Not So Dumb as Economists, Part 1
I was going to point out that finance people are not so dumb as economists,* but Echidne’s takedown of Gary Becker is so divine it deserves your attention more:
This argument was initially made by Gary Becker, an economist, a very long time ago.** It is not an uncommon argument from conservatives (or from certain types of anti-feminist sites.) That does not mean that it shouldn’t be discussed. So let’s do that by looking at what is unrealistic about the specific conclusions….
In [Becker’s] first model only owner/managers have a dislike towards workers from a particular group. That, my friends, is the model from which the above conclusion comes, though even then it would only work to eradicate discrimination from the whole industry if the industry was essentially a competitive one. If the industry is not sufficiently competitive, the bigoted owner/managers can hang on and practice discrimination.…
Becker argues that if the only problem we have consists of some bigoted owner/managers, while everyone else is just so sweet, sufficiently well-lubricated markets can get rid of those nasty bigots, always assuming that everybody knows everything relevant about everyone else.
There are no misconceptions in the model. Even the bigoted owner/managers of a pizza parlor, say, know that Joe and Jane are equally good pizza-bakers. They just hate Jane and are willing to hire her only if they can get her for less money.
This cannot last if we can find at least [one] non-bigoted nice owner/manager.
That’s the background of the old chestnut. Becker, having become immersed in the imaginary world of his simple model, concluded that competitive industries would never exhibit any long-run sex or race discrimination. Only oligopolies or monopolies could survive with at least some bigoted owner/managers. [emphases mine; hers varied]
It is a rare and delightful moment when someone looks seriously at an economic model. Strangely, when you examine the social premises of the mathematics—returning economics to its beleaguered claim to being a social science, as it were—it starts to be clearly why people believe economists are the problem, not the solution. It’s progress to see a blogger destroy an economist this thoroughly.***
*And I may still, using this post by Mish as the springboard, but I think the post leads to that as an inevitable conclusion, so for now I’ll just refer people there.
**1971, apparently, though, iirc, several of the papers are from 1965-1966.
***Yes, I know The Snake Woman is, in real life, a qualified economist. But she’s not being asked to play one on television, like Larry Kudlow, whose degree from WooWoo is patently not in economics, or Megan McArdle, who has an Ivy League degree in English Literature and an MBA.
I’m not going to read this… just no time… but i’m going to make two comments anyway.
First is to guess that the fallacy is that one nice guy pizza owner can hire all the qualified women and blacks that are being shunned by the all the bad guys. Or it could be that all pizza owners will hire people for whatever they are willing to work for, and women traditionally have been willing to work for less. (I know it’s a vicious circle.)
But mostly I wanted to say that Larry Summers is, I think, a bona fide economist, and he is a very bad man. And that, surprisingly makes him a bad economist… just like all the rest who forget that the point of economies is to make humans happy. Not increase the “aggregate wealth” whatever that means.
Megan McArdle: And a questionable MBA at that, given the kind of crap that comes out of that place. Such as much of what she has to say.
Barry O? I’m not going to take this seriously just because of that.
Yes, two Barry Os in a row from Ken, in fact. And “Barry O” is turning out to be symptomatic of a way of thinking that tends to add little to the conversation. Angry Bear has gone through a number of permutations in its lifetime, some more intelligent than others. (Welcome back, Kash.) Right now, it is very often “the world according to Ken”, an opinion journal both narrow and shallow. The goal of this post is to educate us that economists aren’t as smart and financeers. My dog is bigger than your dog. My dad can whup your dad. Oh, Joy. The goal of another is to let us know that “BarryO” has made some mistakes – with no new facts, no new assessment of the facts and no effort at balance.
Please make it stop.