Monday, February 03, 2014

Do the economic facts have a conservative bias?



Chris House has a new post arguing that, unlike other sciences, the facts in economics have a well-known conservative bias.

I'll grant that the facts in econ are far less biased toward the liberal position than in evolutionary biology, cosmology, or climate science; after all, those are areas where conservatives have decided to make a point of bucking the scientific consensus. But although it has a grain of truth, I'm not so sure that Chris' general thesis is right. Here's the argument:
In economics it seems like the facts and the analysis have much more of a conservative slant than a liberal one.  It really is true that taxing labor income reduces labor supply (a little).  It really is true that extending unemployment benefits encourages people to delay looking for a job (a little).  It really is true that taxation can reduce employment demand; that excessive business regulation seems to be correlated with reduced levels of business formation; that union concentration has a detrimental effect on industries and on and on.  Moreover, the theoretical analysis seems to fit with the observations.  Now of course, a liberal’s response to this would normally be “OK, perhaps these effects are there in the data, but the magnitude of the effects is usually pretty small.”  That’s often true.  It’s certainly true with the minimum wage.  At its current level, and I suspect at the proposed new $10.10 level, the effects of the minimum wage on employment will probably be modest.  Republicans tend to describe the minimum wage as though it is a “job killer” that could cripple the economy – a description which is completely over the top...Nevertheless, many basic empirical patterns and basic economic ideas have a fairly conservative profile.
Do these facts really have a conservative profile?

If you think the liberal position is "Taxes have no detrimental effect on labor supply whatsoever," then sure. But that's quite a bit of a goalpost relocation. Maybe a hardcore Marxist would make such a claim (I don't actually know, since I don't know any hardcore Marxists). But a mainstream American liberal would not. A mainstream American liberal would likely claim that the small efficiency loss from taxation was an acceptable price to pay for the welfare gain of redistribution.

The same goes for most of the other facts Chris cites. Interventionist policies lead to small efficiency losses. That contradicts the (possible) Marxist position that interventionist policies lead to no efficiency loss. But it also contradicts the (very real, commonly stated) American conservative position that the efficiency losses from those policies are very large.

In other words, most of the facts Chris cites seem closer to the beliefs of the American center-left than to the American right. It all depends on where you put the goalpoasts.

In fact, my guess is that it's no accident that the American center-left has a more realistic conception of economic tradeoffs than does the American right. In the late 70s and early 80s, we were probably over-taxed and over-regulated; the economic facts really did have a conservative bias. But that led America to adopt conservative policies in the 80s and 90s. And of course conservative politicians and pundits overreached (as politicians and pundits are wont to do), while the American left moderated its positions. In other words, conservatives moved away from the facts because they could, and liberals moved closer to the facts because they had to.

So basically, it's not 1980 anymore.

But while we're on the subject, let's talk about some other facts that Chris doesn't mention. For example, every rich country I know of educates most of its children through a public school system. Every rich country I know of has a mostly or entirely publicly funded road system. Every rich country I know of has extensive public health and safety regulations. Every rich country I know of has extensive consumer protection laws. Every rich country I know of except the United States has a universal health care system.

Of course, correlation doesn't equal causation, and maybe the government simply butted into all those areas, and education, roads, health, safety, consumer protection, and health care would all be done better by an unregulated private sector. You never know til you try! Maybe we can find a country that is willing to try.

Also, note that every rich country spends at least 30% of its GDP through the government, with most somewhere around 40%. And interestingly, the correlation is the same in the U.S. time-series: as America's GDP has gone up, we have spent progressively more of our GDP through the government.

Now, again, correlation does not equal causation, and perhaps government is not an enabler of societal wealth, or even a reflection of changing tastes, but simply a giant parasite that grows larger with time, and eventually it will kill the host, and our complex civilizations will collapse under the weight of our own hubris. I guess this could be the case; I keep hearing this on web forums. But if so, it's still kind of amazing that the parasite has managed to grow to such a monstrous size without showing any sign of killing the host.

So I feel like there are a lot more facts out there that we might consider when deciding whether liberals or conservatives are closer to the True Way.

But in the end, it's not really true that the facts have a liberal bias. Or a conservative one. That line was a joke. It was a joke making fun of the hubris of conservative overreach during the Bush administration. The truth is that facts don't have any bias at all; they just sit there and exist. It's we who have the biases.


Updates:

Antonio Fatas and Robert Waldmann offer their thoughts. Basically, they both think that it is economic theory, not economic facts, that has a conservative bias. This makes sense to me, since after all, sociologists tend to lean very strongly to the left, and they are working with many of the same facts that economists are.

Matt Yglesias says basic economics actually has a liberal bias, citing many examples from econ 101.

Chris House responds, addressing the issue of economic performance vs. government size. Again, it really depends on where you put the goalposts. There is some optimal nonzero "amount" of regulation and taxation/spending, and if you go over that you'll hurt your country, but if you go under it you'll hurt your country too. Whether that optimal point is "liberal" or "conservative" seems like it depends on the politics of the day (and of the specific country), not on any eternally fixed ideological spectrum.

82 comments:

  1. The conservative view is facts which have a liberal bias aren't facts at all and reject them and liberals must reject everything they accept or they would be conservatives. They haven't yet accepted people could recognize facts as having limited applicability, magnitude, and range or could conflict with other facts or accept their facts and reject their conclusions. A challenge to conservatives: are there any facts you admit, the implications of which you dislike?

