Last week I tweeted a couple of observations about the role of economics in modern propaganda and marketing; namely that it’s a frequently used tool in both of those disciplines that relies on its ability to advocate for political parties or ideologies or corporate – or other interests – while masquerading as an impartial science. Some people agreed with this and others took objection, and twitter isn’t the best medium for fleshing these things out, so here’s a more extended take.
There’s a famous science fiction short story called The Cold Equations. It was written by a guy called Tom Godwin and published in 1954 in Astounding Magazine. In it an emergency ship is heading to a remote planet with urgently needed medical supplies without which the explorers on the planet will die. The pilot finds a stowaway on board the ship: a young girl. But, the pilot explains to her, the ship does not have enough fuel to account for her additional mass. If she stays on-board then she, the pilot, and all the people who need the medical supplies will die. She must be blasted out of the airlock into space. The laws of physics demand it, and there can be no humanistic appeals to morality against the cold, hard equations of the universe. In the end (spoiler) she willingly goes to her death.
There have been plenty of criticisms of this story, all making much the same point: Godwin’s science is fine but everything around it is ridiculous (engineers especially hate it on the grounds that no space mission would ever have such a tiny margin of error that a ~60kg weight discrepancy, preventing even the most minor course correction, would doom it to disaster). A whole lot of absurd premises are piled on top of each other to get to the point where the author can blast a young girl into space and justify it on the basis of science.
Most of the economic arguments I encounter look exactly like this to me. Selected, sometimes sound but often absurd premises carefully framed around a statistical finding or mathematical model so the economist can advocate for a client or ideology or agenda but say, ‘Look. Science! We gotta face the cold hard facts. There is no alternative!’ Here are two very recent examples:
1. Should we have a ban on foreign property buyers? BNZ Chief Economist Tony Alexander says we should. He provides six very compelling-sounding reasons why, but doesn’t mention what is certainly the most important from the BNZ’s point-of-view – that foreigners paying cash or overseas-raised debt for houses means fewer mortgages for New Zealanders, and thus less profit for the BNZ. And he ignores the fact that Australia has a foreign-buyers ban (with an exception for new homes) and absolutely none of the things Alexander predicts a foreign-buyers ban will accomplish have happened in Australia. The empirical evidence from the very similar country right next door seems like it should have some salience here.
Bank economists are, along with politicians, the most prominent economic spokespeople in our society. Most people hear economic arguments from these two groups every day, and sometimes what they say is sensible and sometimes it ain’t – but there is always an agenda, and the reason these groups use the language of economics to advance their own interests is because they know that it is the perfect propaganda tool, because it disguises itself as impartial and scientific.
2. But, twitter pointed out to me, what about academics? Politicians aren’t real economists and of course bank economists have an agenda, but academics are out there doing real science and getting peer reviewed, right?
Well here’s something that a bunch of right-wing economists, mostly academics, were all retweeting today. A blog post by Bryan Caplan, a very famous professor of economics at George Mason University in the US. Caplan is also a libertarian which means he adheres to an ideology which preaches that government is evil, and all of his research as a scientist harmoniously proves that his ideology is correct. (This doesn’t tend to happen in other sciences; science is mostly the experience of dreaming up beautiful ideas and theories and testing them to find out that they’re dead wrong, but somehow libertarian economist’s results always seem to endorse their beliefs about the state, and left-wing economists results’ always endorse theirs, even though the two ideologies are totally incompatible). Caplan talks about a documentary in which a homeless guy is given $100,000 and wastes it. He concludes:
Libertarians have occasionally offered their critics the following deal: We’ll support a one-time Equalization of Wealth, if you agree to abolish the welfare state. I’m not surprised that no one has taken the bait. Most poor people aren’t as dysfunctional as Ted. But deep down even bleeding hearts subscribe to my insensitive theory that – at least in the First World – ordinary prudence is enough to keep almost anyone out of poverty.
I could say a lot about that but I’ll restrict myself to the science. Firstly, most scientists try to have a cohort of more than one person before they make a sweeping statement about all of humanity. Secondly, you also try and have a control group. What happens if you give a non-alcoholic non-homeless person a huge sum of money? Like, say, lottery-winners? Well, if you google ‘lottery winners curse’ then you find out a lot of them do exactly what the homeless guy did – they fritter it all away. Some middle-class lottery winners end up becoming homeless. The academic literature on just how prevalent this is is contradictory, but my point is that this prominent academic economist and all of the economists retweeting and endorsing him sure don’t look like serious scientists. They look like bank economists or politicians, only they’re advocating for ideologies, not corporate or political interests.
The other point I’d make about economics and peer review is that yes, other sciences have peer review, but peer review is not really that robust. If you find something interesting in a new anti-cancer drug and you’ve tested it on mice, then you publish it in a peer-reviewed paper. If you want to give the drug to thousands of patients then you have to put it through clinical trials, a very robust process that takes years (and costs a fortune). You really, really, really need to be right. But economics doesn’t go through that kind of screening before it gets picked up by policy-makers and used to justify policy changes that affect the lives of millions, or tens of millions, or billions. Here’s an Economist article on the Reinhart-Rogoff debacle (too long to excerpt) explaining why that’s a problem.
But what really set me off on my twitter rant was thinking about Thomas Pikkety, and the response to his contention in Capital in the Twenty-First Century. His thesis in that book is simple – that in a capitalist system the rate of return on capital is greater over time than economic growth, meaning capitalism leads to concentration of wealth and greater inequality. It’s an important and simple thing to know about the economic system that drives the world. If he’s right then it has huge implications for our society and the level of redistribution and government intervention. Caplan above believes that capitalism is moral. If you work hard it will reward you. Piketty claims the opposite. That it is an amoral system in which wealth simply aggregates to itself.
Unfortunately there’s no way for a layperson to tell whether Piketty is correct because the response from his economist peers are neatly divided along ideological lines. Left-wing economists say he’s right, right-wing economists insist Piketty has been ‘debunked’. He’s dead wrong.
Because my values are left-wing I’m inclined to think Pikkety is right. But I also trained as a scientist, and I know that a gut-feeling based on my prior values isn’t good enough when you’re making huge decisions about the political economy. Economics is supposed to be a science, and economists certainly view themselves as such, and tend to be far more confident in their findings than, say, climate scientists, or geologists, or psychologists, or any other field that deals in uncertainty. But as a non-economist I find that every time I encounter the discipline it looks nothing like science and is indistinguishable from either politics and political activism or marketing, but is made more insidious and more powerful from its presentation as a cold, objective set of facts against which there can be no argument.