Robert Heilbroner — The Embarrassment of Economics: Weekend Reading

Robert Heilbroner hits it out of the park in this short article, originally a speech. It's a fun read, too.

Grasping Reality
Robert Heilbroner (1996): The Embarrassment of Economics: Weekend Reading
Brad DeLong | Professor of Economics, UCAL Berkeley

Sandwichman — "Opportunity Cost of Socialism"

Why is the Council of Economic Advisers producing party political propaganda for the GOP?…

Are Trump's "economic advisers" really so ignorant of basic economic concepts beyond the most elementary textbook simplification?...

But, but... economics is a science! (snark)

Econospeak
"Opportunity Cost of Socialism"
Sandwichman

Lars P. Syll — Blog Balanced budget religion

Paul Samuelson quote you may wish to keep on file if you don't already have it.

Lars P. Syll’s Blog
Balanced budget religion
Lars P. Syll | Professor, Malmo University

Noah Smith — Economists Lose Credibility When They're Too Certain

They made this mistake by claiming free trade had no downsides.

I wouldn't say it is just free trade. 

This is what happens when ideology trumps scientific rigor, and scientific credibility is used to push a political agenda.

Economists appear to fall into this trap often enough to have destroyed their public credibility. It's another form off fake news. 

As Noah Smith points out, they know better, but do it anyway. Now they and we, are reaping the whirlwind of rabid populism as the working class bites back.

Bloomberg View
Economists Lose Credibility When They're Too Certain

Noah Smith

Michael Roberts — The economics of Luther or Munzer?

History lesson. Trading one dogmatism for another?

Michael Roberts Blog
The economics of Luther or Munzer?
Michael Roberts

Erik Reinert — Towards a better understanding of convergence and divergence: or, how the present EU strategy – at the expense of the economic periphery – neglects the theories that once made Europe successful

This new working paper attempts to address some of the main problems of the European Union today. The main thesis is that the Weltanschauung and the economic narrative on which the European project has been based have changed radically since the inception of the European Project, from one conducive to convergence and cohesion to another which is conducive to divergence and, in the last instance – I shall argue – to a form of internal colonialism towards the economic periphery.

The field of Science and Technology employs the term sociotechnical imaginary [1] about the collective narratives and visions of social futures and of the common good. I shall argue that the European Union has moved away from the sociotechnical imaginary, or narrative, that dominated after World War II. I shall argue that this post WW II Marshall Plan Narrative (MPN) gave way to an equilibrium-based Neo-Classical Economics Narrative with an added innovation rhetoric, which I shall argue is based on a fairly shallow understanding of innovation (which I shall call NC+I)....

Worthwhile post. The working paper looks good, too, but I haven't yet read it.

He sums up the problem in economics as it is practiced in relation to policy formulation. Conventional economics is a simplification that tends toward oversimplification. Policy based on conventional economists' modeling assumptions and methodological choices risks being unrealistic. This has consequences that manifest not only economically but also socially and politically.

In other words, we must attempt to perceive the complex realities behind simple numbers.

Developing Economics
Towards a better understanding of convergence and divergence: or, how the present EU strategy – at the expense of the economic periphery – neglects the theories that once made Europe successful

Erik Reinert | Professor of Technology Governance and Development Strategies at Tallinn University of Technology, Estonia, Senior Research Fellow at NORISS, Norwegian Institute of Strategic Studies, in Oslo., and Founder and Chairman of the Other Canon Foundation

Jason Smith — Corporate taxes and unscientific economists

Another takedown.

But let's take this result at face value. So now we have a largely model-independent finding that to first order the effect of corporate tax cuts is increased wages. The scientific thing to do is not to continue arguing about the model, but to in fact compare the result to data. What should we expect? We should a large change in aggregate wages when there are changes in corporate tax rates — in either direction. Therefore the corporate tax increases in the 1993 tax law should have lead to falling wages, and the big cut in corporate tax rates should have lead to even larger increase in wages. However, we see almost no sign of any big effects in the wage data...

Now you may say: Hey, there are lots of other factors at play so you might not see the effect in wage data. This is the classic "chameleon model" of Paul Pfliederer: we trust the model enough to say it leads to big wage increases, but when they don't appear in the data we turn around and say it's just a toy model....

