Economics Is Not a Science

Seven Bad IdeasThe pretense that economics is a science is harmful in that it gives economic ideas more credibility than they often deserve. Policymakers — and US citizens — are unaware of the questionable underpinning of much of the advice offered by economists, which has time and again led to gravely incorrect policy decisions.

But evidence often does not seem to matter. Only in recent years have most economists softened their antagonism to a higher minimum wage, despite the persuasive analyses undertaken by some since the 1990s that it can be beneficial. Similarly, most in the profession have only lately broadened their thinking about the adverse effects of offshoring jobs. A renewed interest in financial regulation, including higher capital requirements, was provoked only by the devastating 2008 financial crisis, which revealed gaping holes in efficient markets theory. The position of some economists from prestigious universities on the benefits of austerity economics was a mockery of good research, as updated scholarship has clearly shown. Despite this intellectual flexibility, policymakers seem to think that most economists know what they are talking about when they agree with them, or they cynically use them to promote their own political agendas in areas such as financial regulation, free trade, and workers’ rights.

Also, there has been a de facto censorship of needed ideas that don’t fit today’s idological preferences. For example, until the slow recovery after 2009, economists generally did not even enter into a discussion about the role of consumer demand and high wages as sources of economic growth. The orthodox conversation instead focused on low inflation and the dangers of rising wages…

The basis of much of economics is a set of value judgments, a claim as widely denied as it is generally true. The Invisible Hand cannot be divorced from a bias in favor of laissez-faire solutions. Economists opposed to active government involvement find adherence to the Invisible Hand comfortable as they do a belief in self-adjusting economies. Given the predominance today of such views, judgments are often skewed because the path to professional success requires conformity, not scientific objectivity.

—Jeff Madrick
Seven Bad Ideas

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