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  2. Your arguments are solid if you consider "liberal" and "conservative" in terms of highly engaged policy-oriented intellectuals/wonks/politicians. I think House's only rock to stand on with this argument is he's talking about the utterly uninformed general public. If you poll the average "man on the street" (liberal or conservative), they will not understand that taxes, tariffs, burdensome licensing/regulation, etc., cause deadweight loss (whether or not they use that term of art). They will probably just see all of these as tools for redistributing gains, and argue for or against them purely on those grounds. So to the extent that the average person's assessment of costs and benefits to economic policy intervention is entirely overlooking deadweight loss, some rudimentary and widely-agreed-on economic analysis would add some "conservative bias" to the equation.

    I totally agree that once you get into the intellectuals and policymakers, it's quite the opposite: you routinely see routine right-wing belief that we are on the downward sloping part of the Laffer curve, or Prescott saying monetary neutrality is a scientific fact, etc.

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    1. John Soriano11:38 PM

      Agreed. Noah, overall your points are fair, but I think your idea of a "mainstream American liberal" is skewed by the fact that the majority of the people you interact with are familiar with the basic insights from the economics discipline. If you haven't already read it already, Caplan's *Myth of the Rational Voter* does a good job of showing the differences between the views of layperson and the economist. To Chris's point, I saw a review of the book written by a noneconomist that complained the positions Caplan portrayed as the economists' position (which weren't controversial views within the profession) were the views of conservative demagogue economists.

      Or do you remember the walk-out of Mankiw's intro class a few years ago? They protesters believed that the uncontroversial microeconomics that Mankiw's textbook teaches was a slanted product of his conservative ideology. They also complained that Keynes wasn't being taught in a micro class, but that's a different story.

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    2. Geeze. Not again with the Laffer Curve. That's right-wing nonsense - which applies in spades to its 'mathematical justification'. Which brings me to my point, namely that most of the economic nonsense presented to the man in the street on those oh-so-informative talking heads shows is right wing economic nonsense. The reasons for this are obvious, of course

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    3. The Laffer Curve is perfectly rational and generally accepted idea amongst economists. The objections come as to when does the inflection point occur that is disputed and mostly informed by ideological bias.

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  3. Oh my. I note that the US had much faster growth back when the top marginal income tax rate was 70%. Rather broadly across rich countries, the period from WWII until oh recently (I say showing my age) was one of extremely high marginal tax rates and extraordinarily fast growth. A totally a-theoretic look at the facts suggests that higher than current top marginal tax rates are correlated with higher growth. That is *not* a conservative bias of the facts.

    http://ideas.repec.org/p/rtv/ceisrp/281.html

    Also countries haven't always had universal public education. The experiment of doing without and seeing what happens was tried for milennia. The coincidence that in the past few centuries countries have introduced public schools and become very rich is uh striking. I think it is obvious that most of world income would not be produced if it weren't for public education. In any case, the crude correlations suggest that this kind of public spending is good for growth. The positive partial correlation of public spending and growth has been noted by the well known radical red Robert Barro. He is generally very very able to fight the facts to a draw. I think there is no doubt that the facts have a very very strong liberal bias in this case.

    I think you vastly vastly understate your case.

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    1. Western Europe has increased taxation over the last 30 years. How did they perform relative to the US?

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    2. Anonymous6:52 PM

      Post hoc ergo propter hoc

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    3. Well, why did the catch up totally reversed in the 70's? Why did their "culture" change so much then and working hours collapsed? What would the mysterious reason be?

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    4. Anonymous1:26 AM

      I think you are absolutely right that most of Europe has lost it's competitiveness. The problem though would be completely attributing this to taxation in regulation when other countries with similar regimes have done incredible well such as Norway

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    5. Anonymous4:00 AM

      Germany would have the most competitive export sector of just about anywhere. Japan's exports are also very competitive. However countries, especially large ones, do not "compete". The problems lie in their domestic sectors. However you have to remember that they are still very wealthy countries, with wealth relatively equally distributed, and although growth has lagged, so has their population growth. Japan in particular seems to be happy with getting smaller. It is also a very neoliberal thing where it assumes that countries, even very wealthy ones, should just keep on growing.

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    6. "Western Europe has increased taxation over the last 30 years. How did they perform relative to the US?"

      On a per capita basis OK - the US performance hasn't exactly been stellar(abstracting from current short term issues).

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    7. Reason,

      The performance of the us was better, even though one would expect a lagging growth and continued Western European catch-up, which was the case before the 70's.

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    8. You state that with great confidence but provide no evidence. If there is a difference it is trivial.

      https://mitpress.mit.edu/sites/default/files/titles/content/9780262025539_sch_0001.pdf

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    9. Reason,

      Here you have a representative graph of the french and swedish catch-up through the early 80's, followed by the long descent since:
      http://2.bp.blogspot.com/-XWMV7u_4RZM/TXtp0pIqWJI/AAAAAAAAAdM/W5_9ttJzXG0/s1600/france.jpg

      http://1.bp.blogspot.com/-a_Dr-Qy3g8Q/TXtp_DFrZgI/AAAAAAAAAdU/9mZgX9tdKxQ/s1600/sweden.jpg


      Again, as the standard conditional convergence arguments would suggest, given how much poorer they are, they should continue catching up instead of falling behind. Pray tell: what happened?

