I've spent some time the last day or two thinking about the ways in which economics is caricatured by those who don't like its conclusions. A reader sent me this target-rich environment from a Harvard (!) conference, which included this description of one of the papers:

Economics is a two-faced, one might almost say schizophrenic, discipline. It claims to be a science, describing the world, telling it like it is without preconception or value judgment. (Never mind that the hey-day of positivism that enshrines the separation between fact and value is long past; economists have always lived in a time warp.) The reality is that descriptive economics has been shaped by a framework of assumptions, a metaphysics more geared to its normative message than to its descriptive pretensions. This framework is essential to the normative side of an economics that trumpets the virtues of markets and is maintained even when it gets in the way of understanding how the economy really works.

The 19th century physicist, Lord Kelvin, famously proclaimed the virtue of knowledge imbued with the precision of number. Economics goes physics one better, from epistemology to ontology: anything we can�t measure�like community�simply doesn�t exist.

If this was a non-economist writing I'd probably blow him off as an ill-informed crank. Except he's not. I remember hearing him interviewed on Econtalk and while I disagreed with his critique I found him thoughtful.

Couldn't remember when I heard this so I had to download and listen again. Russ Roberts does a good job of jotting some stream-of-consciousness notes to the page and there's a reference there that caught my eye:

Hayek was very aware, in The Fatal Conceit, championing the extended order of the market economy. Felt we had to be of two minds, interacting with our friends and loved ones differently. Dangerous to extend either realm into the other, though we may disagree where to draw that border.

The extended order or, as I say in development economics, the extending order, is the process of widening the circle of potential traders that allows greater specialization and exchange. It is, in the view of the speakers of this conference, perfectly fine to extend the order but only to a certain degree. The quote above is of Roberts responding to Marglin who says this in the podcast (in Roberts' notes):

What is it that the market is actually doing so well? It's producing more and more goods. In large parts of the world that's still the prime necessity. In the U.S., though, we have plenty of goods, enough to lead a dignified life. Why is enough never enough? Dismal science, what does pursuit of more and more does to our relationships?

Yet the production of those goods is not just an end in itself. Certainly in a 19th Century factory that division of labor, specialization and exchange may have lead to mind-numbing repetitive tasks, a suffocation of creativity and even spirit. But now? I find it difficult to hold that the act of creating a service or good doesn't contain some value to the worker. I take my income because my employer gives it to me, because I persuaded her or him to do so, but how many of us just do what provides a maximum income versus a job that provides some satisfaction from the work itself? The division of labor is not only about the maximization of production. It is about allowing a person to specialize in doing that which they do better than they do anything else. What other way to satisfaction do speakers at this conference see?

Note: no numbers were harmed in the production of this blog.

Labels: economics