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  1. Preference Falsification in the Economics Profession

    • When I was a cadet in my senior year, we had to take a class with the senior officer in charge of the ROTC department. One of the concepts that I remember him trying to drive home was that we were preparing to enter a “profession”. At the time it struck me that he was grinding some sense of inadequacy, looking for a word that would make his own career more significant in the way some janitors want to be called “sanitary engineers”. However, two elements of his definition of a profession have remained with me (I’m sure there were more). In the colonel’s definition, a career field was a profession if it had a body of knowledge and an ethical code of conduct. Merely having an expert knowledge of a field made you a technician, not a professional. The ethical code of conduct instructed you on how you were to use your expert knowledge, and provided purpose for professional practice.

      In the quote above, Davis is referring to what the important work of the economics profession is, rather than what is important to be successful in the profession in this particular quote, but in an ideal world, the latter should flow from the former. I believe many people come to the social sciences with a desire to make society better (we may not all agree on what “better” means, but that is a separate issue). The dissatisfaction I read, overtly and between the lines, is that the “profession” of economics, in its pursuit of the air of positive science, has lost its ethical code of conduct and has devolved to a technical career field. The statement, “The economics profession is a bad joke. More and more economists are saying less and less to fewer and fewer people. And they conceal their vacuity in abstruse language and mathematical formulae” (p. 364), strikes at the heart of the loss of a professional ethic in the field. What is the ultimate purpose of economics but ultimately to increase society’s understanding of the economy and thereby guide policymakers to make effective policies? This does not necessarily mean that a lay person should be able to pick up an economics journal whose audience is intended to be professional economists and understand it fully any more than a lay person should be able to pick up a copy of the New England Journal of Medicine and expect to fully understand it. Every profession must have an introspective element that works to extend the professional knowledge, and a means of communicating that new professional knowledge.

      Davis paraphrases respondents who say collectively “The bifurcation of the economics profession into researchers, teachers, and policy-makers has gotten worse and the number of individuals who are respected for contributions in all three areas gotten fewer and farther between” (364). I am not sure this is actually a problem – it sounds like a matter of comparative advantage for the individuals involved. We are after all the field that promotes specialization of labor. The real problem seems to be that the economics field has been overwhelmed by its pursuit of the professional body of knowledge, and in particular a very narrow portion of the body of knowledge as defined by the use of mathematical methodology, and has lost its commitment to the ethic of betterment that defines social science practitioners as professionals rather than as mere technicians.

    • 3 comments
    • First comment 21 Apr 2010 by Jon Goldstein
    • Last comment 22 Apr 2010 by Shawn Reed
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  2. Economics Professors' Favorite Economic Thinkers, Journals, and Blogs (along with Party and Policy Views)

    • I was intrigued by your title, but the first line of the abstract is very disconcerting: “A sample of 299 U.S. economics professors, presumably random, responded to our survey…” In survey research, one can never merely presume that a survey sample is random. The implication in your abstract is that your sample has not been assessed for its representativeness of the population of all economists, either in terms of observable characteristics or selection on unobservables. This left me wondering whether I would learn anything useful about the population of interest, or only your sample of respondents, whatever subset of that population they may be. The abstract suggests the latter, so I decided my scarce time would be best spent reading something else.

    • 2 comments
    • First comment 15 May 2011 by James Bailey
    • Last comment 14 Jun 2018 by Trudy Ann Cameron
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  3. Adam Smith’s Marketplace of Morals

    • Otteson recognizes a common underlying theme uniting Adam Smith’s Theory of Moral Sentiments (TMS) to his later Wealth of Nations (WN). The uniting theme may resolve the so-called “Adam Smith Problem” that a conflict exists between the mutual sympathy presumption of TMS and the self-interest presumption of WN. As Otteson sees it, moral sentiments and economies are both “systems of unintended order that develop according to and conform to the model of a market.” (211) The marketplace metaphor is slightly strained; nevertheless, it effectively reconciles the two works.

