Political Economy insults Economics; Economist insults Economics

My Econ professor: “Economics is a value free science.”

My Power and Money reading: “Maintaining the myth of value-free economics poses corresponding dangers. First, economics embodies ethical judgements that would be controversial if made explicit. When there judgements are introduced into policy under the guise of science, one set of values prevails without public debate” (Political Economy: A Comparative Approach by Barry Clark).

Me: *facepalm* This should be interesting.

I’m taking four Political Science courses and one Economics courses. Power and Money aka Political Economy looks to be the most interesting/fun class. Since I handily avoided buying the $114 readings packet by using the library, I will relish it all the more.

This also made me think of an op-ed in the Wall Street Journal by Stephen Moore about the witchcraft that is macroeconomics. He basically said that all those stupid Keynesians should be re-evaluating their theories but instead “Prof. Romer recently complained that the political system will not allow Mr. Obama to ‘go back and ask for more’ stimulus.”

So basically Moore, who left his position at the Free Enterprise Fund (which lobbied for, among other things, the privatization of Social Security) to join the Journal’s editorial board, is doing what he does best and advocating for supply-side economics. Good for him. I’m just not sure he actually knows what macroeconomics is? Or maybe I don’t.

It’s the study of the entire economy using aggregated measures of supply and demand, with fun things like GDP and unemployment and inflation and all those other things. I mean really, microeconomics is not nearly as fun as all that. According to Moore, however: “Macroeconomics simply took basic laws of economics we know to be true for the firm or family—i.e., that demand curves are downward sloping; that when you tax something, you get less of it; that debts have to be repaid—and turned them on their head as national policy.”

But that’s just not true. Economists, when they’re only being economists, focus on making observations, analyzing real data and modeling economic systems. Sure, what they decide to study is probably motivated by their underlying beliefs or interests, but that can be argued for many areas of scientific study. They then step out of their role as economists when they advise on policy, make normative statements and advocate for specific government actions. Moore was not acting as an economist when he lobbied for the privatization of Social Security. His background in economics probably formed his support for such a policy and lent weight to his cause but he was acting as a policy wonk rather than an economist.

A good example: Economists agree that the minimum wage causes some unemployment. It’s a simple matter of a price floor.

The effect of a minimum wage in the labor market.

See the downward sloping demand curve? That’s the demand for labor at any price (wage). Lower wage, greater demand for labor. Higher wage, lower demand for labor. When the government mandates a minimum wage, there’s a gap between the demand and the supply for labor. Ta-da! Unemployment.

Despite this agreement economists do not all think that eliminating the minimum wage is a great idea. According to a 2006 survey of economists 37.7 percent want the minimum wage increased, while 46.8 percent want it eliminated. It’s hard to find anything all economists agree on. They do come close to a consensus on some issues like eliminating trade barriers (87.5%) and agricultural subsidies (85.2%). Prof. Greg Mankiw, a Harvard guy and the author of my very first Econ textbook, also has a list of statements economists can reach a consensus on at his blog.

So I don’t think that Moore is correct in completely dismissing all of his fellow economists who study macroeconomics as witches just because he disagrees with the Keynesian school of thought. I knew academics could get really heated about things, but an accusation of witchcraft seems a little extreme. Why can’t he be more civil? What if people start burning economists?

Part of it may be a little suppressed bitterness. Moore got his degrees from the University of Illinois at Urbana-Champaign and George Mason University. I don’t think that’s a problem, but Moore scoffs at the Obama administration’s position on unemployment insurance by writing that “Only someone with a Ph.D. in economics from an elite university would believe this.”

He doesn’t have a Ph.D. either. Just sayin’.

Eh. Maybe I just don’t know enough about macroeconomics yet. That’s alright. I’ll be taking at least three more economics classes… Then again, according to Political Economy, I’ll face “the challenge of grasping several competing perspectives from which to understand the economy.” I think I’m up for it.

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One Response to Political Economy insults Economics; Economist insults Economics

  1. Big Brother Mike says:

    I think Tue hidden cost of an employee is more to blame for unemployment. Minimum wage is below livable so it has become a nonfactor. If you can’t survive on min wage then you aren’t better off than if you’re unemployed. And with government handouts being unemployed is better!

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