      Some countries, such as UK or Ireland, have been catching up until the crisis, but his only happened after they opened their economies. Actually, the comparison of Ireland and France is very instructive. In mid 80's the Irish had GDP per head of only 60% of France, now (after the crisis!) they are above 120% of French GDP per head.

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  4. It is fairly clear that economists are socialized to not care if what they are saying is true or even makes any sense. And, in this sense, economics has a conservative bias. But this has nothing to do with facts.

    Chris House writes, ""You will find this self-proclaimed liberal [Paul Krugman] touting the virtues of trade and the folly of poorly thought-out market interventions." Here is a problem - among many economists, Krugman is not thought of even today as very liberal. He seems to be stumbling to, say, recognize the virtues of Kalecki's ideas. Here is another problem - the idea of 'market intervention' is ill-defined. It is not as if some configuration of property rights is a natural construct, existing prior to all human interventions. The elimination of institutionalists from economics department is a manifestation of a conservative bias. But this too has nothing to do with facts.

    Chris House writes, "Marx is just not taken very seriously by economists anymore and hasn’t been for quite some time." I doubt Prof. House can justify why Marx should not be taken seriously. It would surprise me if he could describe in any detail the analyses of, say, Michio Morishima or John Roemer. This ignorance, if it exists, is a political bias that should not exist.

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    1. Anonymous5:26 PM

      The above post continues in this vein, attributing beliefs to Marxism while simultaneously stating that it has no idea what Marxism is all about. What's up with that?

      But this is endemic to economics (in America at least) because they have succeeded in ostracizing the 'heretics', to the point where the OP here, who is very engaged in the economics discourse, has to admit that he does not know anything or anyone from a significant research tradition within the discipline. And no one thinks this is in any way odd.

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  5. I think these arguments are all a bit wide of the mark - they are arguing about trivia and ignoring the main issues.

    Sure there are micro-economic effects, but they are whammied by macro-economic effects. You can change the macro policy settings to more than offset the micro effects (in normal circumstances at least - the ZLB is another story). Ceterus Parabus is a BIG trap. Ceterus is NEVER parabus.

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    1. Think about this - does an increase in the general level of taxation (or regulation) always result in slower growth and higher unemployment. If you just looked at the micro-economic argument and partial analysis you might think so. But it isn't (or at least isn't obviously) true. Why not? Because policy settings can adjust to offset the micro-effects. (We know it is true the other way around that the monetary authority will put in the brakes in a boom - so the converse is also probably true.)

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    2. Another way to point is to consider any Casey Mulligan argument. The unemployment are just taking a paid holiday on unemployment benefits. What could possibly be wrong with this argument. (Like that the unemployed can't just a get a job whenever they feel like it - so the micro effect - unemployment benefits reduce the cost of unemployment - are offset by the macro issue - there are more job seekers than jobs!)

      It is the partial analysis is the problem - like the blind man and the elephant.

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  6. Phil Koop8:46 AM

    I agree with your point: by conflating the positive ("the facts are conservative") with the normative ("but the costs are small enough to be worth paying"), House has undermined his own point. You are too polite to say so, but there is something amusing about an argument about "facts" that founders on value judgments.

    But there is a larger omission in your post: House has cherry-picked his examples. "Expansionary austerity" and its allies are purely conservative economic ideas.

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  7. Noah,
    what the hell is the photo all about?

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    1. Please don't ask. He might put the blonde version up and that one's just frightening.

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    2. "moving the goalposts"...

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    3. Ah, but what is it doing in the carpark?

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    4. And obviously I was confused because the young men in the photo look like normal people not American footballers.

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    5. In the Free Market USA, we don't use professionals to tear down the goalposts; volunteers motivated by Gumption, Beer and School Spirit do it :)

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  8. It seems to me that facts in every science have an inherent liberal bias because this is what defines liberalism. Liberalism means that base your opinions on the facts, in their most updated form and interpretation, rather than on first principles or tradition or some structure that allows you to fit new facts into old paradigms. It's a potentially valid criticism of liberalism that facts aren't really as important as liberals think they are. Not all knowledge is empirical.

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    1. Really? Like environmental GMO or green revolution hysteria?

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    2. hippies =/= liberals

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    3. Have you heard about the Ford foundation blocking green revolution techniques in Africa in the 80's? The mainstream environmentalists have blood on their hands.

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  9. Anonymous11:56 AM

    "It takes a lot of Harberger triangles to fill an Okun gap." Also hardcore Marxists aren't as bad at labour economics as you seem to think ;)

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  10. Noah,

    "A mainstream American liberal would likely claim that the small efficiency loss from taxation was an acceptable price to pay for the welfare gain of redistribution."

    And a mainstream American conservative may make a similar argument about global warming. So then, there is no liberal scientific bias on climate change?

    "every rich country I know of educates most of its children through a public school system."

    And the most successful ones, including Sweden (at which many American liberals look for inspiration) offer school choice through vouchers (a libertarian idea).

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    1. Anonymous9:06 AM

      Except the recent Swedish experiment with education is collapsing in a morass of recrimination, a staggering collapse of standards when compared to other nations, the actual bankrupcy of a number of private school chains, and a wholesale reappraisal of the 'free school' experiment at the political level. And this comes just as the UK adopts it as a workable model for the future of its education system.

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    2. It ain't so because you say so.