And this is the problem with economics — because what if Mankiw's and Cochrane's derivations and definitions of "static" analysis were mathematically and semantically correct? Would they just say I guess you're right — corporate tax cuts do raise wages. Probably not. They'd probably argue some on some other tack, much like how Cochrane and Mankiw would argue on a different tack (in fact, probably every possible tack). This is what happens when models aren't compared to data and aren't rejected when the results are shown to be at best inconclusive....

Data is the great equalizer in science as far as models go.

Conventional economists remind of the well-known Texan putdown, "All hat and no cattle."

Information Transfer Economics
Corporate taxes and unscientific economists

Jason Smith

Dániel Oláh — If You Look Behind Neoliberal Economists, You’ll Discover the Rich: How Economic Theories Serve Big Business

The road to serfdom – sponsored by big business.

Some history of economics.

Evonomics

If You Look Behind Neoliberal Economists, You’ll Discover the Rich: How Economic Theories Serve Big Business
Dániel Oláh

See also

Naked Capitalism
Gaius Publius: Defining Neoliberalism

Brad DeLong — Where Does the Use of "Takers" as in "Makers and Takers" and "A Nation of Takers" Come From?

It appears to come from right-wing loon and goldbug Edmund Contoski:

WCEG — The Equitablog
Note to Self: Where Does the Use of "Takers" as in "Makers and Takers" and "A Nation of Takers" Come From? : It appears...
Brad DeLong

David Glasner — The Standard Narrative on the History of Macroeconomics: An Exercise in Self-Serving Apologetics

During my recent hiatus from blogging, I have been pondering an important paper presented in June at the History of Economics Society meeting in Toronto, “The Standard Narrative on History of Macroeconomics: Central Banks and DSGE Models” by Francesco Sergi of the University of Bristol, which was selected by the History of Economics Society as the best conference paper by a young scholar in 2017.... 

Sergi’s paper is too long and too rich in content to easily summarize in this post, so what I will do is reproduce and comment on some of the many quotations provided by Sergi, taken mostly from central-bank reports, but also from some leading macroeconomic textbooks and historical survey papers, about the “progress” of modern macroeconomics, and especially about the critical role played by “microfoundations” in achieving that progress....

I will focus on two other sections of Sergi’s paper “the five steps of theoretical progress” and “microfoundations as theoretical progress.”...

Uneasy Money
The Standard Narrative on the History of Macroeconomics: An Exercise in Self-Serving Apologetics
David Glasner

Frances Coppola — Beyond disappointment

Symptoms showing why both deconstruction and inclusion are necessary in economics to avoid cognitive sclerosis.

Coppola Comment
Beyond disappointment

Frances Coppola

Simon Wren-Lewis — Economists: too much ideology, too little craft

One of the features of mainstream economics today is the huge diversity of models that are around. Academic prestige tends to come to those who add to that number. But how do you decide which model to use when investigating a particular problem? The answer is by looking at evidence about applicability. That is not a trivial task because of the probabilistic and diverse nature of economic evidence, and Dani Rodrik describes that process as more of a craft than a science....

Mainly Macro
Economists: too much ideology, too little craft
Simon Wren-Lewis | Professor of Economics, Oxford University

Lars P. Syll — Seven sins of economics

Pramit Bhattacharya quote. 

Double significant since it is a signal of rising criticism of the profession coming from outside the Anglo-American world that is presently dominant. Hopefully, this is a sign that this domination of ideas and methods will not spread and will be balanced soon.

Lars P. Syll’s Blog
Seven sins of economics
Lars P. Syll | Professor, Malmo University

Jason Smith — Solow has science backward

Jason Smith makes a key observation here that many miss. Science is inherently a skeptical enterprise where conclusions are tentative on both forthcoming empirical findings and new explanations that challenge existing ones, which they may replace if they provide a better explanation in the view of the scientific community.

"Firmly held beliefs" has another label — dogma. The dogmatic approach is opposite of the scientific one.

Of course, this doesn't mean that fringe views are to be considered on a par with consensus ones. at the same time, the consensus view represents heavy investment that may attempt to neutralize challenges by categorizing them as fringe. However, scientific method provides criteria for addressing such controversies. On the other hand, see the works of Paul Feyerabend, especially Against Method.

