TCS Daily


Economists of Scale

By Tim Worstall - April 3, 2006 12:00 AM

Just how right wing are economists? A serious question, not a joke. If you look around at some of the favorite liberal or left wing ideas, or policy proposals, you see that most economists start sucking their teeth, muttering under their breath and generally, well, at best, not supporting the ideas. Even those who share the goals of a more egalitarian society, even economists known to be left wing politically, tend not to support some policies on their economic arguments. Why is this? Why is it that economists, to liberal viewers at least, all seem to be right wing?

Simply to state that the Right is right, while tempting, isn't really enough. Nor is to turn around a favorite trope of the left about the liberal bias of most of the academy: those people bright enough to be professors, well, of course they're going to be left wing, all the clever people are! Our reading of this would be that only right-wing types are so especially intellectually gifted so as to actually understand economics. Again, tempting, but not really a strong enough idea to take all that seriously.

Fortunately, a real economist (rather than I, interested amateur that I am) has actually addressed this problem: Gebhard Kirchgässner on "(Why) Are Economists Different?" He starts by defining what he means by what I have called "right", preferring the word "conservative" and quotes George Gilder:

"I shall mean by a conservative in economic matters a person who wishes most economic activity conducted by private enterprise, and who believes that abuses of private power will usually be checked, and incitements to efficiency and progress usually provided, by the force of competition."

Yes, I understand that to many liberals this would indeed be a description of a conservative position but it strikes me as being rather closer to the Classical Liberal (or as it is known nowadays, libertarian) one. Still, it is one at odds with what we think of as the liberal position in the American sense.

First, of course, we have to try and work out whether economists are in fact more "right" or classically liberal than either the rest of the population or the rest of academia. After a rather neat comparison of the business and economics pages of some European newspapers and their more rightward slant than the general editorial opinion of those very same papers Kirchgässner notes an earlier study:

"On the other hand, academic economists are today with respect to their political identifications - on the average - significantly right of the general public. This also holds for the United States, as R.F. HAMILTON and L.L. HARGENS (1993) show. They report the results of a survey taken in 1984. According to those, only 27.7 percent of economics professors identified themselves as being left or liberal, compared to 39.5 percent of all 4,944 professors asked, 66.1 percent of political scientists and even 78.4 percent of sociologists."

Well, that would be a yes then. That number for the sociologists might also explain quite why so many of us find it very difficult to understand what they are on about. There are also differences between groups of economists:

"It was the conviction of the various authors of these studies that the general public does not have the same strong belief in the working of the market system as the economists. As evidence for this B.S. FREY (1986) pointed to the result that economists working in the government had already less trust in the market system than academic economists; while, for example, 45 percent of the academic economists believed that minimum wages increase unemployment, only 33 percent of the economists working in the government did hold the same belief."

That minimum wage question is exactly one where we see the divergence between what the average liberal believes and what the average economist (even if a liberal at heart) does. (For a longer discussion on this point try here from January.) The essential point being that rises in the minimum wage almost certainly have a detrimental effect on the incomes of those who receive them, for if you raise the price of something then people will buy less of it. Economists, whether liberal or not, are more likely to be able to get their heads around this seeming absurdity, that if you mandate a raise in people's pay their incomes will fall.

So, viewed from Planet Liberal, economists do indeed seem to be right-wing. The above insistence that minimum wages might be a bad idea, the near universal agreement that unrestricted free trade is just fine and dandy, that immigration, while it does have some bad effects (sorry, everything has bad effects, it's the sum of all effects that is important) is on balance similarly a good idea...even the public choice theorist's insistence that government isn't actually a disinterested all-wise and all-knowing arbiter with only our best interests at heart. Actually, it's a collection of people just as self-interested and corruptible as you and I. These aren't tropes and memes that play well with those on the political left although, with the occasional exception, I don't think you'd find an economist who would reject them. Shades of difference in opinion, in how important they are, of course, but a general acceptance of the truth of the propositions.

So having established that economists are indeed right wing, or at least perceived to be in the prescriptions they offer, the interesting question is why?

Kirchgässner looks at two possible answers. That economists are self-selecting, that only those already predisposed to such ideas study the subject in sufficient depth to actually become economists. Looking at some age cohorts of students, among other things, he notes that in the same school, those with more years of economic education are, in the sense that we are using the words, more right or conservative than those with fewer. This points, as he says, to the cause being indoctrination:

"And if we have good reasons and see economics as a social science, the discussion about indoctrination versus self-selection is not very interesting. This holds not only because it is extremely implausible that there is not at least some indoctrination, or, to say it somewhat more friendly, learning in this respect. It should be obvious that the study of economics changes the perception individuals have of the market mechanism; we who are teaching economics would miss our job if this would not be the case."

In other words, if you study a science then it can't really be all that much of a surprise that you learn something of that science. And if economics is indeed a science then there are such things as correct answers, ones that will be recognized by all practitioners of that very same science.

