Dan McLaughlin

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To Home Page Latest Newsletter Column Archives Click to get these columns for your local paper	© 2006 Daniel J. McLaughlin Economists Or Politicians? Star power is an important sales tool. Many consumer products companies use it all the time in their advertising campaigns. Star power also works in politics. An established expert vouching for a program gives it an aura of credibility among the buyers, the voters. For instance, see the list of economists used to promote the passage of new minimum wage laws. Included on that list are university professors and Nobel Laureates, individuals who are seen as outstanding in economics. Most economists understand that minimum wage laws increase unemployment among low skilled workers, and have negative economic effects. In spite of this, these notables add their names to a minimum wage public relations piece like basketball superstars for a Nike ad. Joseph Stigliz is a fine example. He is a Nobel Laureate, a professor of economics at Columbia University and was a member of the Council Of Economic Advisors under President Clinton. An article by Vedran Vuk highlights what he wrote in the early 1990’s, that "Price floors have predictable effects too…. If government attempts to raise the minimum wage higher than the equilibrium wage, the demand for workers will be reduced and the supply increased. There will be an excess supply of labor.” That is standard theory long accepted by most economists. His textbook on economics from that time denounced the minimum wage and it’s ill effects. What, then, is to explain why he subsequently says that the minimum wage doesn’t significantly affect employment and is good for the poor and the economy? It is explained by the fact that he switched from being an economist to being a politician. When he joined Clinton’s Council Of Economic Advisors, he saw the light. Political expediency trumped economic theory. He said of his new found wisdom “I changed my mind, what’s the big deal?”. Like so many academics and intellectuals, he labors long to expound plausible theories of why government intervention is good. When academics develop convoluted social and economic theories that don’t seem to make sense, that is probably because they really don’t make sense. They are not intended to explain reality in a rational way, but rather to justify political policies. Don’t bite the hand that feeds you is the guiding principle. Economics has become such a complex subject, not because of any inherent difficulty in understanding the concepts, but because there is so much noise from politicians masquerading as economic scientists. Their theories tell people what they want to hear, so they become popular with lots of people. They also give easy excuses for big government, so they find favor with the political elite too. It is easy to find or compile selective statistics to support just about any stand you take. The bulk of modern mainstream economics and social theory has little to do with understanding reality and everything to do with justifying positions. No longer the dismal science for telling people the hard truth, economics has become a kind of ear candy for the masses and politicians. The New York Times uses star power with the ever popular Paul Krugman. He is a visible and vocal economist, college professor and prolific writer. He argues intensely on such issues as income inequality, railing against the outrageous pay of CEO’s. But when he gets $50,000 for a single speaking engagement, he says that’s different, it is justified because he is worth it. Most of what he says is so nonsensical and obviously political that it is hard to believe he has any credibility left. The sad fact is that there is a big market out there for those who tell people what they want to hear. Politics and economics have become kissing cousins. They support and defend each other, and it has become difficult to tell the two apart. It really isn’t surprising or new. Politicians have used economists to justify everything from destruction of crops to the enslavement of nations. When we have such a visible showing of economists in support of economic fallacy as in the PR piece for minimum wage, we are offered an opportunity to make a statement and point out the obvious. Intellectuals are people like you and me. They have their opinions, which is fine. What is not fine is using their credentials as objective scientists to advance their own biases or those of the political elite. By abusing their credentials, they reduce the credibility of economics and science, and undermine the potential for further progress and well being of all people.
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Daniel Mclaughlin Copyright © 2006 [Daniel McLaughlin]. All rights reserved. Revised: 03/18/08

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Economists Or Politicians?

Star power is an important sales tool. Many consumer products companies use it all the time in their advertising campaigns. Star power also works in politics. An established expert vouching for a program gives it an aura of credibility among the buyers, the voters.

For instance, see the list of economists used to promote the passage of new minimum wage laws. Included on that list are university professors and Nobel Laureates, individuals who are seen as outstanding in economics.

Most economists understand that minimum wage laws increase unemployment among low skilled workers, and have negative economic effects. In spite of this, these notables add their names to a minimum wage public relations piece like basketball superstars for a Nike ad.

Joseph Stigliz is a fine example. He is a Nobel Laureate, a professor of economics at Columbia University and was a member of the Council Of Economic Advisors under President Clinton. An article by Vedran Vuk highlights what he wrote in the early 1990’s, that "Price floors have predictable effects too…. If government attempts to raise the minimum wage higher than the equilibrium wage, the demand for workers will be reduced and the supply increased. There will be an excess supply of labor.” That is standard theory long accepted by most economists.

His textbook on economics from that time denounced the minimum wage and it’s ill effects. What, then, is to explain why he subsequently says that the minimum wage doesn’t significantly affect employment and is good for the poor and the economy? It is explained by the fact that he switched from being an economist to being a politician. When he joined Clinton’s Council Of Economic Advisors, he saw the light. Political expediency trumped economic theory. He said of his new found wisdom “I changed my mind, what’s the big deal?”.

Like so many academics and intellectuals, he labors long to expound plausible theories of why government intervention is good. When academics develop convoluted social and economic theories that don’t seem to make sense, that is probably because they really don’t make sense. They are not intended to explain reality in a rational way, but rather to justify political policies. Don’t bite the hand that feeds you is the guiding principle.

Economics has become such a complex subject, not because of any inherent difficulty in understanding the concepts, but because there is so much noise from politicians masquerading as economic scientists. Their theories tell people what they want to hear, so they become popular with lots of people. They also give easy excuses for big government, so they find favor with the political elite too. It is easy to find or compile selective statistics to support just about any stand you take. The bulk of modern mainstream economics and social theory has little to do with understanding reality and everything to do with justifying positions. No longer the dismal science for telling people the hard truth, economics has become a kind of ear candy for the masses and politicians.

The New York Times uses star power with the ever popular Paul Krugman. He is a visible and vocal economist, college professor and prolific writer. He argues intensely on such issues as income inequality, railing against the outrageous pay of CEO’s. But when he gets $50,000 for a single speaking engagement, he says that’s different, it is justified because he is worth it. Most of what he says is so nonsensical and obviously political that it is hard to believe he has any credibility left. The sad fact is that there is a big market out there for those who tell people what they want to hear.

Politics and economics have become kissing cousins. They support and defend each other, and it has become difficult to tell the two apart. It really isn’t surprising or new. Politicians have used economists to justify everything from destruction of crops to the enslavement of nations. When we have such a visible showing of economists in support of economic fallacy as in the PR piece for minimum wage, we are offered an opportunity to make a statement and point out the obvious.

Intellectuals are people like you and me. They have their opinions, which is fine. What is not fine is using their credentials as objective scientists to advance their own biases or those of the political elite. By abusing their credentials, they reduce the credibility of economics and science, and undermine the potential for further progress and well being of all people.

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