Paul Feyerabend (1924–1994) argued that no description of scientific method could possibly be broad enough to include all the approaches and methods used by scientists, and that there are no useful and exception-free methodological rules governing the progress of science. He argued that "the only principle that does not inhibit progress is: anything goes".[48]

Feyerabend said that science started as a liberating movement, but that over time it had become increasingly dogmatic and rigid and had some oppressive features. and thus had become increasingly an ideology. Because of this, he said it was impossible to come up with an unambiguous way to distinguish science from religion, magic, or mythology. He saw the exclusive dominance of science as a means of directing society as authoritarian and ungrounded.[48] Promulgation of this epistemological anarchism earned Feyerabend the title of "the worst enemy of science" from his detractors.[49] — Wikipedia-Philosophy of Science-Contermporary approaches

Incidentally, the quotation, "When the facts change, I change my mind. What do you do, sir?" has been attributed to Keynes so often it is now a commonplace. There is no solid documentation of this, however.

Information Transfer Economics
Solow has science backward
Jason Smith

Bill Mitchell — When economists lose the plot entirely and show their colours

When I started studying economics at University, I had a lecturer in microeconomics who, thankfully, was an antagonist of the mainstream micro mantra about perfect markets and their capacity to deliver optimal, efficient outcomes for all. She is no longer with us but her early teachings have stayed with me (thanks Kaye!). She used to say that the market was like a voting system where the votes were cast in dollars. The rich have more votes and can sway the outcome in their favour. At the extreme, they can deprive the poor of the essentials of life, yet mainstream economists, who recite the mantra in those textbooks, would claim that outcome was optimal and efficient because supply and demand interacted to determine a ‘market-clearing’ price. 

For those who resisted the socio-pathological tendencies that arise from a complete undergraduate program in mainstream (neo-liberal) economics, it was obvious that the narrative was a fantasy. The real world is nothing like the requirements that the textbooks specify before ‘markets’ deliver optimal outcomes. Deeper study, not usually, taught in standard, mainstream economics programs also allowed one to understand that when the ‘market’ is not as specified in the textbook (read the real world) attempting to engineer ad hoc shifts towards that ‘idealisation’ probably resulted in even worse outcomes. At any rate, application of ‘perfectly competitive’ theory is fraught. 

And that is before we invoke basic morality and human valuation. Unfortunately, events like Hurricane Harvey, bring out economists who think it is smart to apply these ridiculous textbook models and claim authority over the rest of the citizenry. All they achieve is that they utter venal garbage and shame on the media outlets who give them oxygen....

Paragraphing introduced for online readability.

Bill Mitchell – billy blog
When economists lose the plot entirely and show their colours
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Tim Worstall is not alone. Another case in point.

Econolog
"Price Gouging" Is Urgently Necessary
David Henderson

David F. Ruccio — American myth

And yet the myth persists. American elites and policymakers still to choose to emphasize the economic returns to education as the panacea to address socially established wealth disparities and structural barriers of racial and ethnic economic inclusion.
The question is, why?
According to Hamilton and Darity, such a view

follows from a neoliberal perspective, where the free market, as long as individual agents are properly incentivized, is supposed to be the solution to all our problems, economic or otherwise. The transcendence of Barack Obama becomes the ideal symbolism and spokesperson of this political perspective. His ascendency becomes an allegory of hard work, merit, efficiency, social mobility, freedom and fairness, individual agency, and personal responsibility. The neoliberal ideology is not limited to race. It more generally places the onus on individual actions, and more broadly leads to deficiency narratives for low achievement, but this is especially the case when considering race and other stigmatized workers. Perhaps the greatest rhetorical victory of this paradigm is convincing the masses that implicit in unfettered markets is the “American Dream”—the hope that, even if your lot in life is subpar, with patience and individual hard work, you can turn your proverbial “rags into riches.”

And so the myth of college and the American Dream is perpetuated, while the unequal distribution of wealth—across the entire population, and especially with respect to ethnic and racial minorities—which has been growing for decades, continues unabated.

Occasional Links & Commentary
American myth
David F. Ruccio | Professor of Economics, University of Notre Dame

Heiner Flassbeck — Are Keynesianism and Neoclassical economics antipodes?

Over time, it has become abundantly clear that Keynesians made a major strategic mistake to consider neoclassical economics as a scientific counterpart that has to be opposed. Instead of characterizing neoclassical economics had from the very outset as a normative structure, which serves no scientific purpose, they took it on as a science. But no science can ever win the confrontation with an ideological superstructure. The neoclassical attempt is not directed to make genuine scientific progress, but to defend its own position at all costs and even if this cost comes with the high price of inconsistency no one cares. The “general theory,” which Keynes attempted to write, was not ‚general‘ because neoclassicism was not a special brand of economic theory, but a normative structure.

