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Sadly, the average economist is no Milton Friedman.
It beggars belief when economists at Princeton, Harvard and Berkeley claim that they are lone voices in the wilderness boldly striking heterodox positions against the hegemony of "free market economics."
David Card, for example, says “You lose your ticket as a certified economist if you don’t say any kind of price regulation is bad and free trade is good.” Really? Card and Krueger's famous paper on the minimum wage was a 1993 NBER working paper published in the AER in 1994. What happened then in 1995? Was Card decertified, drummed out of the profession, vilified by his peers? Hardly, in 1995 David Card was honored (deservedly imho) by the American Economic Association with the John Bates Clark medal.
Dani Rodrik says “I fall into the methods of the mainstream, but not the faith,” which he defines as the belief that more markets and free trade are always good and government regulation is always bad. Give me a break. Let's go to the data.
Klein and Stern surveyed members of the AEA on a host of policy questions bearing on markets and government regulation. The result, "Only a small percentage of AEA members ought to be called supporters of free-market principles."
Even on the minimum wage, support for which Card says gets you decertified, the mean economist position is in between "support mildly" and "have mixed feelings." Indeed, even Card has mixed feelings about the minimum wage! (See his book with Krueger in which he points out that the minimum wage is not a very effective way to help the poor). On a host of other issues concerning government regulation, like support for OSHA, the FDA, and the EPA, the mean economist is somewhere between strongly and mildly support.
Only on free trade is there strong opposition to government regulation in the form of tariffs. Thank goodness for small mercies.
Posted by Alex Tabarrok on July 11, 2007 at 03:54 PM in Economics | Permalink
Comments
Let's face it: The article sucked.
I have strongly converted to behavioral economics in many areas. The most convincing pieces of evidence came from articles published in the mainstream journals. It turns out the people leave serious money on the table all the time for behavioral or cognitive reasons, to the point where it really does affect the equilibrium outcome.
So score some for behavioral economics, or even a unified social science approach that tests different hypotheses and explains deviations from the rational choice prediction.
But some of these "heterodox" types are simply leftist morons who are mad that economics doesn't fulfill their ideological fantasies. (Oh, and by the way, I've seen some other ideological types who have similar problems with economics.)
I mean "deficits don't matter because the government can always print money?" Break me a fucking give. That guy's out NOT because he has bold insights that the rest of us don't want to hear, but because he's an idiot who's wasting our time.
I'm all for rigorous testing of assumptions to generate better models, and if insights from other social sciences then turn out to work better than pure-rational choice models in this or that case, then great. Of course, in many cases, like low-skill labor markets, the neoclassical model works great, and yes, minimum wages do cause disemployment. Card and Kruger were wrong, boo-freaking-hoo.
But spare me the bellyaching from every half-assed left-wing dildo who claims that neoclassical economics was some Reaganite plot.
Posted by: Keith at Jul 11, 2007 4:12:21 PM
In other news, the policies would be more pro-free market if only economists ran the country...
Posted by: Person at Jul 11, 2007 4:24:10 PM
Milton was strong on the distinction between positive and normative economics.
Just because something causes harm is no reason to oppose it if you're a curmudgeon.
Posted by: Coruscation at Jul 11, 2007 5:21:08 PM
if it is true that there is dispute about some of these beliefs within economics, then does this not make bryan caplan's claims of voter irrationality seem dubious? or are the economists the ones who are irrational now? or is it just anyone who doesn't agree with bryan caplan?
Posted by: irrational guy at Jul 11, 2007 5:29:12 PM
Bryan is correct that average economist is better on markets than the average person. The standard, however, is low.
Posted by: Alex Tabarrok at Jul 11, 2007 5:37:31 PM
Brilliant! Rants in the blogosphere are rarely of this caliber. We could use a lot more of this gloves off honesty. Make sure you have your laptop with you the next time you fall into a bottle of Jack and you may be able to pump out a few more of these.
Posted by: Carl Marks at Jul 11, 2007 5:43:10 PM
My vote for most disingenuous quote:
'“Economists can’t pretend that the consensus for free markets and free trade that existed 30 years ago is still here,” said Robert B. Reich, a public policy professor at Berkeley who served in President Bill Clinton’s cabinet.'
