Tuesday, April 16, 2013

"Economics Textbooks - Decades of Scientific Fraud"

Lars Syll has written a post, titled "Economics Textbooks - Decades of Scientific Fraud". If you had not already read it, could you guess what it is about from the title?

I would expect likely guesses to be non-unique. It is not about:

  • How the Cambridge Capital Controversy demonstrates that textbook teaching on labor markets and, for example,on the minimum wage is nonsense.
  • The incoherence of textbook teaching on the justification for lack of tariffs by the theory of comparative advantage.
  • The textbook misrepresentations of the theories of various economists, including John Maynard Keynes.

You can extend the above list at your leisure.

In many ways, economics seems to me to be an extraordinary subject. Good arguments have existed for decades for discarding most of mainstream teaching and practice. As far as I can see, the bulk of these arguments, including their very existence, are just ignored by most mainstream economists. I am willing to entertain demonstrations of the fallacy of theories taught in almost all mainstream textbooks for decades. I think my willingness to explore other demonstrations than those I have been previously aware of is partly due to my belief that most economists are socialized into willful ignorance.

I can see why some young mainstream economists may resist the notion that they have been taught, mostly, lies and nonsense. And so they may look in the research literature for arguments against the arguments and demonstrations that I accept, or at least try to explore. Since my favorite positions were established after long controversy, you can find neoclassical counter-arguments, of a sort. For example, one might cite, in response to the Cambridge Capital Controversy:

  • Edwin Burmeister's championing of Champernowne's chain index measure of capital1.
  • Frank Hahn's advocacy, including in response to the Cambridge Capital Controversy, of General Equilibrium Theory2.

In response to the application of the CCC to the theory of international trade, one might cite:

  • Christopher Bliss's suggestion that the necessary existence of gains from trade follows from including an assumption that all produced goods, not just consumer goods, be traded internationally.
  • Wilfred Ethier's claim that the endowment of capital be calculated in equilibrium prices in models of international trade.
  • A suggestion that the theory of international trade be organized around comparisons of intertemporal equilibrium paths3.

One might think a conclusion is more justified from the weight of the evidence when multiple arguments reach that conclusion. So one might react to existence of such controversies in the research literature as allowing one to support mainstream teaching. However, one would be wrong in this attitude. If you look at these responses in some detail, you will find that the orthodox economists do not end up at the textbook position, but at some other point. But, as far as I can tell, neither side ends up being transitioned from the research literature to conventional teaching. Would you not be more confident in adopting some such conventional counter-argument to one of my favorite arguments if it were widely taught? Otherwise, should you not suspect yourself of adopting an idiosyncratic misinterpretation of the theory?

  1. This chain index is endogenous, not exogenous, as needed for much of neoclassical theory. Furthermore, Burmeister accepts the validity of demonstrations of reswitching and capital-reversing.
  2. A focus on intertemporal and temporary equilibria is a rather drastic change of theory from the traditional neoclassical focus on a comparison of long run equilibria. The latter comparisons seem to be to provide the (exploded) foundation for most mainstream policy advice.
  3. Avinash Dixit (May 1981). The Export of Capital Theory, Journal of International Economics. V. 11, Iss. 2: pp. 279-294.


A said...

Speaking of which, how about this Reinhart-Rogoff mess, eh?

Robert Vienneau said...

I guess that mess is an example of black humor. Harvard has some economists I respect, despite their periodic purges.