More on economics (though you can read that the other way around)

Last week, I wrote a post that was largely critical of economics, pointing out that, as a discipline, economics fails to fulfill the conditions of being a true science. That would be fine, except that economists have become so important to our society as pundits, advisers, even decision-makers.

I don't want to appear to be writing an anti-economics blog, as I believe it to be a young discipline with some insights; it's just relied upon in lieu of actual thinking. And there is no precept, no matter how commonly believed, that cannot be set aside if an economist is trying to make a political point (witness free trade in labor, which basic economic theory will tell you implies that the higher-cost country will have to reduce costs, leading inexorably to lower salaries - but few economists will be honest about that).

Nevertheless, economists can be their own worst enemies. That they are highly-placed in government and business can lead to a remarkable self-importance, especially remarkable given their lack of concrete results. For example, check out this post on Crooked Timber. Daniel Davies discusses a post on Gregory Mankiw's blog (Mankiw is the Harvard economist who served as Bush's chairman of the Council of Economic Advisors, and we know how that worked out):

It’s been a staple of CT over the last five years that altogether too many economists have altogether too much academic arrogance when it comes to their dealings with other social science disciplines, but this is as April showers when it comes to the ugly contempt and patronisation displayed by your typical economist to the general working public.

The risk?

Joe Sixpack is pretty aware that his livelihood is under threat from something, because his bloody real wages haven’t gone up in the last thirty years. If he ceases to blame the foreigners, then since the problem won’t have gone away, he is likely to start looking round for alternative explanations. And the results of that search are unlikely to be anything but very bad news for the Republican Party.

Actually, the case is understated, because there is a remarkable consensus on quite a few issues that cross parties. Unfortunately, that common wisdom doesn't jibe with what most people see. As a result, economists, and the politicians who rely upon them, lose credibility. When the average person knows that his or her life is higher in risk and lower in reward, and the ruling class says everything's great, this mismatch bodes poorly.

Occasionally, someone cuts through the mist, and tries to present an alternative view to the conventional wisdom. For example, take a look at this paper by Dean Baker. This is a real economist who dares to question his colleagues, something he does quite often on his blog.

I'll let you read the paper, titled "Trade and inequality: The role of economists," for its insights. The basic thrust, though, is:

The role of economists in trade debates is especially pernicious because there is no area of economics in which economists have been less honest about what their models show. They have consistently exaggerated the benefits that are predicted by standard trade models. At the same time they have ignored or downplayed the distributional consequences. In doing so, they consistently deride those who raise questions about the path of recent trade policy for failing to accept fundamental realities of the modern world.

(I may discuss the actual results of this paper at a later time; suffice it to say that Baker calls into questions the commonly-held ideas about free trade, particularly with respect to winners and losers - let's just say it isn't an unqualified win-win, which is what you would think if you read editorials, think pieces, or listened to anyone influenced by modern economic thinking.)

The point of this post is to point out the remarkable hubris shown by a profession that has "proven" almost nothing. There are still serious doubts about even the most common place aspects of economic theory, but you wouldn't know this unless you dig it out. I, for one, would have a lot more respect for economists if they would, at least occasionally, qualify their statements - I suppose that would cost them money, though. And that part of the model, that they've got down.