Flassbeck argues that neoclassical economics has an ideological bias toward a government-free market based economy and creates a narrative that pictures a "natural" economy based on supply and demand in markets as one without government. Their solution to market failure is therefore to blame government intrusion and to seek to reduce the role of government. Flassbeck observes that this has no empirical basis and is completely ideological.

A problem with many "Keynesians, " e.g., New Keynesians, is that they have acknowledged the scientific basis of neoclassical economics, where there is none, and tried to shape their views in reaction but within the same flawed framework. This, too, results in pseudoscience.

flassbeck economics international
Are Keynesianism and Neoclassical economics antipodes?
Heiner Flassbeck | Director of Flassbeck-Economics

James Kwak — How Ideologues Use Grade-School Economics to Distort Minimum Wage Debates

Economism may not accurately describe reality, but its reduction of complex phenomena to simple concepts was a major asset in the battle of ideas. The political landscape of the United States after World War II was dominated by the shadow of the New Deal and the idea that the government could and should pay a major role in managing the economy. Businesses that opposed intrusive regulations and wealthy individuals who feared higher taxes needed an intellectual counterweight to the New Deal, a conceptual framework that explained why an activist government was bad not just for their profits and their pocketbooks, but for society as a whole. Economism filled that need.…

In short, conventional economics is propaganda for an ideology rather than being a science as advertised. "Simplify and conquer" was added to "divide and conquer."

Evonomics
How Ideologues Use Grade-School Economics to Distort Minimum Wage Debates
James Kwak | Associate Professor of Law at the University of Connecticut School of Law

Pete Dolack — Austerity Never Ends: Economists Say Wages Are Too High

Lars Syll and David Ruccio get a shoutout.

Counterpunch
Austerity Never Ends: Economists Say Wages Are Too High
Pete Dolack

James Kwak — What’s Wrong With Econ 101

Both Hayek and Friedman saw themselves as participants in a battle of ideas against encroaching socialism. In their hands, an analytical framework became a universal worldview: Economics 101 became economism. Economism is the belief that basic economics lessons can explain all social phenomena — that people, companies, and markets behave according to the abstract, two-dimensional illustrations of an Economics 101 textbook. Ideally, students should learn that the competitive market model is just that — a model, which by definition abstracts from the real world. According to the rhetoric of economics, however, the lessons of Economics 101 can be transplanted directly into the real world. The central idea that free markets generate the greatest possible economic well-being for society becomes a universal framework for understanding and answering any policy question.

Economism may not accurately describe reality, but its reduction of complex phenomena to simple concepts was a major asset in the battle of ideas. The political landscape of the United States after World War II was dominated by the shadow of the New Deal and the idea that the government could and should play a major role in managing the economy. Businesses that opposed intrusive regulations and wealthy individuals who feared higher taxes needed an intellectual counterweight to the New Deal, a conceptual framework that explained why an activist government was bad not just for their profits and their pocketbooks, but for society as a whole. Economism filled that need....

Economism aka Econ 101 is ideology, pure and simple, masquerading as science — because the math "proves" it.

As the mantra of free markets, small government, and lower taxes became more popular with voters, Democrats adapted by also paying homage to competitive markets. It was Bill Clinton who said, "The era of big government is over." And Barack Obama’s signature health-care-reform program is centered on the idea of using (regulated) market competition to expand access to health insurance.…

Economism is the reduction of social reality not just to Economics 101, but to just one Economics 101 lesson: the model of a competitive market driven by supply and demand.

If we were to redesign Economics 101, what would it look like? One possibility is to begin not with abstract models, but with the real world. How do companies use technology to produce goods, and how are those companies organized? How are products and services distributed, and how do manufacturers, intermediaries, and retailers set prices? How are wages determined — not in the theoretical model, but in real life? What factors determine the set of opportunities available to different people on different parts of the planet?...

Connecting the dots between Adam Smith and Donald Trump.

The Chronicle of Higher Eduation
What’s Wrong With Econ 101
James Kwak | Associate Professor of Law at the University of Connecticut School of Law