[bjhoops1]

Golly, if I didn't know any better I'd think that maybe the field that deals with questions of power and resource allocation might not actually be apolitical, but may be primarily driven by the need to justify existing distributions of power and resources.

[tomrod]

Economist here. I think you're mixing political science (power distribution + more) with economics (efficient resource allocation + more). Happy to talk more if you're interested.

[neffy]

You may or may not be fully cognisant of how your field is actually practised, which the original commentator obviously is.

I have lost count of the times that senior people in your field, have happily admitted how their research is targeted towards the desired outcome of its funding source. Which the people funding the research are fully aware of, they just go economist shopping for whatever result they want to back their policy decisions.

The real issue with current economics isn't that it's not a science, it is that it's not practised scientifically. Those who do look at the field scientifically, have learnt a very great deal from the 2008 debacle - but they're not getting published where anybody is going to read them. But that is far from new. Let me present one of the great, sadly overlooked papers of your field:

David Jones, Emerging problems with the Basel Capital Accord: Regulatory capital arbitrage and related issues

https://www.sciencedirect.com/science/article/pii/S037842669...

Written by a researcher at the Federal Reserve in 2000, he pretty much nailed the causes of the 2008 crash, at least 8 years in advance. His reward was that he got to be part of the cleanup judging by his subsequent career - efficient resource allocation indeed.

[jeffreyrogers]

I think you're overestimating the homogeneity of the field and underestimating the degree to which most economists understand (and in many cases agree with) the issues you're raising. Plus, finance is not the same is economics and you seem to be conflating the two.

[bjhoops1]

Their definitely is a difference between academic economists vs the "economists" who direct policy in the halls of power.

[tomrod]

Please name some individuals that come to mind.

[FabHK]

Not GP. Krugman frequently makes this point though, and highlights the economic incompetence of Trump's "economists", eg here:

https://www.nytimes.com/2017/10/23/opinion/federal-reserve-j...

https://www.nytimes.com/2018/07/02/opinion/trump-trade-war.h...

[FabHK]

I think things are not that simply delineated, and the use of economics to justify existing political arrangements is well documented (eg in James Kwak's book Economism).

[fallingfrog]

Power distribution = resource allocation. Always has, always will. The two are literally measuring the same thing: the amount of money you have is nothing more than the ability to direct resources according to your desires. What better definition of power could there be?

[tomrod]

I agree there can be significant overlap. I do not agree that every case of resource allocation is a power distribution. As a case in point, there is a question that HN often asks -- what should I set my consulting rate at? This is inherently an economics question, and there is not often a power distribution discussion of whether the consultant has unique skills that let them charge what may seem to be outrageous sums, or if the consultant is freelancing in common skillsets.

Another point to be clear about is that economics is not solely concerned with resource allocation. Welfare consequences of policy, counterfactual reasoning, causal inference, algorithmic game theory and mechanism design, etc. are all research areas that are applicable to resource allocation but not only used for such.

[fallingfrog]

Of course your consulting rate is a measure of power! The question about your rate is a question of how easy you are to replace. If you have skills (which are a form of capital, which is a form of power) or relationships that are hard to find then you have leverage to negotiate a higher rate. Power is at the heart of that question.

Whenever you are negotiating a rate or salary, you are forming a relationship, and the terms of that relationship depend entirely on your relative levels of power and leverage.

[fallingfrog]

I guess I'll give you one thing though: whereas what two people want from each other can be complicated, power is not a scalar value like electric charge. But in many cases it acts like a scalar, especially if it takes the form of money, which is abstract and transferable.

[awakeasleep]

Can you explain how resource allocation is not a political issue?

[tomrod]

I can't, because the overlap with politics certainly happens in a number of contexts. One question we economists do not routinely address is "where do the preferences we study come from?" Often times preferences are politically motivated.

[fallingfrog]

Preferences?

I think what you're missing is that money is one type of power, and that basically the study of economics, politics and culture are all just different ways of studying human relationships, of which inequalities of power are a crucial part. There are two broad types of relationships: relationships of rough equality and relationships of gross inequality of power. The latter are almost always abusive, because if you are in a position of much greater power than someone else, it's just too tempting and easy to take advantage of them. Preferences have little to do with it.

[tomrod]

Preferences are the starting point of economic analyses, under the assumption that people pick what they want after who-knows-what a priori decision process.

