"One of Brad DeLong’s commentators compares what’s going on to the discovery that some eminent biologists are creationists, but it’s actually worse than that: it’s like discovering that some eminent biologists have never heard of the theory of evolution and the concept of natural selection." -- Paul KrugmanI am in agreement with, for instance, Krugman and DeLong that the U.S.A. government currently needs to spend a lot on a stimulus package. But I wondered if such more-or-less liberal economists acknowledge other controversies in economics. Have they heard factor prices (like wages) cannot necessarily be explained by the interaction of well-behaved supply and demand curves in factor markets, even under ideal assumptions of perfect competition, flexible prices, perfect information, etc? I don't know whether I want to put much emphasis on Brad DeLong's failure to note such in this post about immigration.
Wednesday, February 04, 2009
Economists As Creationists Who Have Never Heard Of Evolution
I found this quote amusing:
And I wonder if economists, liberal or not, will acknowledge, that the labour supply curve is not the simple upward bending slope that they use in their models. Robert E. Prasch pointed out, that the work supply might well *expand* under low wage conditions, creating a market with two locally stable equilibria ('Reassessing the Labor Supply Curve', he mentions reswitching too). Maryke Dessing did that too and collected evidence from industrial and developing countries.
ReplyDeleteWell, as I've pointed out in my review of Krugman's new book, he does mention the possibility of a backwards bending supply-curve for labour in his introductory textbook.
ReplyDeleteAnd then, for no good reason, ignores it! Even after pointing to the history of working hours in America for over 100 years.
Review: The Conscience of a Liberal by Paul Krugman
Steve Keen (in Debunking Economics) has a good discussion of the labour supply curve and its implications. (pp. 119-23) As does Hugh Stretton in his Economics: A New Introduction (pp. 403-4 and p. 491)
I would say that there are good ideological reasons for economists ignoring this possibility -- it makes it harder to justify cutting wages as the cure-all for unemployment...
Iain
An Anarchist FAQ
Thanks Iain,
ReplyDeleteI found a quote in one of Walter Eucken's works from 1952 where he mentions the exact same problem and suggests minimum wages to correct this anomaly. This is in particular juicy, because Eucken is one of the fathers of Germany's ordoliberalism (which associated with Hayek) and somewhat unsuspicious of leftist ideological stances.
what is just as troubling is that most economists think and work as if they were creationists! With a very few exceptions amongst cognitive economists and economic historian concepts such as inheritance, the selfish gene or the 'savanna brain' paradigm are totally ignored.
ReplyDelete"the selfish gene"? I do hope you realise that the selfish gene does not imply the selfish individual?
ReplyDeleteDavid Friedman points to Dawkins' The Selfish Gene as providing the genetic basis for "capitalism" in one of his books. That is questionable, as selfish gene theory does not imply that competition is the best. In fact, co-operative behaviour is equally possible (which explains why humans lived in primitive communism for most of our time on this planet).
As for using evolutionary theory in the economics, that can be misused to justify social darwinist policies -- and has. The evolution of institutions and societies should be a key part of any serious economics, but "evolution" and "selfish gene" seems to be more likely to be used to justify free-market capitalism and a "dog-eat-dog" rationale for inequality and oppression... Something Dawkins himself has complained about!
Equally, appealing to evolutionary theory seems ironic when most mainstream economists use a methodology which explicitly assumes that market individualism is "natural", and was evolved to refute claims by socialists that capitalism, like other social systems, will evolve into something else...
Geoffrey M. Hodgson, an institutionalist economist, is worth reading on the matter of economics and evolution (his works include Economics and Utopia).
Iain
An Anarchist FAQ