Economists

Economics and Unpleasant Truths

I enjoyed this snippet from an essay by Arnold Kling of GMU here:

As economists, we remind people of some unpleasant truths. Such unpleasant truths are deserving of respect, even if not all economists are.

One unpleasant truth is that resources are finite. As individuals, we would each like unlimited access to medical services without having to pay for them. But economists will point out that this is not possible, and instead hard choices must be made. It would be easier to make health policy if resources were not finite, and people are understandably resentful when the consequences of finite resources are spelled out.

Another unpleasant truth is that the “intention heuristic” does not work on a large scale. The “intention heuristic” is to judge the morality of a policy by its intentions, without regard to its consequences. Instead, an economist will point out that a higher minimum wage might harm low-skilled workers, even though the intention is the opposite. It would be a lot easier to assess policy if the “intention heuristic” were reliable, and people are understandably resentful when the problems with that heuristic are exposed.

When research is widely read, there are likely to be enough reviewers with different points of view to ensure that flawed analysis is subject to criticism.

The theory that economists were corrupted by special interests is an example of the “intention heuristic.” It suggests that economics failed to prevent the financial crisis because of bad intentions on the part of economists. With better intentions we would reach a wiser consensus.