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Doctrine-centered versus
problem-centered economics
Peter Dorman
(The Evergreen State College, USA)
Bruce Caldwell's response to Bernard Guerrien illustrates
exactly what is wrong with mainstream economics as it is taught and applied:
it is doctrinaire. He believes that he has made an advance over more
typical teaching approaches by scaling down the math, but I can see no change
in the overall project of imposing a dogma in the name of an academic
discipline. It is sad to have to conclude this, given Caldwell's large
contributions to economic methodology, but there it is.
His examples of "economic reasoning" for the improvement of
undergraduate minds are worth a closer look. I could take up all of
them, but I will confine myself to the two that are given the most attention,
the role of price supports in agriculture and the advantages of free trade
over protection.
Agriculture
Agricultural policy has many dimensions. It is a social policy that can
support, change or weaken rural culture. It is certainly an ecological
policy, whether by intent or not. It influences food security in the
face of ineradicable uncertainties in supply.
It is competition policy, favoring either
centralized or decentralized market structures. And, or course, it has
a political economic dimension, responding to the various interest groups
that have a stake in the choices made by government.
What do Caldwell's price ceiling diagrams tell us? If they are like all
the other price ceiling diagrams I have seen, they announce that, as a
first-round effect, price supports are economically inefficient, sending
false signals to the marketplace and incurring deadweight loss. The
second-round effect, alluded to by Caldwell, is political: there is
rent-seeking that further absorbs resources and distorts policy.
It seems obvious to me that the price ceiling analysis, while it has some
value, is hopelessly inadequate as a primary guide to what to do about
agriculture. The role of uncertainty and time, of environmental
externalities and public goods (such as a healthy rural culture) ought to be
central to any serious analysis of this topic, and to short-circuit the
process in the way Caldwell describes is to abandon higher-order for
lower-order thinking. In practical terms, it also silences students,
because their common-sense intuitions about agriculture (many of my own
students have rural backgrounds) often have no standing amid the supply and
demand curves.
Trade
Caldwell would have students learn the theory of comparative advantage as a
guide to making sense of globalization and combatting
the naive belief that interference with trade can ever be a good idea.
He talks in precise dollar terms about the cost per job saved by tariffs on
steel, as though the complex effects of such a policy can be perfectly know
and calculated. Yet trade policy is complex, and it is fair to
say that economists have not yet put together a convincing model of how the
system works. In particular, comparative advantage depends on the
assumption of balanced trade at the margin - that every extra dollar or euro
of imports will be automatically and simultaneously balanced by an equivalent
additional value of exports. If this were true in the real world, of
course, we would have a simpler, more pleasant life: no country would
experience balance of payments crises, there would be no pressure on
countries to be "competitive", and one policy alone - free trade -
would be all we would need to follow. (For a more extended critique of
this sort of cost-of-protectionism analysis, see Dorman, 2001.)
Unfortunately, life is not like that. Laid off steel workers will not
automatically find jobs in exporting sectors, and not only because they have
the wrong skills or live in the wrong cities, but also because the effect of
more steel imports may simply be that the trade deficit increases.
(Yes, I know, there is also a theory that says that this can't happen because
it would require investors to change their already-perfect international
allocation of asset positions. No comment!) This doesn't mean
that protective tariffs are a desirable policy response, just that an a
priori dismissal of them contradicts the creative, disciplined thinking that
teachers ought to encourage in their students - and that denying the
legitimacy of reasonable ideas that might occur to students pushes them into
passivity or out the door altogether.
Conclusions
I have two concluding thoughts. First, the level of math is not the
issue. One can be dogmatic with blackboard diagrams and open-minded
with reams of equations. In general, less math is generally better,
because it lowers the barrier to critical thinking, but simply getting rid of
math is not the point. Second, the solution is not to replace one dogma
by another or even by a menu of competing dogmas, but to redefine, for our
students and ourselves, economics from being a doctrine-centered
to a problem-centered enterprise. Instead of
agreed-upon theories dictating simplified or completely fictitious examples
(with their widgets, perfectly behaved functions, etc.), real-life cases in
all their messiness should be the measure of any theories we throw at
them. Such an economics would not only be post-autistic, but also a lot
more fun.
Reference:
Dorman, Peter. 2001. The Free Trade Magic Act. Economic Policy
Institute Briefing Paper. For
details visit
http://www.epinet.org/briefingpapers/dorman-bp2/dorman-bp2.pdf
SUGGESTED
CITATION:
Peter Dorman, “Doctrine-centered
versus problem-centered economics”, post-autistic
economics review, issue no. 14, June 21, 2002, article 3. http://www.btinternet.com/~pae_news/review/issue14.htm
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