs, especially if economics comes up with conclusions one finds socially unacceptable. At its best, economics tends to be a dialectical debate rather than a science, albeit a positive debate that usually reaches commonly accepted conclusions in one area before moving on to the next controversy. So the message is: if you do not like the theory, don’t dismiss it, think up one that fits reality better. Or pay someone to do so, as Wall Street and the Government do.

    On that dialectical principle, one should be grateful for, but also suspicious of , the great Neo-classical Neo-Keynesian synthesis that emerged in the 1990s. It is, after all, an agreed Friedmanite/Keynesian position that is giving us that monetary policies that are currently wrecking the West.
    For that reason, I also agree that there is a great danger in all the simplifying (and sometimes false) assumptions that are made in order to construct internally consistent economic models that can be programmed into computers. This obsession has led to the almost complete neglect of studies of the real world of business and industrial organisation, which also helps to explain why the Anglo-Saxon economies are in such a pickle.

  39. Outsider talks a lot if sense. I would add that the point about trade offs is itself an example of thinking in economic terms. Time and resources are scarce so we need to make choices.

    Back to public choice economics, it is absurd to say that this aspect of economics is silent on the corporate world. Liberal economics have been banging on about how Big Business has lobbied for special privileges etc for years. libertarians often condemn corporate welfare.

    Ii really galls me how people, in their determination to try and attack what they think is “neo-liberal” economics, are so keen to misrepresent it. Worse, when called out on this, instead of dealing with it, they just plough on as if nothing has happened.

    I just cannot take these folk seriously.

  40. “Economists have damaged societies in many developing countries, like Chile in South America (i.e. the Chicago boys) and Russia through the post USSR privatisations. ”

    FFS…

  41. Politicians who don’t understand (or choose to ignore) the fundamental principles of economics have done far more harm, both in the Third world and the First.

  42. SR819, seeing as you could replace most instances of the word ‘economics’ in your post with the word ‘politics’ can we also get rid of all the shite left wing politics lecturers?

    Does anyone really consider economics to be a proper science rather than a social science?

  43. Seems to me that the problems have not been so much economics as politicians ignoring economics. Blaming the discipline of economics for poor economies makes as much sense as blaming geologist for earthquakes, and biologists for disease.

    “Economics is only seen as important because it has a crucial role in justifying the status quo and maintaining the elevated position of the economic elite in our society.”

    Uh, no it doesn’t. And see Natalie’s earlier comments explaining that the economic elite are not a homogeneous group whereby all their interests are aligned with each other.

  44. Economists consider themselves as proper scientists. Look for Edward Lazaer’s paper “Economic Imperialism” to see the sheer arrogance and bloated sense of their abilities that economists have.

    And yes, politics has caused damage to the world as well, but that’s not the discipline’s fault, it’s the fault of politicians taking advise from neoliberal economists promoting free market policies that helped cause the financial crisis.

    And we can blame economics for poor economies, because economists have been giving advise to governments in both developed and developing countries, promoting policies like mass privatisation, deregulation and removal of all government mandated safety nets, while promoting tax cuts to the richest people, all of which has damaged societies and communities severely. It’s not as if the advise of geologists cause earthquakes, or that biologists release a deadly virus into the population through incompetence.

  45. Given a choice between western economists and Soviet economists, I think it’s a no brainer… tell me, which group brought about the most human suffering? Which brought about permanent economic crisis?

  46. “or that biologists release a deadly virus into the population through incompetence.”

    Well one would hope not but you might want to take that up with the people who’ve produced an easily transmittable and deadly strain of flu virus. Then there’s nuclear weapons of course, not forgetting the sainted Alfred and his stuff that goes bang. Why single out economics for your opprobrium when just about anything that humans do has a good chance of going tits up ? If we are going to junk economics as an academic subject why not history or sociology or any other non science subject, subjective and open to abuse as they all are ? Your position sounds horribly anti-intellectual to me, you don’t like the messiness of the world so you want to pretend it doesn’t exist and all we need is love, your education is being wasted on you.

