Behavioral Econ: Less Dismal, Less Denialist

Patricia Cohen reports in today’s New York Times on a development in economics that will have a huge effect on denialism: the increased willingness to question the orthodoxy of neoclassical economics. Consumer rights, environmental protection, and any number of other issues has suffered for decades under the neoclassists, who hold their beliefs in markets so strongly that it’s just like a religion. A bad religion. Anyway:

“There is much too much ideology,” said Alan S. Blinder, a professor at Princeton and a former vice chairman of the Federal Reserve Board. Economics, he added, is “often a triumph of theory over fact.” Mr. Blinder helped kindle the discussion by publicly warning in speeches and articles this year that as many as 30 million to 40 million Americans could lose their jobs to lower-paid workers abroad. Just by raising doubts about the unmitigated benefits of free trade, he made headlines and had colleagues rubbing their eyes in astonishment.

“What I’ve learned is anyone who says anything even obliquely that sounds hostile to free trade is treated as an apostate,” Mr. Blinder said.

And free trade is not the only sacred subject, Mr. Blinder and other like-minded economists say. Most efforts to intervene in the markets — like setting a minimum wage, instituting industrial policy or regulating prices — are viewed askance by mainstream economists, as are analyses that do not rely on mathematical modeling.

That attitude, the critics argue, has seriously harmed the discipline, suppressing original, creative thinking and distorting policy debates…


  1. Sam Centipedro

    Sounds a bit like the badly-named “post-autistics economics” movement at Unfortunately the PAE people seem to have their own communication difficulties and don’t express clearly what underlies their approach. But their basic idea is, I think, to chuck out the logic that classical economics (CE) uses:
    * our classical economics theory (perfect markets etc.) predicts that in circumstances A people will do X
    * but in circumstances A people do Y (and Y is not X)
    * therefore people are wrong
    * people must be corrected to conform with theory

    The revolutionary idea of PAE was to suggest that perhaps it wasn’t the people that were wrong but the theory. Shades of a nascent scientific approach?!

    Classical economics sometimes has affinities with theology, in producing detailed arguments founded on fallacious premises. The perfect market becomes an axiom rather than a simplifying idealisation.

  2. Blinder has a good economics primer called “Hard Heads, Soft Hearts: Tough-minded Economics for a Just Society” for anyone who is interested. It may be a bit dated now, but it takes on the “Voodoo Economics” of the Reagan era.

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