      The performance of Swedish students had been declining before the reform. The question is, did the reform slow-down the trend? The answer is yes, but it takes a while. Here is the study by researchers in Sweden:
      http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2100771

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    3. "And a mainstream American conservative may make a similar argument about global warming. So then, there is no liberal scientific bias on climate change?"

      Except for that whole, ah - fact - that people researching global warming are also trying to assess the economic and human impacts.

      Whereas on the right, the claim that it'll be beneficial is used in parallel with the idea that it's not happening.

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  11. Chris House writes, of the tendency for many scientists to be liberal, “Deliberately setting out to tear down established parts of your field requires a certain mindset and this mindset might be more common with people who have liberal political views. (While it is clear that faculty on American college campuses are quite liberal I am not convinced that we need to do anything about it. If the best chemists and physicists also happen to be Democrats then so be it. Particularly if they confine their teaching to their area of expertise, I wouldn’t think political bias by itself should be a problem.)”

    I am afraid that this misses the main point of deciding to go into science (and art) — perhaps missing it, by substituting the decision to study economics. Young people become scientists (and artists) out of love of knowledge and beauty, and out of curiosity about the universe. This is not the same thing as “self-interest” or “economic rationality”, which are given to you the first day of Econ 101. Other young people usually are NOT driven (initially) by fears of getting a job and making money. We know (from experimental data) that economists are skewed in this direction unnaturally. It is a faulty wrench in economists’ purchase upon reality.

    Meanwhile conservatives are far more emotionally disposed — obsessed, even — with the idea that most other people do things by self-interest.

    It should be no wonder that the economics “data” brought forward, in support of the thesis of self-interest, are almost entirely accounts of money. And that fact that the data are oftentimes just barely conclusive, in favor of the the conservative view, ought to tell us something rather different than we have been hearing.

    In my opinion the idea that there is a prior “economic reality” which naturally inculcates the virtue of self-interest could be an historic mistake. Or perhaps we could say, this direction for economics may have been of good use in early modernism (i.e. the time period from the inception of industrialism through much of the 19th century). But it may be worse than useless, now. The underlying idea that conservatives have, of some unalterable human nature, may be in gross error — yet has perpetuated itself via the intellectual status of the profession of economics, now to our detriment.

    Instead of focusing on how government welfare destroys souls, conservatives might consider whether it is time to jump over an historical boundary, and find ways to make people smarter, happier, more curious, and unworried about money.

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    1. And a mainstream American conservative may make a similar argument about global warming. So then, there is no liberal scientific bias on climate change?

      Maybe, but I think a mainstream American liberal would talk about tail risk rather than expected harm. And since tail risks are hard to measure, concerning the impact of global warming I'd say we don't actually know which way the facts lean, concerning the most important questions.

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    2. Noah,

      I am replying here since your reply to me was also misplaced. Yes, I do not disagree, but clearly then it becomes a matter of personal preferences (e.g. risk tolerance). I am not picking sides, I am just saying that if we define "mainstream" as you do then of course science does not favor EITHER side. The question is how mainstream these "mainstream" views are, by looking at the frequency with which they are held in each group. It seems to me that it is far more likely to find conservatives who do not believe climate change is man-made. Similarly, it is far more likely to find supporters of unions or people who believe that raising the minimum wage has no effect on employment among liberals.

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    3. To add a final point, I think "mainstream" conservatives and "mainstream" liberals, for example conservative and liberal economists, agree far more that your "average" conservative and your "average" liberal. "Mainstream" liberal (and conservative) bloggers choose to ignore "non-mainstream" commentators, for example by not replying to their comments. However, it is important to remember that such people do exist and that they are perhaps the majority, especially when they seek to ignite emotions with their writings. Not every reader is able to filter things appropriately.

      To see what happens when the intellectual leaders forget this, one need only take a look at the tea party. Conservatives played that game by appealing to their constituency's lower emotions, and now they are having a hard time controlling the damage. Case in point, here is truth-out, a liberal website, on Rahm Emanuel as mayor of Chicago. I think they would be kinder if he was Republican (the word neoliberal is used in the article to refer to classical liberalism).
      http://www.truth-out.org/opinion/item/19810-the-rise-of-chicagos-99-against-rahm-emanuel-mayor-1

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    4. I'd like to focus on what leaders and intellectuals think, rather than what voting blocs think. Otherwise it gets harder to draw any conclusions at all.

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    5. Well, Kari Lydersen, who is being interviewed by truth-out in the link I provided, is a "journalist and instructor who currently works at Northwestern University." So I would argue that makes her an intellectual, or am I wrong?

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    6. Well sure, even among intellectuals there's going to be a spread of ideas.

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  12. Anonymous1:28 PM

    I think you're overestimating how much the typical American liberal is like the typical centrist Democratic economist.

    There's a large contingent of American liberals who agree with Occupy Wall Street and hate Larry Summers.

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    1. I'm just focusing on liberal politicians and intellectuals.

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    2. Anonymous1:08 AM

      Your examples all seem to be of the intellectual part, not politicians. When was the last time you heard a politician campaigning for something like a minimum wage increase say something to the effect of " My opponent says that my minimum wage proposal will reduce jobs. He`s right. But the evidence suggests effect will likely be modest, it`s only one factor in determining employment levels, and I believe the benefit to the workers receiving the wage increase outweigh the lost jobs. Vote for me."

