Arnold Kling  

Economics and its Enemies

Can you Beat the Market?... Economics of Hydrogen...

William Coleman, author of Economics and its Enemies, gave a lecture on the history of anti-economics. He sees two main sources of hostility to economics. First,

The paradoxical truth is that nothing is more unpopular than the pursuit of the public interest. For every member of the public is a vested interest who wants preference and privilege, rather than the cold equality before the law of the free market. Barring fortuitous circumstances, for any economic interest there is always a regulation/intervention that will improve that interest’s position relative to what it would enjoy in the free market. No one, in other words, has a vested interest” in the completely free market.

In addition to self-interested opposition to economics, there is ideological opposition. One form of opposition is what Coleman calls "irrationalism."

While right irrationalism sees science as subversive of authority; Left Irrationalism sees it as constructive authority. Left Irrationalism condemns science and expertise as tools of social control, holds scientific authority to be an extension of political authority

For Discussion. Coleman says, "I would venture that 'anti-economics' is now the leading demonology of the intellect." Is he overstating his case?

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CATEGORIES: Alternative Economics

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Ian writes:

I'm not entirely sure I even understand the statement about anti-economics being "the leading demonology of the intellect." Perhaps the "other-side-of-the-pond" use of "demonology" is one I've not picked up. I read it to say that anti-economics is the leading/loudest/most-possessed of followers theory with an intellectual pursuit in its cross-hairs (as did/does anti-psycholgy with its blithe dismissal of psychological/psychiatric precepts and theories).

I'd venture to say that Coleman is going a bit overboard, but understandably so as he is giving a lecture to a room full of economists. Rhetoric in service of a point, I would guess. But still, his point is an interesting one.

Few other intellectual pursuits or disciplines earn so virulent a set of attacks as economics. Even the appellation "the dismal science" is a crude joke that illustrates how both sides of the ideological spectrum often dislike the news economists bear. People with the ability to implement or influence policy rarely like to hear that what they want to do doesn't correspond to what an economic analysis might suggest they ought to do.

Then again, economics so rarely offers a clean suggestion about anything. (The joke about Truman wanting a one-armed economist should be inserted here...)

I wonder if most of the anti-economics strain comes from a deep-rooted misunderstanding about the very point of some of these models and methods economics (as well as political economy) employ. Their existence, to some, demands that the results carry some sort of value-laden judgement. People seem to willingly ignore the idea that describing trends or movements in the market, or changes in forces, currency, interest rate, whathaveyou...are simply identifications of activity.

In fact, they seem to misunderstand models in the first place. The value of a decent model isn't in how accurately it reflects reality, but in how successful it is as a predictor. There are any number of highly educated attacks on some of the foundations of economic thought (rationality, in the sense of transitivity, complete ordering, etc.) that make strong cases that people are simply incapable of acting in the way economics would demand (Sen, for instance). Full rationality would seem to require a level of information and understanding the average person would or could never put into something like buying a shirt -- nevermind what it would take to assess market movements. Of course, there's always Freidman's classic retort about people only needing to act as if they're rational, rather than be perfectly rational. But we can just go back to statistics to find the employment of the notion that, whenever possible, it is best to use the simplest model available. When we reach the point where our models must contain the massive complexity and burdensome amount of factors of real life activity, then we cease to have a useable model.

The drive to "end economics" seems like a response to what can feel like a very dehumanizing process when viewing what economics might have to say. I.e: "...raising wages means an increase in unemployment." Perhaps the anti-economists are responding to the perception of a blase attitude on the part of economists towards real people losing jobs, having nowhere to work, not being able to pay rent, buy food, etc. Sitting in class, or reading a tract, and being subjected to constant comments about the disappearance of firms from a market, increases in unemployment, welfare loss, underserved groups that can't afford a good at a cost (especially when the examples are staples like food, shelter, etc)-- all of it can start to feel very heard-hearted. I would look to the possibility that most of economics teaching begins with an "ideal" state and then we talk about all the bad things that happen once something, anything, happens to upset equilibrium. If there were a way to teach it from "here's the choas and problems and misery of the real world...and here's how some of it can be alleviate through policies that enable more people to more fully participate in an uninterrupted market system...", perhaps people would have a better view of things. After all, this is often how lessons about government and science are taught. "People can get terminally ill, but medicine can impose order and health..." "Society would be violent and primitive, but for the cooperation that we call laws or government..." Again, I think it's only because people want to ascribe some sort of moral value to the effects talked about in economics lessons that engenders a real dislike for them.

Part of the value of economics to me, however, is that it never has to take on a value-laden tone. True, there is a great deal of effort in trying to codify questions of equity and fairness in market outcomes. None of them are fully satisfying, though. In fact, when economics becomes the tool of moral justice, we get results like Marx. His was one of the most powerful critiques of the entire enterprise of capitalism and even he had to admit the incredible value the system had in the modernization of the world. That capitalism includes, by its very construction, its own downfall is probably the foundation for most critiques to come later (since they all seem to rely on being situated in rational thought in order to criticize from within), and Marx gove one of the most articulate demonstrations of how this might come about. Unfortunatley, Marx then moved on to making economics a tool of morality. That perfect equality of outcomes was not possible under capitalism (pratically speaking), it must therefore be oppressive of some. The only answer is an eventual revolution against the oppressive system. But the use of equality of outcome as the basis for judgement of the current or future system is simply another moral decision. I, personally, dislike the idea of equality of outcomes very much, which would make Marxist Communism an unjust system for someone like Rawls...but I digress.

It just seems to me that economics is simply the ground on which people have chosen, wrongly, to fight out a larger ideological issue -- namely the issues of equity, fairness, or justice. Perhaps it can be used as a way to discuss these subjects, it just shouldn't be mistaken as a replacement for them.

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