  47. Of course nuclear weapons are pretty good evidence that particle physics is correct. Likewise an engineered virus is pretty good evidence that the science behind genetic engineering is correct. Outcomes we might not like is no evidence that a discipline is not legitimate. Not making any testable predictions that prove correct would be a better measure of the legitimacy of a subject.

  48. Am utterly mystified by much of this debate. Claiming that economics lacks (empirical/theoretical) validity is a sensical argument, whether one tends to agree or not. Leaves a problem for governments – means that it is impossible to evaluate economic consequences of policies so, despite the fact those consequences are enormously important, best not to even enquire into them or risk creating false counsel. Problematic but a coherent and self-consistent possibility. Plausible if you doubt the real economy is computable, even if you think economics isn’t bunkum.

    Claiming that economics (in all its schools) is nonsense, and then criticising economic policies (e.g. dissing on the ‘Chicago boys’) FOR THEIR ECONOMIC CONSEQUENCES, WHICH YOU IMPUTE TO THEM, is inconsistent and makes no sense whatsoever. I mean, by what mechanism can you draw that imputation? You must have some method, empirical or theoretical or something, by which you have decided a certain economic policy has had a certain practical ie economic consequence. Ergo you, and other people as super-genius as you, can work out whether an economic policy is a good or bad idea. And make much wonga from governments you advise using your super-genius powers. Indeed collecting enough such super-geniuses together, you could fill a whole Department Of Not Really Economics, busy critiquing the economic effects of the economic policies you so despise by whichever supergenius methodology you have developed. But it looks to an outsider that what is going on in the DONRE is, by another name, the practice of (an attempt at) economic science.

    (I think the person who criticised this all as undergraduate ‘second year syndrome’ was being very harsh. But anything that smells this ‘meta’, or of such deep rejection followed by reinvention, is at least symptomatic.)

  49. DBC Reed – “It is hard to think of any other university course that has occasioned so many revolts against one-sided tecahing as Economics: from the Sorbonne (and Cambridge)in 2000 to Prof Mankiw getting walked out on in the States recently.Why does n’t this happen in History ?Or Philosophy?”

    This is not true. Of course it happens. The 68 radicals disrupted an enormous number of history and philosophy courses. Until they got what they wanted. Now they have a de facto monopoly on the fields and they do not allow right wing views into their subject. That does not mean students do not complain about being penalised for not being politically correct. They do. There is just not a lot they can do about it. The Right does not usually go in for organised disruptions of people’s lectures.

    There are other courses where the Left does not have a monopoly. But they are trying to enforce one. Biology is a good example. Because E. O. Wilson dared to say something politically incorrect about humans, Marxists like Stephen Jay Gould tried, and failed, to get him fired. Their students did disrupt his talks and physically assault him though. Crick was all but deported from Britain likewise.

  50. SR819

    So it’s all economists’ fault that politicians are evil self-serving corrupt scum, is it? Astonishing. I think that’s a bit hard on economists and far too lenient to politicians.

    But of course PCT applies as much to economists as it does to anyone else. So any suggestion that economists operate from the purely disinterested desire to improve the lot of the common man is fantasy (sorry, Tim). Your average economist is as interested in feathering his own nest as everyone else.

    So if, as an economist, the most effective way of feathering your nest is to “prove” to corrupt politicians that the policies which will get them elected are the “right” ones, that’s what you will do unless you are Sir Galahad in disguise. Hence the alignment between popular political ideas and economic theories that someone noted about a hundred miles further up this thread.

  51. Erm, economics is all about how to improve social welfare. That is it, tout de court.

    No, it is about trying to describe how some of the aspects of the real world work. You may then try to apply these theories. Either to make yourself stinking rich or, less likely, “to improve social welfare”. PCT says the former is more likely, especially if people claim to be doing the latter.