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  13. The "hard sciences" have no political positions. There are no conservative or liberal biologists, unless you take creationist cranks seriously. Evolution is politicized because its conclusion is so profound that it shakes religious beliefs, but within the field itself biologists come in no political flavors.

    Climatology is an interesting parallel with economics because it too works in highly summarized and synthesized aggregates, unmeasurable free parameters, and complex chaotic systems. One could average the wind speed and direction across multiple worldwide sites, and say that the wind is blowing "NE at 3.2mph" on average globally. You would miss a lot of local variation--storms, latitude bands, etc. ("microfoundations"), and using such a variable in any sort of predictive weather model is dubious. But the macroeconomics field tries to do just that with summarized and highly synthesized variables like "inflation". Theoretical debates rage about whether the wind is driven more by low pressure systems ("demand") or high pressure systems ("supply"). If you blow a lot of hot air over Washington DC, it will change the average wind direction, but can these idealized models really account for the blowback?

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  14. Anonymous4:36 PM

    Most philosophical and moral principles that market economists claim to hold as near and dear, when combined with an actual basic understanding of game theory, like first year undergraduate level, completely justify some sort of communist autocracy. Hard to see where the conservative bias come out of that.

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  15. Given that the general shape of public policy in terms of burden of taxation and regulatory impacts has significantly diverged over the last 30 years between the US and Europe, it is very instructive to compare growth paths over the term. Western Europe has switched from pretty fast catch-up (through the 70's) to a significant fall-back. France is a perfect example. At around 80% of our GDP per capita (PPP) in 1980, they now stand at 60%. Things add up. Also compare Ireland and France and the relative performance of countries that deregulated their economies in the 90's (such as Canada) to those who didn't. Those micro things do add up in the longer term. Not to mention that we (the US ) have paid for Europe's military security and all the major advances in medical technology, while vaulting ahead.

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    1. performance of countries that deregulated their economies in the 90's (such as Canada)

      I don't think Canada deregulated it's economy in the 1990s. What Canada did do in the 1990s was increase income taxes and put caps on the rate of growth of some Federal government spending items. Canada did enter into free trade agreements with the US and then the US and Mexico but those agreements were fairly mixed in their outcomes and accelerated the destruction of the manufacturing core of Ontario.

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    2. Anonymous6:35 PM

      Krzys: France's GDP per capita in 2012 was 35,520 while the US for that year was 49,965. Which meants France's GDP per capita is 71% of the US. But if we control for wealth inequality via the Gini coefficient we would would find that the life of the average Frenchman is comperable if not better than the average American. Also the large supply of public goods such as healthcare in France increases their average quality of life even more.

      Honestly a better measure of wealth would probably include some measure of total poplation welfare.

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    3. Anon,

      Fair on the numbers. What I wanted to say is: in 1980 gdp per capita PPP was 20% higher in the us! now it's 40%. Anyway, PPP compares all the goods, including medical care ( niot to mention that we subsidize their care), but even median household income comparisons show a large gap to the us.

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    4. Absalon,
      http://http-server.carleton.ca/~winers/papers/Comparative_Size_Proofs_CPP_June_%2007.pdf
      The size of the govt. in canada peaked at roughly 50% in 1992 and has since steadily gone down to around 38%, compared to 33% in the us.

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    5. BTW, the WSJ editorial page played with this idea about Canada, not mentioning that as the economy of the USA took off in the mid/late 90's, so did the Canadian economy.

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  16. Anonymous5:20 PM

    Dude - if you have no idea what a research tradition believes, and you recognize this, don't attribute beliefs to them - it makes you sound like a fool. I mean, I get that you don't get called out on this, because as you said you don't know any Marxists, but usually people in a position of ignorance either keep their lips shut or have some humility, instead of making baseless assertions.
    Marxism isn't just 'radical liberal economics', but has its own internal logic and concepts which are in many ways orthogonal to the traditional left-right political axis people are familiar with in America. Either study that logic, and then talk about it, or stay ignorant, and don't speak about things you don't understand.
    It really is that simple.

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  17. Anonymous5:50 PM

    What sort of over-reuglation are you speaking of in the 1970's? While we passed tremendous amounts of regulations (OSHA ,EPA, etc.) in the 1970's, it does not appear to have harmed long-run economic growth.

    In fact, one could argue that safe working conditions, environmental regulations, and the Clean Water and Air Act increased the quality of life for Americans. That is, unless you are a conservative, who believes that these regulations are dragging down the country.

    The Conservative narrative is that excessive regulation and high taxation killed the economy during the early 80's. Then Reagan swooped in and saved the day from big government, high taxation, and Jimmy Carter's evil solar panels. Slashing top marginal taxes and railing against big government ushered in American Renaissance.

    The liberal side of the story is that high taxation and new regulation did not cripple the economy during the late 70's and early 80's. What brought on the twin recession was contractionary monetary policy to ward off double digit inflation. Recovery was not brought about revolution supply-side economics, but lower interest rates and increased government spending/employment.

    What side is the side on reality?

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    1. Yes, what the nameless one said.

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    2. Anonymous1:07 AM

      don't forget the war. they always 'forget' to mention the war and its role in creating the inflationary problem in the first place. economic policy does not exist in a vacuum.

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    3. Not to mention the oil shocks; I've seen time and time again even economists leaving out little things like a 3x increase in the price of a commodity upon which the 20th century was built.

