What is the only source of profit?

Adam Smith on export promotion @stevenljoyce

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Alfred Marshall on @johnmcdonnellMP socialism with an iPad

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Economic and sociology vocabularies compared

Lord Nicholas Stern – wrong from the start

Source: Nicholas Stern “Professor Bauer on development”, Journal of Development Economics (1974).

Source: “A Voice for the Poor”, The Economist (2 May 2002).


Source: Ian Vazquez “Peter Bauer: Blazing the Trail of Development”, Econ Journal Watch (May 2007).

Lord Acton on the risks of political alliances for liberty

A quote from “The History of Freedom in Antiquity” that Friedrich Hayek used at the start of “Why I Am Not a Conservative,” his famous postscript to The Constitution of Liberty.

Source: In Praise of Lord Acton, David Henderson | EconLog | Library of Economics and Liberty

A guide to schools of economic thought

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George Stigler on Adam Smith’s greatest contribution

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George Stigler and the role of scientists in public policy

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Milton Friedman would replace the Fed with a computer

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Stigler on economics as a big tent @RusselNorman @NZGreens @GreenpeaceNZ @Mark_J_Perry

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The dangerous left-wing bias of economists strikes again

The left-wing bias of economists must be taken into account in public policy-making. Any suggestions to regulate the economy, spend our way out of a recession, increase the top tax rate and so on must be discounted for that well-known but little publicised political bias.

Source: Economists Aren’t As Nonpartisan As We Think | FiveThirtyEight

As is not well-known enough, Cardiff and Klein (2005) used voter registration data to rank disciplines at Californian Ivy League universities by Democrat to Republican ratios. Economics is the most conservative social science, with a Democrat to Republican ratio of a mere 2.8 to 1. This can be contrasted with sociology (44 to 1), political science (6.5 to 1) and anthropology (10.5 to 1). 40% of Americans are Democrats, 32% are independents with the balance Republicans.

Zubin Jelveh, Bruce Kogut, and Suresh Naidu confirmed that bias: that the typical economist is a moderate Democrat. They found a 60–40 liberal conservative bias

Jelveh, Kogut, and Naidu also reminded, as many have before them that economics is the most politically diverse of academic professions. Sociology is a notorious left-wing echo chamber as an example. Their most likely view of Jeremy Corbyn is he is a bit of a Tory. Oddly enough, sociologists are the first to point the finger at economists for political bias.

Jelveh, Kogut, and Naidu correlated political donations of more than $200 in the Federal Elections Commission database with the language used in 18,000 journal articles back to the 1970s.

More interestingly, they correlated political bias with the estimates of quantitative effects such as the top tax rate and its impact on labour supply and investment:

We found a (significant) correlation when we compared the ideologies of authors with the numerical results in their papers. That means that a left-leaning economist is more likely to report numerical results aligned with liberal ideology (and the same is true for right-leaning economists and conservative ideology)… liberals think the fiscal multiplier is high, meaning the government can improve economic growth by increasing spending, while conservatives believe the multiplier is close to zero or negative.

They are not suggesting a rigging of the results. Economists tend to sort into the fields that suit their ideologies:

It’s more likely that these correlations are driven by research areas and the methodologies employed by economists of differing political stripe. Economics involves both methodological and normative judgments, and it is difficult to imagine that any social science could completely erase correlations between these two… macroeconomists and financial economists are more right-leaning on average while labour economists tend to be left-leaning. Economists at business schools, no matter their specialty, lean conservative. Apparently, there is “political sorting” in the academic labour market.

Before you start writing out the indictment that economic policy and the global financial crisis is the product of a vast left-wing conspiracy within the economics profession you should remember the wise words of George Stigler.

Stigler argued that ideas about economic reform needed to wait for a market. He contended that economists exert a minor and scarcely detectable independent influence on the societies in which they live. As is well known, Stigler in the 1970s toasted Milton Friedman at a dinner in his honour by saying:

Milton, if you hadn’t been born, it wouldn’t have made any difference.

Stigler said that if Richard Cobden had spoken only Yiddish, and with a stammer, and Robert Peel had been a narrow, stupid man, England would have still have repealed the Corn Laws in the 1840s. England would still have moved towards free trade in grain as its agricultural classes declined and its manufacturing and commercial classes grew in the 1840s onwards because of the industrial revolution.

As Stigler noted, when their day comes, economists seem to be the leaders of public opinion. But when the views of economists are not so congenial to the current requirements of special interest groups, these economists are left to be the writers of letters to the editor in provincial newspapers. These days, they would run an angry blog.

Greg Mankiw on the zero influence of modern macroeconomics on monetary policy making

Two of my brothers studied economics in the early 1970s and then went on to different paths in law and computing respectively. If Greg Mankiw is right, my two older brothers could happily conduct a conversation with a modern central banker. Their 1970s macroeconomics, albeit batting for memory, would be enough for them to hold their own.

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Source: AEAweb: JEP (20,4) p. 29 – The Macroeconomist as Scientist and Engineer – Greg Mankiw (2006).

I would spend my time arguing with a central banker that Milton Friedman may be right and central banks should be replaced with a computer. The success of inflation targeting is forcing me to think more deeply about that position. In particular the rise of pension fund socialism means that most voters are very adverse to inflation because of their retirement savings and that is before you consider housing costs are much largest proportions of household budgets these days.

Lucas and Sargent on why new classical macroeconomics was unpopular

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Applied welfare economics was never value free, but applied price theory is @TimothyTTaylor

The first words uttered in my first lecture in applied welfare economics by Bob Rutherford were ‘this course starts with an explicit political position – that of liberalism’. I never forgot that.

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Source: CONVERSABLE ECONOMIST: Crossing the Ravine from Economic Theory to Policy Advice.

This leads us to Robert and Zeckhauser’s taxonomy of disagreement:

Positive disagreements can be over questions of:
1. Scope: what elements of the world one is trying to understand?
2. Model: what mechanisms explain the behaviour of the world?
3. Estimate: what estimates of the model’s parameters are thought to obtain in particular contexts?

Values disagreements can be over questions of:
1. Standing: who counts?
2. Criteria: what counts?
3. Weights: how much different individuals and criteria count?

Any positive analysis tends to include elements of scope, model, and estimation, though often these elements intertwine; they frequently feature in debates in an implicit or undifferentiated manner. Likewise, normative analysis will also include elements of standing, criteria, and weights, whether or not these distinctions are recognised.

The origin of political disagreement is a broad church indeed in a liberal democracy. Those you disagree with are not evil, they just disagree with you. As Karl Popper observed:

There are many difficulties impeding the rapid spread of reasonableness. One of the main difficulties is that it always takes two to make a discussion reasonable. Each of the parties must be ready to learn from the other.

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