Money (or, more commonly, assets) is sometimes included in models, but is not a starting point. If you're looking for models where solely wealth=power as an entry point into the field, I suggest political science (mentioned above) or finance. Overlap with economics in toolkit and occasionally questions, yes, but not composing the entirety of economics.

[FabHK]

I find your stance disingenuous.

Consider the question the Obama administration faced in 2009 (and the EU then and later): "Should we inject a large fiscal stimulus, or revert to austerity?"

Very obviously, economic and political issues are inextricably intertwined there.

Your notion that economics is a pure, purely descriptive (and somewhat predictive) "tool", while politics concerns itself with values, is not sustainable.

[bjhoops1]

Thank you for demonstrating my point. Economics imagines that it's possible to divorce the two, when it fundamentally is not. When economists do attempt to divorce the two, they inevitable work from a set of political assumptions which reinforce and never directly challenge the existing distribution of resources and power.

It's a very adroit slight of hand that benefits the global economic elite: "Hey there, smart professional, I want you to think VERY hard about this problem of how to efficiently allocate resources. Oh but you're not allowed to question why I, the descendant of a colonial robber baron have the ability to personally deploy the wealth of entire nations, and your definition of efficiency is literally just return on investment, no need to worry about questions like 'will the planet remain habitable' or 'is this system in any way just.'"

[petermcneeley]

Whats the leading economic theory on the economic effects of minimum wage? (Theory- not empiricism)

[tomrod]

I love this question. Mostly because what seems like should be a simple thing to answer, isn't. There are certainly strong opinions and much data that support both sides, however.

Neoclassical microeconomics (mostly like what one sees in mid-level undergraduate courses) suggests a minimum wage gives a kink point in individual's budget constraints--implying people may prefer to stay at minimum wage jobs rather than trade time for higher wage jobs, based on preferences. Additionally, if minimum wages rise too high producers will choose to replace labor (people) with capital (machines)--Stigler's argument.

Neoclassical macroeconomics suggests that minimum wage increases may result in inflation (more dollars chasing same number of items), black markets (e.g. hiring illegal immigrants or paying wages under the table), and so on. It is seen as a market distortion.

Labor economics and other sub-fields grant more nuance to these simplistic views. In the simple assessments above, minimum wage policies are at best set up as policies generating economic inefficiencies, at worst painted as immoral policies to support lazy people.

However, we do not live in a neoclassical world. Debates about the economic consequences of minimum wages are still hot topics, decades after they were first engaged, with supporting and detracting evidence. Wikipedia's coverage is a good entry point.[0]

For myself, I tend to come near "Bleeding Heart"/Arizona school libertarian when it comes to social policy--fiscally "conservative" (in that I want to make sure taxes are spent efficiently for the "best" outcomes, which we collectively decide is best), socially liberal, and a foreign dove. The toolkit of analysis emanating from economics does not immediately identify or lend itself to some superior moral framework -- that's on each person to choose themselves. Economics simply helps you identify where waste can occur, whether in the form of bias, inefficient capital deployment, risk, etc. For me, I sleep better at night knowing that my neighbor can afford healthcare and that the janitor I see working tirelessly can put money away for a rainy day.

Some of the more accessible discussions have happened on Barry Ritholtz's blog[1], where one of his contributors defend's Seattle's raising of the minimum wage and resulting impact.

[0] https://en.wikipedia.org/wiki/Minimum_wage#Debate_over_conse...

[1] http://ritholtz.com/2016/12/seattle-min-wage-update/

[FabHK]

Yes, this is a great example of how naive neoclassical micro appears to get things wrong. So, my argument is that given the malleability of supposedly purely descriptive and value free economics, the intrusion of politics is inevitable.

[bjhoops1]

Good thread for more specifics on the myriad problems with mainstream economics: https://twitter.com/unlearningecon/status/920325123810447361

[closeparen]

Whether mainstream economics has issues is wholly uninteresting, unless you are proposing a different theory with fewer issues. "The academy is flawed" doesn't mean that what the populists feel in their hearts is correct. It's the closest approximation of the truth we have.

[FabHK]

The argument is that basic economic training leads to policy prescriptions that advanced economic training (and related fields, such as economic history and political philosophy) repudiate.

So, no need to propose a different theory. Just prominently include the above disclaimer while you're teaching basic economics, and then proceed to teach further economics (and related fields) before the kids go off to work for investment banks.

[mcguire]

And the Ptolemaic model of the universe is perfectly adequate for most uses.

[closeparen]

Galileo proved its conclusions false. That’s a far cry from asserting that it failed to sufficiently consider his feelings about identity.