    To use one of the previous analogies – physics isn’t all about improving nuclear weapons. But you can use new theories (or even unexplained results) in physics to improve nuclear weapons.

  52. Economists have damaged societies in many developing countries, like Chile in South America (i.e. the Chicago boys) and Russia through the post USSR privatisations.

    Yeah, because Russian society was functioning splendidly before the Chicago boys showed up and told them all to start murdering and maiming each other in a race to get their hands on the property formerly owned by a state which no longer existed.

  53. “Eonomists have damaged societies in many developing countries, like Chile in South America (i.e. the Chicago boys) and Russia through the post USSR privatisations.“

    This is really an astonishing claim. I mean, let us completely ignore the counterfactuals (e.g. Zimbabwe, China in the 70s-80s, North Korea, Cuba, etc) as well as the fact that Chile isn’t really doing that badly and that Russia was run by maffia thugs.

    It is almost as stupid as the claim that economic theory doesn’t look at corporate executive pay, a conclusion one can only reach by either being ignorant enough not to have heard of the principle-agent theory or by misrepresenting economics

  54. a conclusion one can only reach by either being ignorant enough … or by misrepresenting

    I think we are dealing with “true believers” here. If it is ignorance, it is wilfully so. They do not like the moral outcomes of the last few years (and I’d join them there), therefore (huge leap of faith required but …) all the economics they are being taught (which was pretty much the economics being taught 10 years ago – certainly at the undergraduate level) must be wrong.

    Note to anybody who believes in the predictive powers of any economic theory – how many billionaires are professional economists? Left or right.

  55. SR819 – “Economists have damaged societies in many developing countries, like Chile in South America (i.e. the Chicago boys) and Russia through the post USSR privatisations.”

    It is true that economists have damaged societies in many developing countries. Socialist economists ruined Ghana. Their off spring with their dependency theory f**ked up Latin America royally for a couple of decades.

    But the Chicago boys in Chile are not such an example. Chile is the best off of any Latin American country. By any standard the people of Chile ought to thank the Chicago boys for what they did.

    Of course pointing out the facts will make no difference. Pinochet killed a Communist and prevented Chile going the way of Cuba and the chattering classes will never forgive him. But that doesn’t make it so.

  56. Which comes back to the separation of morality and economics.

    It may have been better, under many people’s moral views, and certainly for the Chilean left, for Allende to have remained in power. Despite Chile, in all probability, now being significantly poorer than it actually is.

  57. ChrisM // Jan 21, 2012 at 10:29 pm

    Of course nuclear weapons are pretty good evidence that particle physics is correct. Likewise an engineered virus is pretty good evidence that the science behind genetic engineering is correct. Outcomes we might not like is no evidence that a discipline is not legitimate. Not making any testable predictions that prove correct would be a better measure of the legitimacy of a subject.

    You’re right of course but SR819 seems to have a guilt complex about economics as though there’s something about it that makes it uniquely liable to produce unpleasant consequences.

  58. I wasn’t disagreeing with you Thornavis. Although I was responding to your point, my comments were directed at SR819 who as you note, seems to have some strange ideas about how to decide if a discipline is a legitimate area of study.

  59. Surreptitious Evil – “It may have been better, under many people’s moral views, and certainly for the Chilean left, for Allende to have remained in power. Despite Chile, in all probability, now being significantly poorer than it actually is.”

    While Russia is significantly poorer than it was, I don’t think that the pre-1919 Left really benefited from the Revolution. Anyone who think that Chile, even Chile’s Left, would have benefited by Allende continuing his path down the road to, let’s be positive and say Cuba, is fooling themselves. Large chunks of the Cuban Left were eliminated along with everyone else.

    Even Chile’s socialists were better off under Pinochet. As Cuba’s socialists were under the old regime. Of course some of them are idiots but that does not change that fact.

  60. I was talking about morality rather than actuality. Sorry for being unclear.

    And you’re being unfeasibly reasonable. Only “some” socialists are idiots?

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