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  18. The number of things I consider "facts" in economics can fit under my fingernail and still leave room for dirt. Not one thing on your list of "facts" has been verified with randomized clinical trials.

    As for public school, I lived in England and there is far more school choice than here. I live in one of the best school districts in Maryland, and I think the school does a crappy job educating my children in basic math and science. We are talking 6th grade math here, not differential equations. The district spends about 17k/year per child, and the private school up the street costs $20k. Where republicans differ on public school is not that the state should not finance it, its that they don't think the govt should be granted a monopoly. I do not see any returns to scale or other market features that would suggest educational services require a monopoly. I do, however, see a powerful public sector union protecting jobs. Why shouldn't I be given a voucher for the 17k? Are you suggesting competition does not improve educational services? People move out of Baltimore City because there is no school choice and the schools are on average pretty dangerous. The state spends only a little less per child in city schools. For a family with 2 kids in the city, $32k buys a heck of a lot of education.

    Now, I am told that the Brookings institution, which puts out a lot of stuff on school choice, is a "center-left" institution. But I can tell you, here in bluest of the blue states of Maryland, advocating school choice makes me "right wing" in Maryland (even though I have "liberal" friends who agree with me) because the Dems here are firmly in the pockets of the unions. As a rule, I think monopolies deliver poor services whether they are an airline or a labor union, and I see no redeeming market features that would lead me to think a monopoly in education is warranted.

    I could not care less whether "facts" have a liberal or conservative bias. I am interested in whether a policy works and what the tradeoffs are. On many things I agree with the "right" and on many things the "left." I think the blogosphere needs to get back to actual attempts to do policy analysis and stop throwing poop like monkeys in a cage. I realize there is a tremendous incentive to throw poop to get an audience. Tell me, what is the right policy to reduce the poop throwing among economists in the blogosphere?

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    1. Except there are two very big ways that public school districts are not monopolies.

      1. Magnet programs.
      2. School board elections.


      1. Just because you can't take your child outside of the education system, assuming you are unable or unwilling to pay for private school, doesn't mean you don't have choice within the program. Magnet schools offer specific programs to attempt attract students to their schools. I remember shopping around for a high school and they took their recruitment fairly seriously.


      2. Even if your school system is too small to have significant choice between schools, you still have a means of affecting how the school system is run. Elections are also a form of competition. If you don't like how things are run, see who else is out there that wouldn't mind getting things done. Put pressure on the Board, if they want to get elected, they have to meet Demand. Get involved with the school board one way or the other.

      In short, I don't see why $17,000 should be taken from public school coffers because you would prefer your kid to go to some private school or other. And the biggest problem with your argument is your implict assumption that the $17,000 per student is a variable cost. If you think about the costs to run a school the vast majority are fixed, which need to get paid regardless as to whether the school loses a few students.

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    2. Utilities have special programs and many PUC commissioners are elected. Monopolies are usually defined by the lack of competition.

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    3. Middle and high school math is not a "talent" amenable to magnet schools. It's a fundamental skill. School board elections do not make individual teachers accountable.

      You have not given me an argument Benjamin why I care about the "public school system" Why shouldn't they compete for resources like anyone else? Give me a solid economic argument what characteristics of the education delivery market creates natural monopolies. Electricity is deregulated in MD, and they effectively split the fixed costs (infrastructure and delivery, provided by utility) from the energy costs (where I have choice). Charter schools in many districts share space, which is an analogous model - although I am not convinced the state of Maryland has particular expertise in constructing a building with a gym.

      And, don't get me started on students with disabilities like autism, I know many parents who have had large legal fights with various districts to prevent mainstreaming and to get their kids into appropriate schools.


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    4. At the end of the day it is YOUR responsibility to make sure that your children get the most out of their schooling. Even the best teachers will fail miserably if the parents are undercutting their efforts by trash talking the school system.

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    5. trash talking the school system? Why is that harmful? Every year my boss reviews me, is that trash talking? Does it make my performance better or worse? How about when customers post negative product reviews on Amazon?

      Of COURSE its my responsibility to make sure my child gets a good education. Fortunately, I make 6 figures and have the choice to move out of Baltimore City and put my children in a good school district. And fortunately, I have the EXTRA 20k per year if I choose to put my children into a private school, or move. And, fortunately, I also have the time (and skills) to tutor them in math, or pay a private tutor $50/hr.

      See how that works? School choice is only for the fortunate.

      So, since I want everyone to have the same fortunate choices as me with regard to school choice, and I a nutty right wing tea partier trashing the school system, or a hardened liberal because I want equality of opportunity?

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    6. John S11:58 PM

      Agree with you 100%, dwb. Have you heard of the Sudbury Valley School? They are able to offer completely personalized education for each student at only $8200/year for the first child (less for younger siblings). Vouchers should easily be able to cover both fixed and variable costs of private education (esp. in states with lower living costs than MA).

      I really can't understand why any talk of school vouchers is verboten on the left, save the union angle.

      http://www.sudval.org

      http://en.wikipedia.org/wiki/Sudbury_Valley_School

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  19. Bill Ellis8:54 PM

    Facts are sooo Zazen.

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  20. I am most surprised that Capital, at least Volume I hasn't been read by writers here. Shocking, even unexpected! (?)

