Sunday, December 03, 2006

What else do economists teach when they teach economics?

Christopher Hayes conducted an interesting experiment: he enrolled in a course on "Principles of Macroeconomics" at the University of Chicago. The results he recounts are an eye-opener:

Efficiency is the Chicago School’s defining value. The free market economists who came before—most notably Austrian Friedrich Hayek—offered a philosophical critique of the political consequences of state regulation and control of the economy. But Milton Friedman, his colleague George Stigler and the entire Chicago School focused on the actual economic problems of state control, namely, inefficiency. They rejected Keynes’ contention that markets function best with routine government intervention and instead harkened back to Adam Smith’s classical conceptions of equilibrium. Chicago School theories gained popularity when global capitalism hit a major funk in the ’70s—a period of slow growth and high inflation. Friedman argued, plausibly, that it was too much government that had caused the problems.

What may seem a subtle rhetorical shift had major consequences. It transformed what had been conservatism’s moral argument about capitalism bestowing the most benefits on those who worked the hardest—and the inherent injustice of a coercive state forcibly redistributing capital—into a technical argument about the inefficiencies associated with non-free-market solutions and the perverse incentives that made any social programs destined to fail. Thus, arguments about the way the world should be were converted into assertions about how the world actually was. Or, to put in terms that economists favor, normative arguments became positive ones.

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This article has been doing the rounds for a while now; I discovered it through Mark Thoma and Henry Farrell. There are tons of comments on both posts. From the latter post, we also get links to these two and articles (from 1993 and 2005, respectively) which reinforce the basic message.

In the comments section of this post on Dan Drezner's blog, Chris Hayes defends his article.

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Thanks to Veena for an e-mail alert, and to Swarup for making it easy for me to get the links quickly!