So we do, in the end, come to the answer originally rejected as being tempting but not really enough. Economists are right-wing because, on economics, the Right is right.

Categories:

18 Comments

not so simple
Professional economists have learned that the world is complicated. For example, Nobel Prize winner Stiglitz believes in globalization in principle (conservative) while denouncing the "forced open markets" policies of the World Bank and IMF and praising developing countries that maintained trade barriers to protect their citizens. My own informal sampling of academic economists shows that while many agree that a minimum wage raises unemployment a little, it (together with a safety net for unemployed) raises workers' living standard.

Few with any familiarity with history would agree with:

> " . . . abuses of private power will usually be
> checked . . . by the force of competition."

We have to distinguish between conservative and Republican. Few "conservative" economists believe in the "Laffer curve" that was the basis for Reagan and now Bush tax policies. Paul Krugman is a typical example. He was recruited by the NYTimes as a conservative (pro free market and globalization) economist during the 2000 presidential campain to read the candidates' economic policy proposals. That does not make him a Republican.

History
If you look carefuly enough at history, you will find that almost all "abuses of private power" are checked by competition. WHen we have abuses, those abuses are typically government abuses. Monopolies are not created in free markets -- they are caused by government enforcement. THe same is true with the maintenance of various forms of economic collusion. The federal government going after Microsoft resulted in the collapse of the market, and the destruction of most of Microsocft's actual and potential competitors. Long-term, Microsoft will benefit from that government intervention. ANd if we look at the breakup of U.S. Steel as another case, we can see that the federal government did not step in until the company was losing massive market share (during which time I would not be surprised if we learned their political contributions fell).

Everywhere I look, I see government abuses of power, nt private abuses of power. In a free market, power is distributed among many, many people. But with government, power is increasingly centralized.

ANd, yes, we do ned to distinguish between Republican and conservative. And also between conservative and RIght. And libertarian. ANd among liberal, Left, and Democrat. We throw these terms around too carelessly.

Of course it’s not that simple
I wouldn’t want to suggest, ever, that conservative and Republican mean the same thing. Just as I wouldn’t suggest that most economists were Republican. It’s rather more about how those ideas that most economists do agree upon are seen as being right wing. More a matter of perception than anything else.

Plus, of course, the chance to use that last line :0)

liberal history
I don't understand why you should find it surprising that free traders would have little sympathy for the actions of the World Bank and the IMF. Most of the nostrums pushed by those groups, increased taxes, devaluing currency, etc., have been denounced by the majority of economists for years.

Few with any familiarity with history would agree with your disagreement with the qoute.
Every time you find a businessman abusing his clients and customers, you will find the heavy hand of govt protecting that man. Every single time.

Almost all economists agree with the central concept of the Laffer curve, that being the claim that there is a income maximizing point for tax rates. That tax rates above and below this point will result in less taxes. There is no agreement regarding the exact shape of the curve, but there is no disagreement whatsoever with the basic claim.

As to Krugman, maybe to an evowed Marxist, he might have at one time seemed right wing, but to the rest of the profession, he has never been. He's also lost all credibility in the profession in the last few years.

Sources?
"Few "conservative" economists believe in the "Laffer curve" that was the basis for Reagan and now Bush tax policies. ":

Any sources to back that assertiion?

"Few with any familiarity with history would agree with:

> " . . . abuses of private power will usually be
> checked . . . by the force of competition.""

I would challenge you to provide examples where private power, not backed by some government, was abusive.

Krugman a conservative?
Yeah, I'd like to see some proof that anyone (beside the New York Times) ever considered Paul Krugman conservative. That's a real jaw dropper and worth some out loud laughing.

I would agree that abuses of power are corrected almost infinitely quicker by competition when compared with government. John Stossel's career was changed forever when he came out of journalism school to "do good" (liberal good?) by exposing corruption and greed in big business. I'm sure he found it; however, he was surprised to find much more abuse of power and waste and corruption in government, and that the private sector does almost everything better.

WHY IS THE SURVEY SO OLD?
Isn't there a more recent survey?

answers
Some replies:

Microsoft caused, and still causes, harm by its monopoly practices. But for anti monopoly laws, there would be scarsely a non Windows desktop anywhere.

As for coercive practices, I was not thinking of monopolies but things like violent union busting (the Pinkertons). Of course, politicians being who they are, economic power often translates into political power. That's why many people believe that curbing the concentration of economic power is important for democracy.

If you read Krugman's columns, you would know that he holds the pro competition pro free market views that timworstall was praising. He said that it was reading what he thought were deliberate lies from the 2000 Bush presidential campain that made him anti Bush.

The post makes an important distinction between conservative and Republican. Krugman is a prime example of that distinction, a free market economist who supports Democrats.

My kids used to like the paradox: if right is wrong, then left must be right (but about traffic, not politics).