[robertAngst]

>It's the closest approximation of the truth we have.

Since that approximation is not the truth, but a tiny fraction of the truth, is it wrong?

[neuronexmachina]

"All models are wrong, but some are useful." --statistician George E.P. Box

[abakker]

Since we’re asking rhetoricals, is it useful to have an approximation of some portion of a system, or nothing at all?

[bjhoops1]

I think it is useful, and that’s a perfect way to describe mainstream economics. What’s frustrating (but predictable) is that there exists an entirely separate branch of economics which makes much more powerful observations about the fundamental nature of capitalist economics, including politics, power, and sociology. But Marxist economics are simply excluded from the Western economic tradition because it makes value judgements which directly and dangerously controversy the interests of the ruling capitalist class. In a healthier world, elements of mainstream economics would be combined with the fundamental Marxist critique of capitalism to produce new systems that are more efficient and less exploitative.

[closeparen]

Any serious social sciences / liberal arts program teaches Marx. Often in a core curriculum which is mandatory even for CS majors!

[tomrod]

The wrong model? Almost certainly.

A moral infraction? Debatable.

Able to score points in Econ 201? Yes.

[ItsMe000001]

You don't need a better theory for the purpose of the discussion.

What you can do - as one example - is take the results of what you know to be flawed not so seriously and when making decisions built-in more leeway for errors and corrections, and strengthen the human side. Incidentally, that is actually very capitalist/liberalist: Give more power away from centers to the root, the local people to make their own decisions, overriding what theory prescribes.

For a concrete tiny example, when I tried to return something at a department store the employee was very afraid to do anything not by the book. She was continuously being watched by cameras too. If she had had the power to actually make decisions it would be much better. Sure, people make mistakes, but I question the solution of making people into programmed "by the rules" drones with no ability to react to local events and use their own brains (if an AI would do that everybody would be gleaming, "look how intelligent our AI is!" - even when the results are far worse than that of even a below-median IQ human brain).

The point is what can change is what you do when you find that your theory is not good enough, and I'd say there are plenty of things to do even if you don't have a better theory (now or ever).

[bjhoops1]

Yeah, and because basically all of mainstream economics has VERY strong ideology built into its foundational assumptions, and its practitioners enjoy a great deal of (largely undeserved) respect and often great power (unlike other more truly scientific fields), the odds that a mainstream economist would look at the failure of their theories and conclude "wow, everything we've been doing is deeply flawed at best" is low. Good luck getting a mainstream economist to dig deeply and take a critical look at the fundamental contradictions within capitalism.

[closeparen]

Again, critiquing capitalism != establishing that some alternative is superior.

[dredmorbius]

Karl Marx: "Wealth, as Mr Hobbes says, is power."

https://www.bartleby.com/10/105.html

[_wc0m]

"I drew an upward sloping curve and a downward sloping curve that meet in the middle, and therefore socialism cannot work."

The 2008 crash called for a massive reassessment of the political and cultural status of economics. It required honest economists to recognize their profession not as a neutral description of the world but as a tool for the powerful to exercise dominion over the rest of us. But "cognitive dissonance doesn't work like that", especially when doing so would mean giving up prestige, lucrative consulting opportunities, the ear of the government. For some reason, those other social sciences don't seem to get invited to nearly such lavish parties...

Of course, many people within and without the profession have been making this argument for decades, since way before 2008. But funny thing, the way power works is - those sort of people are never listened to. Why would that change now?

Edit: For a nice overview of these arguments I recommend the book "Economists and the Powerful" from 2012.

[candiodari]

You criticize the social sciences ... because economics is "just about justifying existing power structures". That seems a bit ... well, wrong. Or at least the assumption that social sciences is any different from the worst you ascribe to economics here. NONE of the social sciences, not even English studies, claim to be value free (that would be mighty inconvenient for them. Of course Hamlet only makes sense within the value system of England of that time ... studying it outside of that context just won't work. Likewise criminality happens within a context. Very few bank and ATM robberies in the Soviet Union, everything social happens within a specific context, directed by values).

But ... the social sciences. They're ALL explicitly about something in between studying and justifying existing power structures ... No exceptions. Studying (and justifying) existing society is what the humanities are about. It's the definition.

By contrast economics has a branch that is entirely value free (game theory, imho the hardest part), and most of economics likes to pretend it is value free (and whilst they're not 100% right at that, they're ... let's say 75% right), and only a small part is justifying existing power structures.

