Economics — non-ideological and valuefree? I’ll be dipped!

27 October, 2016 at 21:29 | Posted in Economics | 3 Comments

jp-imgresI’ve subsequently stayed away from the minimum wage literature for a number of reasons. First, it cost me a lot of friends. People that I had known for many years, for instance, some of the ones I met at my first job at the University of Chicago, became very angry or disappointed. They thought that in publishing our work we were being traitors to the cause of economics as a whole.

David Card

Back in 1992, New Jersey raised the minimum wage by 18 per cent while its neighbour state, Pennsylvania, left its minimum wage unchanged. Unemployment in New Jersey should — according to mainstream economics textbooks — have increased relative to Pennsylvania. However, when economists David Card and Alan Krueger gathered information on fast food restaurants in the two states, it turned out that unemployment had actually decreased in New Jersey relative to that in Pennsylvania. Counter to mainstream demand theory we had an anomalous case of a backward-sloping supply curve.

Lo and behold!

But of course — when facts and theory don’t agree, it’s the facts that have to be wrong …

buchC6The inverse relationship between quantity demanded and price is the core proposition in economic science, which embodies the pre-supposition that human choice behavior is sufficiently rational to allow predictions to be made. Just as no physicist would claim that “water runs uphill,” no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.

James M. Buchanan in Wall Street Journal (April 25, 1996)

Economics — non-ideological and valuefree? I’ll be dipped!

3 Comments »

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  1. There is always the possibility, which must be considered, that economists are in fact utility-maximizing rational agents who correctly appreciate on which side their bread is buttered.

  2. Or, to put it another way, if you accept the axiomatic premises of mainstream economics, then what is “true” is whatever would maximize the expected lifetime utility of a mainstream economist if it were “true”.
    .
    Anything else would represent non-optimal decision making by the representative agent.

  3. Oh, now I get it. The 1 million irishmen who starved to death, died from “natural” causes.


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