Monday, October 3, 2016

The "New Economics" and The "New Feudalism"

Economics was once the study of the consequences of market activity by individuals participating in free markets.  As free markets have eroded in the developed countries, so also has the academic discipline of Economics.

Incentives are now thought not to matter when people make economic decisions, according to the "New Economics."  The new approach is to begin with a political point of view and a very specific conclusion.  Then run a few regressions over and over again on the same data until at least one of the regressions reaches your conclusion.

Another strategy is to mix and match data to reach spurious conclusions.  For example, suppose you wished to know if workers in the same industry were subject to wage discrimination.  Imagine that the industry was NFL football.  Calculate the income for men, then for women and see what you find?  There are many, many men making tens of millions of dollars, but not a single woman making that much.  Conclusion: wage discrimination. 

Most publicly quoted studies of gender wage discrimination pay no attention whatever to what the actual jobs are that people hold.  In the medical profession, nurses and doctor incomes are mixed to produce the conclusion that men are overpaid relative to women in the medical profession.   The data doesn't show that.  What the data shows is that most doctors are men and most nurses are women.  These researchers should go look at the data showing who is and who isn't applying to medical school.

But if your goal is to make political points, not to advance knowledge, then the current fads in the Economics profession are the way to go.  If you've wondered why economists' predictions are so notoriously poor and why the economic performance of the developed countries have collapsed, look no further than the correlative trends in the academic discipline of Economics.

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