    In the following two paragraphs from Chapter 31, Marx was utterly clear about taxes, most unforgettably, and rarely more explicit.

    "As the national debt finds its support in the public revenue, which must cover the yearly payments for interest, &c., the modern system of taxation was the necessary complement of the system of national loans. The loans enable the government to meet extraordinary expenses, without the tax-payers feeling it immediately, but they necessitate, as a consequence, increased taxes. On the other hand, the raising of taxation caused by the accumulation of debts contracted one after another, compels the government always to have recourse to new loans for new extraordinary expenses. Modern fiscality, whose pivot is formed by taxes on the most necessary means of subsistence (thereby increasing their price), thus contains within itself the germ of automatic progression. Overtaxation is not an incident, but rather a principle. In Holland, therefore, where this system was first inaugurated, the great patriot, DeWitt, has in his “Maxims” extolled it as the best system for making the wage labourer submissive, frugal, industrious, and overburdened with labour. The destructive influence that it exercises on the condition of the wage labourer concerns us less however, here, than the forcible expropriation, resulting from it, of peasants, artisans, and in a word, all elements of the lower middle class. On this there are not two opinions, even among the bourgeois economists. Its expropriating efficacy is still further heightened by the system of protection, which forms one of its integral parts."

    However,

    "The great part that the public debt, and the fiscal system corresponding with it, has played in the capitalisation of wealth and the expropriation of the masses, has led many writers, like Cobbett, Doubleday and others, to seek in this, incorrectly, the fundamental cause of the misery of the modern peoples."

    Puts paid to utter tea-partiers on taxes. Of course, their reading Marx would be a bit of redirect. The Republican torment over losing workers who toil solely to obtain health insurance, is of a piece

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  21. "Now of course, a liberal’s response to this would normally be 'OK, perhaps these effects are there in the data, but the magnitude of the effects is usually pretty small.' That’s often true. It’s certainly true with the minimum wage."

    Yeah...

    "Republicans tend to describe the minimum wage as though it is a “job killer” that could cripple the economy – a description which is completely over the top..."

    Uh huh.

    "Nevertheless, many basic empirical patterns and basic economic ideas have a fairly conservative profile."

    Wait, what? How did he just acknowledge that the "normal liberal" response is correct, that the thing Republicans tend to say is wrong, and then somehow pull a "nevertheless" out of it?


    I think this is illustrative of some of the major problems with contemporary conservatism. They tend to define themselves in terms of opposition to a straw man of liberalism, then ignore facts and logic on the way towards holding that original position no matter what.

    One could make the equivalence argument (as some other commenters do here and everywhere), that somehow liberals also do have similar blind spots, but I frankly don't see it (pun intended!).

    Seriously though, the difference, creating a lack of equivalence, is that while ignorant liberals exist, teh stoopid has completely dominated conservative thought and policy making in a way that it hasn't for democrats and liberals. The D party is a bunch of mostly technocrats with liberal policy preferences overlaying reasonable assertions, while the R party is off the rails on the topic of economics, endorsing tight money, tight budgets and magical unicorn supply side theories of growth in a time of simultaneously low interest rates, low inflation and low employment.

    Colbert was making a joke, but that doesn't make the line untrue about which way reality biases.

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  22. The basic problem with liberalism is that it has to resort to using very non robust and special exceptions to the simple rules of economics to justify its positions. Just look at Krugman inventing a whole new economics that works only at ZLB, or super special cases when free trade does not work. For some girls and boys it might seem very scientific since it tends to be pretty complicated and gives an infinite opportunity to play with noise and argue forever about the "true" model. Come to think of it, some conservatives are as guilty, see Taylor or cochrane.

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    1. Why do you think simple always valid solutions exist? I really think this love of the one simple true answer to life the universe and everything (i.e. 42) is a peculiarly American disease (something to do with the "manifest destiny" and "American exceptionalism" memes). Sometimes life is messy, live with it.

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    2. Simple answers might be wrong and complex ones might be right, however you will never know it since the available data will never let you filter noise away. It's not the ontology but epistemology, which is the problem.

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  23. Anonymous4:08 AM

    The basic problem with liberalism is that it has to resort to using very non robust and special exceptions to the simple rules of economics to justify its positions.

    You should study history. You will quickly learn that there are no rules. All the "rules" in the economics you study are artificial creations.

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  24. Anonymous7:16 AM

    Economic facts have neither a liberal or conservative bias because the broad groups that are both conservatives and liberals don't know where to stop and their policies are not as failure as they could be only due to the moderating influence of others standing in opposition to them. Reality has a liberal bias, is a quote given by liberals who happen to be idiots and delusional about their beliefs and reality.

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  25. There are only two economic facts, one with a liberal bias and one with a conservative bias:

    1. Life presents plus-sum opportunities that can only be achieved by government coordination.

    2. Markets are more reliable price discovery mechanisms than bureaucracies.

    As it turns out, the prices that markets discover are inherently zero-sum results. Thus, we must use the less reliable price mechanism of bureaucratic intervention in order to achieve the plus-sum results that nature has perversely made available.

    Virtually all economic policy debate is aimed at establishing whether the plus sum gained from coordination exceeds the efficiency lost from intervention. The Right always tells us how much "smarter" the market is than any pointy-headed academic government apparatchik. And the Left tells us how much richer (not to mention "better") we would be if the people who cannot afford to buy things could afford to buy them.

