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Is economics value-free?

from Lars Syll

jp-imgresI’ve subsequently stayed away from the minimum wage literature for a number of reasons. First, it cost me a lot of friends. People that I had known for many years, for instance, some of the ones I met at my first job at the University of Chicago, became very angry or disappointed. They thought that in publishing our work we were being traitors to the cause of economics as a whole.

David Card

 

Back in 1992, New Jersey raised the minimum wage by 18 per cent while its neighbour state, Pennsylvania, left its minimum wage unchanged. Unemployment in New Jersey should — according to mainstream economics textbooks — have increased relative to Pennsylvania. However, when economists David Card and Alan Krueger gathered information on fast food restaurants in the two states, it turned out that unemployment had actually decreased in New Jersey relative to that in Pennsylvania. Counter to mainstream demand theory we had an anomalous case of a backward-sloping supply curve.

Lo and behold!

But of course — when facts and theory don’t agree, it’s the facts that have to be wrong …

buchC6The inverse relationship between quantity demanded and price is the core proposition in economic science, which embodies the pre-supposition that human choice behavior is sufficiently rational to allow predictions to be made. Just as no physicist would claim that “water runs uphill,” no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.

James M. Buchanan in Wall Street Journal (April 25, 1996)

Economics — non-ideological and value-free? I’ll be dipped!

  1. William Carver
    November 4, 2020 at 4:35 am

    “When you mix politics with science, you get politics.”

    • Craig
      November 4, 2020 at 6:59 pm

      That is an important insight to keep in mind because it also means that de-bunking mathematical or theoretical insights like general equilibrium and the necessity of fiscal deficits can be easily set aside by the powers of economic and political vested interests as well.

      And that is why the immediacy of beneficial and problem resolving effect and starkly empirical and temporal universe reality created by a 50% discount/rebate policy at retail sale is so necessary.

      It’s the difference between a palliative non-effect and a complete pattern change.

  2. JD
    November 5, 2020 at 7:43 pm

    Of course economics is not value-free. If you can say that a system that creates both billionaires and thousands of mentally ill homeless people is working just fine, you are expressing the fact that you see no significant difference between these two outcomes, that they have the same value to society. If raising the minimum wage actually increases employment and economists refuse to acknowledge what this means, that’s not economics being value-free. That’s just economists being wrong.

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