Anyone who was around at that time should know that Robert Reich can't pretend he was part of that "consensus" 30 years ago. Which kind of belies the "consensus" notion, eh Bob?
Posted by: M. Hodak at Jul 11, 2007 5:49:17 PM
The fact is, it looks like behavioral approaches mainly strengthen the case for free trade, because the insights from cognitive psychology and organizational behavior (along with agency issues)show that organizations will tend towards insanity in the absence of outside competitive pressure.
Posted by: Keith at Jul 11, 2007 5:55:43 PM
You could write an article like this in any field where not everyone agrees on everything. People whose views are not the most popular can complain that they are being unfairly repressed. By itself, this complaint gives almost no useful info to outsiders. Sometimes such complaints are justified, sometimes they are not.
Posted by: Robin Hanson at Jul 11, 2007 6:03:19 PM
You know, 30 years ago was 1977. I was in high school then, but am pretty sure that there was no "free market consensus", either in economics or in the policy world.
More generally, I think the thing that predicts that employment goes down when wages go up has a different name than "free market theory".
Why do people continue to read the NYT? Every time I read it on anything I know about, the level of ignorance is simply stunning. Note that this is different from a point about bias - that may be there too - my point here is about simple ignorance of what they are writing about.
Like the nation article, this one also confuses methodological disputes with substantive disputes as if all lefties are anti-math and all libertarians are pro-math. This too is empirically false and again shows a deep ignorance of the topic at hand.
Pathetic.
Jeff
Posted by: Jeff Smith at Jul 11, 2007 6:14:07 PM
'“Economists can’t pretend that the consensus for free markets and free trade that existed 30 years ago is still here,” said Robert B. Reich, a public policy professor at Berkeley who served in President Bill Clinton’s cabinet.'
Anyone who was around at that time should know that Robert Reich can't pretend he was part of that "consensus" 30 years ago. Which kind of belies the "consensus" notion, eh Bob?
Huh? Nowhere in that quote does he claim that he was part of that consensus. And he wasn't, as you pointed out.
Posted by: fustercluck at Jul 11, 2007 6:17:37 PM
Actually, in many ways, Caplan's work fits into outside-the-mainstream cutting edge behavioral approaches that the narrowminded are wrongly deriding.
Caplan shows how institutional mechanisms can generate very irrational behavior and outcomes. Majority winner take all voting is an institutional mechanism that can generate bad outcomes because it creates virtually no incentive for voters to discover and transmit information. Any genuinely honest person open to outside-the-box heterodox thinking would find this pretty compelling.
Posted by: Keith at Jul 11, 2007 6:27:56 PM
Interesting that the heterodox reject math on the grounds of it being irrefutable. I thought Karl Popper was out of vogue.
But math can be refuted. All you need to do is reject Aristotelian logic. As, it seems, many of the heterodox have.
Posted by: Jason at Jul 11, 2007 6:59:13 PM
Is it not rather odd that the one social science that fails to lean to the left is now being branded as a religious cult in two recent articles? Hmmmm, does anyone smell the partisan politics behind these hackneyed heterodox complaints? The left should be ever so thankful that the largely rational, normative methodological style of economics has yet to seep into the departments of sociology, philosophy, and cultural anthropology.
Posted by: John Pertz at Jul 11, 2007 7:02:43 PM
As the (apparently) sole alumni representative of the University of Missouri - Kansas City Department of Economics to read this blog, I say to you: Consider the source.
Posted by: Bill at Jul 11, 2007 8:30:48 PM
While I can't necessarily say cognitive psychology leans to the left, yes, I think economists come in for criticism precisely for not being raving leftists.
I think behavioral economics is great. I think more than a few lefty ideologues are embracing it and misapplying it for reasons that have more to do with their own confirmation bias than any genuine understanding of economics and its limitations.
Generally, vanilla econ and supply and demand work quite well for low-skill labor markets, and behavioral economics appears to support free trade. So the article isn't rooted in any genuine understanding of behavioral economics. It's mainly some journalist looking for a reason to justify their own biases over economics.