Social sciences tell the government what to do like priests do : based on what "it should be" according to how we see society. Economists are more humble, and merely try to say "your choices are A, B, C. These will lead to X, Y, Z". And yes, social scientists resent that the real world should be allowed to influence their perfect world, but ... only the truly insane would follow through.

Note that at no point did I say that makes social sciences worthless.

> The 2008 crash called for a massive reassessment of the political and cultural status of economics

No it did not. You act as if people listened to economists before that. In fact, I would argue the opposite is true: economists triggered (out of self-interest, because they were working at banks) the crisis BECAUSE people went too far of the reasonable path with loans.

That's the big problem that never seems to get through. There are many causes of the crisis, of course. However the actual cause is people ... bought and built houses they could never afford (in other words they used up more resources than they could ever hope to contribute to society). That's the cause of the crisis. The banks attitude and corruption and lying ... actually let those people enjoy their ill-gotten gains for a lot longer than would otherwise have been possible (lying on loans then buying ... ill-gotten is a fair description). Not indefinitely. And of course they're the easy target.

The crisis was far preferable to the alternative : that people would just sit on those resources preventing society from working.

But yeah ... "WEI ! They took my stuff ! And look, they're corrupt !". Well, yes, they're corrupt. That's bad, but sorry to say, it's not the problem.

And yet, funnily enough yesterday morning in the newspaper one particular French, poor family came into an article. They were so poor, it was judged by social workers, that they needed to be given a house (that's one thing France does). A large house that they had "helped design and locate".

Which poor family you ask ? The new cabinet minister. The woman makes 8900 euros per month, just from her main job (she has 4, though granted, they likely pay less), and the husband (who does not have published pay), I must say, likely makes more.

Social workers' judgement ? These people needed to be given a free, 3 bedroom home in a Paris suburb.

[pasabagi]

>a branch that is entirely value free

I think values are a little bit like the GPLv3. They virally propogate into anything they are even the slightest part of. So while game theory, as maths, is value free, its place in economic theory, its promotion, its funding, its employment, are all eminently value-driven. Seeing parts of a discourse as clean, free of value judgements is to misunderstand value judgements. Information without value has only analytical meaning. Every piece of synthetic judgement implies a value system - people telling you otherwise are generally trying to sell their values through dishonest means.

[jancsika]

> I think values are a little bit like the GPLv3. They virally propogate into anything they are even the slightest part of.

Hm... I have a git repo that includes a) some 3-clause BSD licensed code and b) a GPLv3 licensed plug-in.

The GPLv3 licensed plug-in certainly counts as being "part of" this repository.

Could you please explain how the GPLv3 code "virally propogates" across the full repository? How is a patch submitted to the 3-clause BSD licensed code tainted by the GPLv3 plug-in?

[bjhoops1]

Strongly agree about values propagated into everything. Speaking of game theory, I highly recommend Adam Curtis' documentary The Trap. He talks about John Nash, the Cold War ethos and his struggle with schizophrenia, both of which highly influenced his work and view of humankind as utility-maximizing machines. Obviously lots of economic implications, kind of touches on "homo economicus", that sort of thing.

[crdoconnor]

>By contrast economics has a branch that is entirely value free (game theory, imho the hardest part), and most of economics likes to pretend it is value free (and whilst they're not 100% right at that, they're ... let's say 75% right), and only a small part is justifying existing power structures.

If you want to see where the "value" part of an econ paper, study the assumptions. Perfect competition, perfect information, etc. -- these assumptions weren't commonly built in to models because they actually simplified them (there are plenty of better ways to simplify economic models).

They were built in because identifying and exposing the source of the power that feeds you isn't the way to get ahead in this profession.

>However the actual cause is people ... bought and built houses they could never afford

The actual cause was banks giving out loans to people who could never afford them and then disguising that fact, taking commission and passing on the losses to somebody else.

Arguing that it's the fault of the people who took the loans is kind of like loaning all of your worldly wealth to your irresponsible, deadbeat cousin and then blaming him because you just went broke.

[algorias]

> Perfect competition, perfect information, etc. -- these assumptions weren't commonly built in to models because they actually simplified them

Um, what? That's exactly why these things end up in so many models.

> (there are plenty of better ways to simplify economic models).

Such as?

[yk]

> Of course Hamlet only makes sense within the value system of England of that time

Lit studies usually claim something quite different, namely that you need a sophisticated interpretative framework. The values of that time may or may not be relevant, but usually are not.