Sunday, July 31, 2011

why do economists disagree?

The New York Times Sunday Review had an article today about social values and science. The article began with a quote from Nobel Prize winning physicist Max Planck:
A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.
The thesis of the article is simple and powerful: scientists who fully embrace their social values when doing research will come out doing better research for it. Instead of purporting to be more "scientific" than the opposition, researchers should explicitly note their social biases, because by doing so, we will approach a higher quality of science: when the social implications of economists' research are explicitly given ("thrown on the table"), so that they are held to be accountable for their ideas, economics will be the better for it.

It's time we started teaching undergraduates a broader view about why economists disagree. Mainstream texts often choose to present the market-centered view as a place of common ground for any group of economists and policymakers who disagree about how we ought to move forward. The "scientific" or rigorous justification for this choice is the welfare economics vision of the economy: i.e., that perfectly competitive markets maximize social welfare and are therefore socially optimal. Welfare economics has succeeded in an uncountable number of ways: from the clever mathematical articulation of its core ideas in the middle of the 20th century, to more unclear (though equally successful) treatments of the ideas in modern economics textbooks.

An alternative view argues that this baseline is an inappropriate way of addressing the concerns of workers, or the poor. For them, the terms of debate ought not to be defined by markets and market efficiency criteria: even if one admits that we are far from the social optimum, this "third view" believes that we should not discuss policy in terms of getting closer to that criterion of social welfare.

The punchline? Liberals and conservatives are both equally at fault for purporting their underlying economic model to be one of science, or even for trying to argue that views can be boiled down to a nice dichotomous world. A broader perspective on how economics is a pseudo-science would admit of more diverse views, and ultimately, better debates.

Economics -- indeed, the world -- would be much better for it.

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