By the way, Blinder's "critique" of free trade isn't rooted in any sort of analysis, much less behavioral economics. It's mostly something like, "Hey, all these people that are kinda like me could be adversely affected." Yeah, so who'll benefit? All the people whose labor is complementary with accounting and financial services? That's like, everybody.
Posted by: Keith at Jul 11, 2007 8:32:06 PM
From the article:
"Mr. Blinder said economists must look more closely at the real world instead of modeling it in the lab. “Economics is insufficiently scientific,” he said. “Mathematics may be useful, but mathematics is not scientific. It doesn’t generate refutable hypotheses.”"
There is evidence, in ever greater quantities, that Mr. Blinder is correct in agreeing with Donald Gordon's hypothesis that mathematical complexity is negatively related to operationalism
in economic theory.
Posted by: indiana jim at Jul 11, 2007 8:37:19 PM
"There is evidence, in ever greater quantities, that Mr. Blinder is correct in agreeing with Donald Gordon's hypothesis that mathematical complexity is negatively related to operationalism in economic theory."
True, but the standard neoclassical model isn't complex, is highly operational, and highly intuitive.
The real high theory disaster in economics was game theory. Incredibly complex with a billion equilibria. Game theory can be useful, and there are some very sophisticated econometric approaches that allow people to use game theory against real data, but the energy expended in game theory in economics far outstripped its usefulness.
Behavioral economics offers quite a bit more, by generating falsifiable assumptions, and adding simple, operational, and intuitive insights from other disciplines to the simple and intuitive insights of neoclassical economics.
Posted by: Keith at Jul 11, 2007 8:51:11 PM
So people experience varying degrees of (minor) approbation for their opinions or findings, and they exaggerate it. This seems like very typical human behavior, but Alex wants to mock their opinions and findings rather than their human-ness.
It's not like Milton Friedman didn't know how to play the demagogue. And it's not like you are a better economist than David Card. So where are you going with this?
Posted by: Matt at Jul 11, 2007 8:59:07 PM
Ok that comment was hasty and I retract it. Alex is, in fact, mocking their human-ness and not their positions (with which he obviously disagrees, but that is not object of his venom). Sorry!
Posted by: Matt at Jul 11, 2007 9:01:59 PM
"It's not like Milton Friedman didn't know how to play the demagogue."
I think that's why I give him a lot of credit, even in areas where I disagree with him. He actually participated and voiced his genuine views, and didn't buckle and pander and he didn't just spew crap. He actually found cutting ways to get his own ideas across. And he actually articulated and explained economic methodology and its usefulness rather than apologizing and trying to give everybody an excuse to ignore answers they didn't like.
Let's face it, you gotta like any guy who replies to Westmoreland's "I don't want to command an army of mercenaries" with "Would you rather command an army of slaves?" What a great way of using opposing hyperbole to demonstrate the silliness of hyperbole.
Posted by: Keith at Jul 11, 2007 9:09:59 PM
Alex wrote: "Sadly, the average economist is no Milton Friedman."
I'd make it much stronger, more like:
Sadly, very few economists are close substitutes for Milton Friedman.
Posted by: indiana jim at Jul 11, 2007 9:12:01 PM
Unfortunately, the state of the art in economics is identical to what you would get if astrology was called astronomy, and there was no way to distinguish the astronomers from the astrologers. Some economists with PhDs are truly incompetent.
Posted by: Russell Nelson at Jul 12, 2007 4:12:59 AM
Mr. Blinder said economists must look more closely at the real world instead of modeling it in the lab. “Economics is insufficiently scientific,” he said. “Mathematics may be useful, but mathematics is not scientific. It doesn’t generate refutable hypotheses
Maybe I am wildly missing something here but I don't get this quote at all. Mathematics is key in developing refutable hypothesis.
Suppose I said:
The head is a big part of the body.
Is that refutable? Not really.
Suppose I said the height of the head from chin to peak will be greater than or equal to one-half of the height of the body from toe to peak.
Is that refutable. Absolutely.
The value of math is that you put information in on one side and you get a prediction out on the other that is necessarily true for a valid model. If the prediction doesn't hold your model isn't valid.
Posted by: Karl Smith at Jul 12, 2007 10:41:12 AM
Did the NYTimes even notice the irony re: evolution?
Posted by: 8 at Jul 12, 2007 11:02:48 AM