Role of Government
THe role of government is to prevent or punish physical coercion/violence. Thus, it would be a proper role of the government to prevent such violence. MIght want to look into why it didn't. TUrns out, the government was on the sides of thee corporations at that time. One thing you can always count on: the government siding with whatever side it thinks will get it the most power. That is its inherent corruption.

Yes
Brian Caplan has done some work on the same subject, his paper being from 2002. I didn’t mention all the evidence given in the original paper because, well, then the article would be longer than the original paper. There are also earlier papers mentioned as well. Have a read of the full paper to get the details.

No Subject
Politics, being the art of persuasion, there is inevitable pressure that words get their meaning changed over time. It seems to me that the fact that the word "liberal" has been redefined to mean something approaching its traditional opposite, has left us with a gap in political discourse. The "left" should actually be blamed less for doing this, since it is inevitable that people be biased in their own interest, than the "right" should for having allowed "liberal" to be usurped & settled into the comfortable but non-radical term of being "conservative".

Quite
I always describe myself as liberal, progressive and radical. I think we can do better than we are now (progressive), that large changes are needed to do so (radical) and that (classical) liberalism is the direction we ought to be headed.
This doesn’t make me many friends amongst those others who also self-identify as liberal, radical and progressive.

Krugman a conservative?
Krugman might say he is a free-marketeer, but that conflicts with other things he says about competition. He praises all things socialist, like national health care and the European systems in general. I don't think Krugman is an honest man.

As for monopolies--not to mention all the damage from government intervention in Microsoft: where are you seeing all those other non-windows desktops now?

Thank God that unions are finally "busting" on their own bloat. My home state of Michigan has just started to recover from the recession, lagging the rest of the country. I firmly believe that the single biggest reason for Michigan's laggard status is its union connection. Did you know that with all the benefits, pensions and wages figured in, the Delphi workers made $80 an hour? That's according to our local newspaper. No company, not even GM, can survive if it's paying low-skilled people ridiculous wages.

such liberal ignorance
Microsoft is not and never has been a monopoly.
The only thing anti-monopoly laws have ever been used for is to protect politically well connected businesses from having to compete.

Violent union busting is against the law. If the perpetrators weren't prosecuted, you need to look at failures of govt, not business.
On the other hand violence by union members against strike breakers is wide spread in this country, and is almost never prosecuted.

Krugman is pro-competition, but only within very narrow bounds set by govt.

There were no lies by Bush in 2000. So Krugman is doing the classic liberal trick of lieing about your opponents.

unions and the Bush lied crowd
I have often passed union picket lines and wondered what would happen if I tried to cross them. In fact, I would love to provoke them into trying to stop me. I don't think the American people would stand for the kind of behavior that the picket line actually represents--i.e., violence against scab labor. I really don't understand why picket lines aren't crossed today. Many people would do those jobs for less money than the union is paid, just to have a paying job. It's just a fact that unions are anti-free market capitalism and they have done much harm to the American consumer.

On another train, I was listening today to a wacked-out liberal talk show host named Tom Hartman. Now he and his ilk are saying that the United States was the only country insisting that there were WMD in Iraq; he is also expressing shock and outrage that there are people who still believe that the whole world thought Saddam had WMD. It's amazing how quickly these kooks will try to rewrite history to support their Bush lied garbage.

Saddam and WMD's
Here's a quote from a recent National Review article;

"But these claims ignore huge amounts of contrary evidence; and most of this evidence can be found in the final report of the Iraqi Survey Group (ISG) — the very same report that many critics hold up as proof positive that Iraq was not a WMD threat. The evidence found by the ISG (an investigative commission set up by the Bush administration after the invasion of Iraq) confirms that Saddam was preparing to rapidly reconstitute his WMD program the moment he broke out of sanctions, which — given the frayed state of the coalition against him — would inevitably have happened. Not only did Bush not “lie”; the critics themselves are guilty of selectively citing evidence and of ignoring facts inconvenient to their argument. The ISG report, as well as the other evidence that continues to come to light, demonstrates that Saddam couldn’t be trusted with the apparatus of a modern state, which he would have turned quickly back to producing WMD as soon as circumstances allowed."

Did not "Lie" Indeed
The report says Saddam was preparing to continue his program while Bush claims Saddam was continuing his program. To make matters worse, the group made additions to the report saying that they have no evidence showing that WMD materials were destroyed and that they might have been moved to Syria. So much for "huge amounts of contrary evidence."

And then there's the latest "leak" from the President, with more details at

http://www.gwu.edu/~nsarchiv/news/20060407/index.htm

What's most ironic about this affair is that the group began its investigation AFTER the U.S. invaded Iraq. That's like shooting first and then asking questions later.

Quite, Indeed
The argument raised in the essay is overly simplistic. For example, it does not consider issues like U.S. reliance on fascist states like China, Saudi Arabia, and others for manufactured goods and oil.

This gives new meanings to the word "right." For example, it can refer to pragmatic ethics and even realpolitik, and to economists who work not only for the U.S. but for countries like Red China.

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