      Both WN and TMS describe processes through which spontaneous orders emerge. In WN, the system of “natural liberty” leads self-interested people to narrow their production to a few goods that satisfy a desire in the rest of society. In a division of labor economy, people modify their production and consumption decisions in response to price signals. In TMS, the motivating desire is to share sentiments with others. It leads people to empathize with others and to moderate their own expressions of emotion so that others may empathize with them in return. The interplay of sentiments lead to what Smith calls the “general rules” of propriety. The price system of WN and the system of propriety of TMS are the unintended orders that result from the respective market mechanisms.

      Framed this way, Otteson dissolves the Adam Smith Problem. Self-interest motivates economic actors to respond to price signals. It also motivates social actors to respond to the general rules of propriety. The difference between economic interaction and social interactions is the communication mechanism.

      Otteson’s marketplace construction highlights how market prices and social norms are the unintended orders of social interaction. But it is also a strained metaphor that highlights how social interactions fundamentally differ from economic interactions. Prices are quantitative measures of money, the intermediate good common to all market transactions. General rules however, pertain to the sentiments themselves, the final good in transactions. In social interactions, there are no intermediate goods. If Adam Smith described a marketplace of morals in TMS, it is really a barter society.

      The strain in the TMS marketplace model may explain why social markets are less efficient than economic markets. The impersonal character of intermediate money goods is a major factor in globalization. Cultures, languages, and preferences vary across countries, but everyone understands money. Currency exchange (and protectionist trade policy) is the only hurdle to international market clearing prices. Social markets move much more slowly because there is no analogous intermediate good. As a result, Chinese culture is still very different from American culture; So is Mexican culture; And so is Amish culture, despite being part of America!

      Otteson’s marketplace model also highlights the importance of institutions. WN discusses several institutions common to division of labor economies, including private property, contracts, and money. TMS discusses the Impartial Spectator procedure. It is the procedure of placing ourselves in another person’s shoes, then comparing our own reactions with theirs. Everyone participates in the informal Impartial Spectator institution, though few are conscious of it.

      Whether social interactions are perfect analogs to economic interactions is perhaps not as important as the fact that they share the most compelling features. Neither requires a central authority for nearly all aspects of the market, and both create unplanned orders that evolve with repeated participation. Though not a perfectly efficient one, TMS is a marketplace of morals.

    • 2 comments
    • First comment 13 Oct 2011 by Michael Foley
    • Last comment 14 Nov 2012 by Michael Smith
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  4. the moral justification of free enterprise

    • One of the first points made by Macfie that I think is noteworthy is that he chose Adam Smith’s Theory of Moral Sentiments because it is, in his view, the most complete and realistic ethical argument for freedom. He points out that although we only deal with the individual aspect, this is appropriate for important reasons. One is that the individual approach ‘puts the spotlight’ on the individual, which is something that economics and ethical studies tend to go around. Questions of human nature are just as important if not more important, in economics as they are in other facets of life; this issue has been lost in economics since the science decided it should not and could not deal with problems of value. He points out that it of course may be replied that this is only due to proper specialization, “[b]ut is there not the risk that the baby is lost between the bath and the water?”

      Macfie reminds us that the problem of human nature is the most important one when it comes to economic behavior. It is, after all, human economic behavior that our science studies. If economists do not deal with it, then who will? Believing that we are only behaving normally (let alone correctly) by doing so and by following this ‘proper specialization’ is incorrect. Critiques of economic behavior from the moral point of view have been made throughout history, and it is abnormal that we dismiss those today as mere issues of value problems while continuing to develop our science without them. I think Macfie has made an important point and it is something that economists should keep in mind when making arguments for freedom. There are many people who want to hear something more than just ‘this way is more efficient’ before they are persuaded by an argument, and there are also people who want to see that the subjects we claim to study are in fact human.

