Skepticism Of Popular Economics Arguments

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Published on: July 16, 1998

I'm now going to venture (on an amateur basis) into the dismal science. Not to tell you the "truth," because I don't know enough economics (and indeed the finest economists may not be able to tell you the truth, either). Instead, I want to focus on detecting falsehood in popular economics arguments.

This task is important: false popular arguments like the Laffer Curve argument of the Reagan era can have substantial effects on policy and who ends up with what results.

Paul Krugman, a notable economist at MIT, has written several popular books debunking popular economics arguments from technical standpoints. But that's too difficult for most people.

What's easier, and more generally applicable, is commonsense based on things we know are true. Most popular economics arguments ignore or contradict these important principles.

Four main methods of economic activity (production and distribution):

  1. Market
  2. Government
  3. Family
  4. From commons.

Economics arguments generally overlook family and commons activity, despite the fact that they are enormous. For example, recently some economists came up with an estimate of dollar value of environmental benefits, which exceeded the entire production of the human race. Something like $33 trillion per year. Housework and child rearing by parents are not counted, despite their obvious enormous value.

Market-focused economic arguments generally prefer market to government, and ignore the importance of the other two methods of economic activity. Still worse, they permit the degradation of the other two. For example, environmental degradation (causing increased burdens of sickness and other costs for avoiding harm) and harm to families (such as child labor, loss of parenting time due to distant or two-parent employment) are generally ignored as economic factors when considering "growth" of developing nations. This is because statistics like GDP do not count family and commons activity, and can seriously undercount government activity.

Economies are tools for our goals, not goals in themselves.
While it's unquestionable that most people want wealth, most people actually have multiple goals: wealth, health, reproduction, status, security, etc.

But even if wealth could provide for all those goals, then the important issue is to ensure an even enough distribution that the goals are well achieved. An economy where a huge fraction cannot achieve basic goals of wealth, health, reproduction, status, security, etc. is not satisfactory, but this is seldom addressed by popular economics arguments from the right. Usually the focus is on production, not distribution.

Additionally, a great deal of economic activity is wasted without changing the satisfaction of these goals. There's much waste in fruitless competition at levels ranging from personal to oligopolistic, and in compensating for harms brought about by other economic activities.

Beware of just-so stories and unsubstantiated metaphors.
Remember the Reagan era metaphor that "a rising tide lifts all ships"? Well, economic growth since that era has predominantly raised the yachts of the rich, and flooded the coastal homes of the poor. Remember the claims that welfare mothers will just pop out babies to continue their payments? Well, research has shown that they have babies just like everybody else.

The biggest problem, of course, is that popular economics arguments are used as tools in propaganda wars. The general pattern is that corporate funded propaganda is phrased in the form of economic arguments, to combat popular interests. As numerous commentators like Paul Krugman have explained, this strategy has been a wild success since the Reagan era, and has concentrated wealth as no other strategy has since the Gilded era of the "robber barons". There will be another counterreaction, as there was to the Gilded era.

Specific examples of bad popular economics arguments would make splendid discussions: feel free to start some. I'll leave you with a paragraph from a favorite article of mine, illustrating the significance of goals other than GDP: Uniting to Defend the Four Freedoms, by Chip Berlet. This is particularly poignant to me, since my own father, a WWII vet, just died of cancer this past month.

Years later, battling cancer, my Dad was determined to don his uniform one last time on Memorial Day. As I helped him dress, I asked him about the war. His only reply was to hand me one of his medals. Inscribed on the back were the words "Freedom from Fear and Want. Freedom of Speech, and Religion." The four freedoms.

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