Economics has no natural political bias
(Some thoughts on recent claims by Slate's Matt Yglesias)
Last week, Matt Yglesias countered Chris House on the idea that economics has a conservative bias. I’m guessing there are few economists who would appreciate an argument over the natural political orientation of their discipline.
Yglesias picked out specific points from ”introductory economics textbooks I’ve looked at” to argue economics favors liberals:
"•Governments (typically through central banks) need to manage the demand level of national economies to prevent catastrophic recessions and mass unemployment.
•Absent carbon pricing, a market economy will massively overproduce greenhouse gases.
•Many industries, such as broadband Internet, are “natural monopolies” where an unregulated market will lead to higher prices and less investment than is socially optimal.
•Due to asymmetrical information, consumers in a market economy will be unable to bargain effectively with doctors and other providers of health care services.
•Due to adverse selection, consumers in a market economy will be unable to effectively insure themselves against health risks.
•Due to the declining marginal utility of money, taking $100 from a rich person and giving it to a poor one will increase human welfare.
•Increasing the number of immigrants, raising taxes on the rich, and making Social Security benefits more generous will make almost everyone better off."
I think it would be constructive to compare this to Greg Mankiw's list of points economists agree on, which is part of the introduction of his “Principles of Economics” text—the most popular economics textbook in the U.S. (It should be mentioned here that Mankiw does lean to the right politically and was the chairman of the Council of Economic Advisers under George W. Bush. However, he is described as a New Keynesian, undermining Yglesias' idea that conservative economists “endorse some kind of out-of-the-mainstream ethical view.”)
Mankiw’s list, as taken from the 6th edition of his book:
"Proposition (and percentage of economists who agree)
1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
2. Tariffs and import quotas usually reduce general economic welfare. (93%)
3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)
6 .Economic growth in developed countries like the United States leads to greater levels of well-being. (88%)
7. The United States should eliminate agricultural subsidies. (85%)
8. An appropriately designed fiscal policy can increase the long-run rate of capital formation. (85%)
9. Local and state governments should eliminate subsidies to professional sports franchises. (85%)
10. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
11. The gap between Social Security funds and expenditures will become unsustainably large within the next 50 years if current policies remain unchanged. (85%)
12. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
13. A large federal budget deficit has an adverse effect on the economy. (83%)
14. The redistribution of income in the United State is a legitimate role for the government. (83%)
15. Inflation is caused primarily by too much growth in the money supply. (83%)
16. The United States should not ban genetically modified crops. (82%)
17. A minimum wage increases unemployment among young and unskilled workers. (79%)
18. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
19. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)
20. Government subsidies on ethanol in the United States should be reduced or eliminated. (78%)
Source: Richard M. Alston, J. R. Kearl, and Michael B. Vaughn, “Is There Consensus among Economists in the 1990s?” American Economic Review (May 1992): 203–209; Dan Fuller and Doris Geide-Stevenson, “Consensus among Economists Revisited,” Journal of Economics Education (Fall 2003): 369–387; Robert Whaples, “Do Economists Agree on Anything? Yes!” Economists’ Voice (November 2006): 1–6; Robert Whaples, “The Policy Views of American Economic Association Members: The Results of a New Survey, Econ Journal Watch (September 2009): 337–348."
The points in the two lists have some differences in both phrasing and inclusion. Yglesias’ first point is similar to Makiw’s fourth point, but Yglesias really pumps his up with subjective phrasing. Saying governments “need
to manage” demand to avoid “catastrophic
recessions and mass
unemployment” (emphasis mine) is probably overstating it. It is true that such Keynesian prescriptions, even as described by Mankiw, are often associated with American liberals.
Yglesias’ also says that carbon pricing is needed to avoid “massively” overproducing greenhouse gasses. This is similar to point 19 in Mankiw’s list, but notice the careful phrasing. Mankiw says only that taxes and permits are better than setting a pollution ceiling. That claim is pretty uncontroversial among economists. Yglesias’ claim probably has more detractors. Part of the issue there, though, might be settling on a defined value of overproduction of emissions. I suspect there’s a range agreed upon among climatologists, but I don’t know what it is.
The last point Yglesias makes about Social Security doesn’t necessarily contradict point 11 by Mankiw, but it does introduce some ambiguity as to “conservative” or “liberal” bias. If mosts economists believe Social Security will be unsustainable without changes, is it necessarily true that “making Social Security benefits more generous will make almost everyone better off”? There may be a way to make some benefits more generous while also changing the program to be more sustainable in the long run, but I think that’s an unsettled debate.
There are other points Yglesias makes that seem far from uncontroversial. The point about health care and asymmetrical information seems especially undecided based on economic literature I’ve read myself. Also, laws have helped consumers against asymmetrical information in other markets in the past. Mankiw also addresses the point about declining marginal utility (Yglesias’ second to last point) here: http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.3.21
. (I use Mankiw in this post because he is a mainstream economist offering opposing viewpoints, illustrating a lack of consensus about certain points highlighted by Yglesias.)
You can pour over all the bullet points yourself if you wish to make your own conclusions about the natural biases of economics. I propose that there is no natural bias. Facts are just that and you can talk to any econometrician to be told that data can be used to support almost any position. With enough data, you get some consensus outlined here, but these aren’t scientific laws. Conditions change all the time in social science, as do policy prescriptions, the only thing we can appropriately call liberal or conservative.
(Original link: http://matthaldane.com/post/76223790653/economics-has-no-natural-political-bias