      One of Macfie’s critiques of Smith’s argument says: “Smith is far from his best when he dabbles in theological argument, I think it was just because he was so conscious of the power of self-love, and of actual evil and sin, that he also required this Divine support”. I think Smith was certainly aware of how strong self-love was as a motivator of human behavior, but I also think that Smith saw self-love as productive of good, especially when individuals were freely interacting in the market. It seems to me that whether the natural harmony in human nature observed by Smith was designed by the ‘Author of nature’ (or just ‘Nature’), and whether Smith’s ‘invisible hand’ belongs to an all-wise and benevolent Deity is almost irrelevant to the powerfulness of Smith’s arguments and conclusions. I don’t think Smith intended to give an explanation as to where this natural harmony came from; it seems more likely that he was actually trying to avoid this issue by being vague when it came to mentioning ‘Nature’, ‘the great Architect of the Universe’, or ‘the great Director of Nature’. In fact, I would argue (as Coase does in his article titled “Adam Smith’s View of Man”), it is not clear Adam Smith ascribed this natural harmony in human nature to some Deity. It is likely that he was suspicious of a somewhat different explanation (i.e. natural selection, which was not known to him at the time), and that his attitude about the issue was to defer his opinion about the matter.

      Thus, when Macfie claims “[t]he background of theology seems to me to obscure [Smith’s arguments]”, I would say that it is not so clear that there is a background of theology behind them. What is more, if there was a background of theology, I think it would be irrelevant to the powerfulness and strength of Smith’s arguments and conclusions. The source of the harmony in human nature observed by Smith (which is the basis for his argument) could be life in Mars for all we care, and it still would not change the fact that it is there. It would not change the accuracy of Smith’s description, and it certainly would not change the ethical and economical foundations suggested by Smith as an argument for freedom.

    • 2 comments
    • First comment 14 Oct 2011 by Paola Suarez
    • Last comment 14 Nov 2012 by Alexander Schwengler
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  5. 'Il est encore plus important de bien faire que de bien dire' A Translation and Analysis of Dupont d

    • I agree with Mr. Byrd’s comment, but I would like to add what I consider to be the true significance of Dupont’s letter.

      Much has been made of Adam Smith’s so-called concessions to State intervention. If you seek to use Smith’s work to advance the liberty principle you are met with resistance from those who declare that Smith was a realist, and that he favored government control of this or that area of economics life, e.g., the postal service, libel laws, differential taxation, etc. Thus you are left without a consistent system to defend against myriad ad hoc violations of the principle.

      It is true that Smith included in his books, especially in The Wealth of Nations, more than a handful of concessions to government. Many liberty-minded readers would like to think these are anomalies, or that Smith had some ulterior motives in including these concessions.

      Dupont’s letter reveals a possible motivation for Smith to include these concessions, even if he would not actually support them. Dupont asks Smith to “forgive the deficiencies of my work that are not unknown to me and some of which were voluntarily committed.” Is it possible that Smith engaged in the same strategic writing? If Dupont was willing to be so candid with Smith regarding his own work, it seems to me very likely that it was an accepted practice of those hoping to bring wide-ranging reform. If Smith was “neither … read nor heard,” he would have no effect on policy or public opinion. If he was “denounced and estranged from the government itself” he risked prolonging “by a decade ignorance and its deadly effects.”

      If this was the generally accepted practice of the reformers of the day then I believe that many of Smith’s concessions can be read as an attempt to avoid “assaulting [the] eyes [of the public] with a bright light,” and “reconstitut[ing] their blindness.”

    • 2 comments
    • First comment 13 Nov 2012 by Bryan Byrd
    • Last comment 14 Nov 2012 by Theodore Phalan
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  6. From an Individual to a Person: What Economics Can Learn from Theology About Human Beings

    • Thanks for your comment, Eric! Let’s stick with the education example (discussing sin might take us too far from the original point): I think the concept of imperfect information solves the problem only partly.

      Would you agree there is difference between a state ignorance in which “I know that I don’t know” (type 1) and a state of ignorance where “I don’t know I don’t know” (type 2)?

      I think traditional economics deals only with the first type – people are rationally ignorant, because they decided they will not obtain further information on a certain problem. However, in the second case (type 2, “I don’t know that I don’t know”) one never makes such a decision – one is ignorant without knowing that one is ignorant (which will be the case of the malnourished person).

      So, the point here is that an economist looking at the problem of an ignorant person would assume ignorance of type 1 (because his models do not allow for any other type), while in reality the person would suffer from ignorance type 2. And the policy conclusions will be different in each case: while in the first case, adding more information (in form of education) would not improve the situation of the (rationally) ignorant person, in the second case such improvement is possible.