    Each side is right, but each claim provides explicitly either a minor or major premise, not a whole syllogism. Unless the Right can show that "smarter" decisions produce an optimal outcome (itself an undefined but nevertheless real desideratum), who cares whether the market is smarter than the bureaucrat? And unless the Left can show that there is a way via intervention to reach a better outcome than the market provides, why does it matter that such an outcome would be preferable to a market-driven one?

    People disagree over these unstated premises. Mostly, though, they are unaware that they are just taking sides in the coordination/efficiency debate, thinking that every problem is unique (even though their positions on nearly every issue are predictable by determining which side represents coordination and which side represents market efficiency. In any given time and place, the need for more coordination may trump the need for more market efficiency, and at some other time and place, the opposite situation may pertain. One might argue that in any given time and place, then, the economic "facts" have a liberal or conservative bias. But such a bias, I submit, is historically contingent, and either side may claim that the facts favor its bias, whether or not they "actually" do, whatever that means.

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  26. "A mainstream American liberal would likely claim that the small efficiency loss from taxation was an acceptable price to pay for the welfare gain of redistribution." That may have been true at one time (see Athur Okun, Equality and Efficiency: The Big Tradeoff (1977)) but it does not seem to describe the current posture of mainstream American liberals. Today, they claim (as President Obama does frequently) that reducing inequality is a necessary condition for economic growth. I have never heard President Obama say that the welfare gains from redistribution outweigh the job losses from his regulatory and tax policies - on the contrary, he (and his academic enablers) insists that such balancing is not necessary. That posture, of course, makes it impossible to have an intelligent discussion about costs and benefits.

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  27. Anonymous3:49 PM

    Intelligent income redistribution would focus upon the group who actually gained most during the last decades and according to Piketty&Saez 2003 it is the top 1%. Now if this group had actually become more productive since the eighties a tax increase would indeed destroy incentives. But skill-biased technological change is nonsense, it is all political economy (I do not have to point out what happened in the eighties) so increasing income taxes on the top 1% will probably have no incentive effects at all. If income effects are stronger than substitution effects for the top 1%, i.e. if the labour supply curve is sloping to the left, a tax increase can even incentivize them to work harder.

    In short, when people make money via political tricks and not via doing some work which is of social value (quite some hedge funds managers out there who frankly admit that their work is socially fairly useless) taxing the shit out of them is a smart thing to do. Plenty of middle class and lower class people whom you can tax less and actually incentivize to work harder.

    So a well designed income tax pattern can actually increase income equality and raise GDP.
    Furthermore we have all read our Stiglitz, the second welfare theorem doesn't hold when there are externalities (which includes incentive problems due to asymmetric information) so allocation and distribution cannot be neatly separated.
    Of course there isn't in general a positive or negative effect of one upon the other, it depends on the model. The lesson is that the connection between allocation and distribution isn't as simple as in the "make the pie larger or distribute it more equally" analogy. Economics is all about incentives ... but income taxes is just one among many of incentive issues.

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  28. re: "A mainstream American liberal would likely claim that the small efficiency loss from taxation was an acceptable price to pay for the welfare gain of redistribution."

    A mainstream American liberal would claim that low taxation is inefficient, and that high taxes promote economic efficiency. The same goes for high minimum wages. They promote efficiency. The issue of redistribution is secondary.

    A good demonstration would be to consider red states and blue states. The latter are much more efficient in that they provide more goods and services to more people with less friction and inherent waste. There's a reason their economies are more robust, and their high real estate prices attest to their desirability.

    This is an example of a common bias in economic discourse. Economics really needs some more critical thought. There's no evidence that high tax rates are inefficient. There is evidence that markets are inefficient. Sometimes high taxes, like lubrication, can make the engine work better.

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  29. "deadweight loss", "Pareto optimality" and much else are conservative notions. As is the methodological individualism that pervades mainstream economics. The profession as a whole is conservative, not because the "facts" are, but because the arguments have been constructed from conservative premises. Which leaves liberals like Paul Krugman in a visibly uncomfortable space.

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  30. Anonymous4:33 AM

    Limited resources, unlimited wants.

    Your first lesson in economics? Ie people are greedy.

    This is not a fact. In fact the whole Enlightenment was about saying that humans and humanity are not like that.

    Not only would philosophers disagree with that. Many psychologists would too.

    Economics is a construct of the rise of the English capitalist and middle class, the British commercial and political Empire and the end of feudalism.

    Even if it (and its budget lines and indifference curves) was an artificial construct, it was an intellectual framework this rising new class could run with.

    Economics needs to go back to having different narratives to explain the truth. That, like any humanities subject does, include a proper re-reading of the classics - in this case the Wealth of Nations, The General Theory and Das Kapital.

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  31. A thing that I note in this discussion is the vague and undefinied way how "liberal" and "conservative" labels are used; "liberal" is applyed to everything from the technocratic social liberalismo to radical enviromnentalism (how can be argued that in some things - like the distrust by modern technology - have more in common to traditional conservatism that to mainstream liberalism); and "conservative" seems to be applyed more to libertarianism/classic liberalismo (see the references to methodological individualism as "conservative") than to "real" conservatism.

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  32. Another myth is that there's such a thing as a scientific consensus. The notion itself is unscientific. Theories, models, and breakthroughs do not result from counting noses. And who says that panels hand-picked by a U.N. body are representative of anything at all?

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