      Is the point clearer now?

    • 2 comments
    • First comment 31 May 2014 by Eric Rasmusen
    • Last comment 05 Jun 2014 by Pavel Chalupnicek
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  7. The Impartial Spectator and Moral Judgment

    • I enjoyed your article, not least because it helped to familiarize me with a literature that I have read only a little of. As you know, I am not a Smith scholar. I have been drawn into TMS because of unanswered, or badly answered, research questions in the experimental (and behavioral) economics literature. For me TMS provides a comprehensive means of understanding the predictive and modeling failures (and successes) of economics since the 1870s fork in the road.

      On the distinction between empathy and normative sympathy. As I see it, we can only imagine what we would feel in another’s situation, never what that person feels. But through our interaction, when I conjecture and take action that misreads what that person feels, and receive corrective feedback, I am aware of error in the rules I follow when mapping propriety as a function of circumstances into an action. I modify my rule-following based on fellow-feeling, and thence my actions.

      As I see Smith on morality, it is social order. Smith and the Scots are trying to understand the invisible forces that account for it. Smith came to understand his own program better through the six editions of TMS over 31 years. Hence, the decline, but not complete elimination of the Divine—he knew that you can’t get purpose out of a better understanding of how things work; it does not pop out of the observations. This explains his discussion of how in “operations…of the mind” we often fail to “distinguish the efficient from the final cause.” He is trying to see how human society adapts, learns and becomes fitter, where it does, and where it goes wrong where it does not. It was an incomplete model, but a powerful thinking machine that was not a lost legacy in economics, but one never found. The success of WN swamped TMS, so who cared about human sentiment? I love the return to Smith and a focus on adjustment processes in rule space.

    • 2 comments
    • First comment 06 Jun 2016 by Vernon L. Smith
    • Last comment 06 Jun 2016 by Vernon L. Smith
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  8. The War on Cash: A Review of Kenneth Rogoff's "The Curse of Cash"

    • As one of seven billion spenders, I use cash almost exclusively for daily shopping. I notice how much faster it is for checkout persons in stores to process my cash purchases versus purchases by those inputting various cards, sometimes unsuccessfully. Cash is recognized broadly; coins fit into parking meters, candy machines, and much else. The utility is here, now, and needs no year-long trial and error implementation. I like cash, I want to keep it, and where do I sign up for any coming save-our-cash war?

    • 2 comments
    • First comment 01 Jun 2017 by Marvin McConoughey
    • Last comment 26 Aug 2017 by Robert Wright
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  9. It Can't Happen, It's a Bad Idea, It Won't Last: U.S. Economists on the EMU and the Euro, 1989-2002

    • There are some people who disagree with this paper.

      http://macromarketmusings.blogspot.com/2015/07/who-predicted-eurozone-crisis.html

      http://krugman.blogs.nytimes.com/2015/07/19/the-euroskeptic-vindication/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

    • 2 comments
    • First comment 20 Jul 2015 by Keith Dow
    • Last comment 20 Jul 2015 by Gary Bradski
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  10. Confirmation That the United States Has Six Times Its Global Share of Public Mass Shooters, Courtesy of Lott and Moody's Data

    • Amazing how everything Lankford claims has so easily been demonstrated to be false. Any academic that refuses to show his data and methodology is already suspect.

    • 2 comments
    • First comment 25 Feb 2020 by Blake Spencer
    • Last comment 24 Mar 2021 by Thomas Cottone
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  11. The Social Science Citation Index: A Black Box—with an Ideological Bias?

    • After a Google keyword search of “Commentary Magazine” and “Social Science Citation Index,” I found this article and was introduced to EJW. The bias Klein and Chiang illuminate, exists not only in the slant of the SSCI journals which make and break careers, but also the themes and questions addressed at major conferences and their panels. (Just take a look at the CfP for next year’s APSA annual.) Now finishing up a PhD and finding the same problem on the job market, the research backgrounds often asked for (my area is IR/ IPE) also come from left field. Rather than become disheartened, this state of affairs increases my resolve to follow and intelligently express my conservative convictions in the face of single minded institutionalized opposition. I love a good fight and know the truth will prevail. I’d rather be right than loved, although it would be nice to be both.

    • 2 comments
    • First comment 01 Nov 2011 by Alex Littlefield
    • Last comment 10 Feb 2013 by Alex Littlefield
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  12. Hume's Manuscript Account of the Extraordinary Affair Between Him and Rousseau

    • Outstanding, thank you so much Professor Tasset. We are reproducing both pieces in a volume from CL Press, and we are making the correction. The erroneous “I mean myself” is in the 1826 Hume edition, the text of which was used by Project Gutenberg, which is where we lifted the English translations of Rousseau from. Thank you again!

    • 2 comments
    • First comment 28 Dec 2021 by Jose Tasset
    • Last comment 02 Jul 2022 by Daniel Klein
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  13. Adam Smith and Conservative Economics

    • I’m struck by a sense of deja vu in the treatment of Adam Smith by political philosophers after his death – indeed, it is much the same treatment a consistent modern friend of liberty might expect from orthodox conservatism and progressivism. The right wing of US politics invokes Smith and other classical liberal economists to defend private property and attack the idea of government intervention in the economy on behalf of the poor, but the cannier among them (such as Burke, among the early 18th-century crop of conservatives) know that true friends of individual liberty are no true friends of their favorite projects – wars and mass expenditures in the name of national greatness and tradition.

      As Rothschild’s article documents, Smith considered government interference in markets ‘a combination of the rich to oppress the poor,’ far from Burke’s conception of it as the agent of the deity on Earth. Of course, when Smith refers to ‘the rich,’ he usually seems to have in mind not capitalists involved in production in a free market but aristocrats wealthy from hereditary privilege and merchants wealthy from government-granted privilege. Smith takes the elites to task, though, not for simply having accumulated large amounts of wealth, or benefiting from a naturally unjust system of property, but for their lack of classical virtues. Smith saw the profligate, frivolous, aristocratic elite that used their influence to tip regulation in their favor as not measuring up to the humble masses engaged in honest toil in many virtues (his primary system of virtues in TMS emphasized prudence, temperance, courage, justice, and love). While falling short in most virtues is blameworthy yet not worthy of punishment, violating commutative justice was definitely considered by Smith as worthy of punishment, and he regrets that any aristocrat should be so powerful and wealthy as to be above the law in TMS.

      Smith should not be read as advocating liberty as simply an instrument to prosperity, to be easily abandoned in such cases in which we believe we can achieve greater prosperity with a clever regulation. Not only is liberty an intrinsic good, for those who have it and for their society, but it positively encourages virtue in general as much as it promotes prosperity. This is why we would never see the shade of Smith siding with the French revolutionaries or the radical left, who want to abrogate liberty and commutative justice in pursuit of a new system of property and a society subordinated to the will of the state. Smith may have had great sympathy for the poor, but it didn’t extend to his advocating the expropriation of the wealthy. Indeed, this might explain why Smith became somehow painted as an arch-conservative apologist for the wealthy despite what he actually wrote: while in Smith’s philosophy, some wars are justified, many customary, traditional and religious rules are laudable, and it makes sense to feel some measure of pride in the greatness and good fortunes of one’s country, it is always contrary to all morality and propriety to rob one’s neighbor, no matter his wealth and no matter your need. Smith can rail against utopian schemers with righteous indignation but would never do the same against God, king and country. Sometimes the distinction between a classical liberal and a conservative appears very fine, and even adherents of either philosophy may confuse or conflate the two, hence the conservative advantage in the race to claim Smith.

      It’s sobering to think that the controversy over Smith’s allegiances has been waged without interruption for over two hundred years and counting, now, and in many respects, the arguments have not much changed. Considering the obfuscation and self-censorship Smith had to practice in his writings and the incentives for political groups to claim him as one of their own, I would not be surprised if we all fought over Smith for another two centuries.

    • 2 comments
    • First comment 07 Oct 2010 by Steve Kunath
    • Last comment 19 Oct 2010 by Brian Bedient
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  14. McCloskey's 1988 Letter Responding to a Letter from the President of Penn State

  15. Is Economics Independent of Ethics?

    • This article does an exceptional job of arguing against the idea of economics as “separate from and independent of ethics” (3). Jack High rejects the independence doctrine, which separates economics as a positive science from economics as policy advising tool. A key example demonstrates that coercion and voluntary action cannot be defined outside of ethics. Ethics plays a crucial role in guiding economists towards the proper benchmarks.

      I agree with the premise that ethics has a definite place in economics, but I also think it is important that economists carefully define which ethical values they are subscribing to and if those values are in fact appropriate. Ethical values are latent in the most commonplace economic notions, for instance Pareto efficiency and the entirety of welfare economics are loaded with ethical prepositions and implications. The key is to recognize these ethical frameworks rather than try to suppress or obscure them from view.

      My only disappointment with this piece is the way that High ends his brilliant discussion. He says that “accepting the proposition that economic definitions depend on ethical judgments does not involve the economist in taking a stand on moral issues…. “value-freedom of economic science” is left untouched by the central thesis” (15). This back pedaling weakens the strength of his previous arguments and ignores that the use of ethical judgments is itself a commitment to those judgments. Accepting ethics as a part of economics does involve taking an ethical stand. The whole point is that we cannot escape this admission. We cannot be value-free.

    • 2 comments
    • First comment 15 Apr 2011 by Echo Keif
    • Last comment 22 Apr 2011 by John Robinson
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  16. Wealth, and Possibly Liberty

    • Although this is an old article, it still poses a critical challenge for economists who believe in policy advocacy. The old-time religion of economics – going back to Adam Smith – assumes that both individuals and society often adopt misguided policies, which good economic advice can dispel. Against this Stigler argues that agents act to maximize their well-being in both the political and economic spheres. To treat them as mistaken is futile. Whatever “is”, if not perhaps right, at least an equilibrium immovable by “preaching”.

      I don’t think that either economists or other idealists need to accept this pessimistic conclusion. There are many episodes in history when economic persuasion of elites led to better policy; the sunset of the Civil Aeronautics Board in the USA comes to mind, or the pro-free trade policy in grain adopted by the British in colonial India (which greatly mitigated famines). Even if ineffective against politicians or interest group leaders, persuasion may succeed in mobilizing society for change. “Preaching” may, first of all, identify an injustice. It may rouse the conscience of ordinary citizens – and perhaps even the perpetrators of the policy itself – by bringing home to them the policies’ true effects on other people. In the 19th century campaign against slavery, for example, reformers used their famous “Am I not a Man, and a Brother” illustration to humanize enslaved Africans. While skin color had previously been a kind of focal block to the extension of sympathy, publicity asserting a common humanity extended the moral circle to include the enslaved. Rhetoric actually changed people’s preferences – something Stigler can’t handle in his closed system, possibly because he rejects the idea of justice. But in fact perceptions of justice – however contested, however mutable – powerfully influence human beings. Even if it has no ultimate foundation, then, economic preaching can shape what people think justice requires and thus move societies into an entirely different equilibrium. Pre-revolutionary Russia, for example, clearly moved into a more miserable equilibrium as a result of Communist ideology. Chile, on the by contrast, adopted relatively liberal economic policies as a result of economic advice in the 1970s and became much more prosperous. As the second example suggests, good economic advice doesn’t even require particularly ethical leaders. In some cases the greater prosperity flowing from liberalization might be enough to convince the holders of power to loosen their reins and share in the bounty. While preachers (of all disciplines) shouldn’t neglect the dynamics of self-interest, they can take heart that the status quo isn’t immutable.

    • 1 comment
    • First comment 22 Apr 2010 by Chris Martin
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  17. The Importance of Analyzing Public Mass Shooters Separately from Other Attackers When Estimating the Prevalence of Their Behavior Worldwide

    • Ok. So the US is the worst country in the world for mass shootings. Why? There’s a reason. It isn’t gun ownership. That doesn’t make sense because we have always been a nation of gun owners. Something changed in our history. I posit that it is our media coverage that is the primary difference. At some point in our history, the media decided that it was more important to sell coverage than it was to report news. At that point, the sensationalism of news media became the tipping point that has fueled this shooting frenzy. Of course I can’t prove it. Hence, the term “posit”. If we look around, though, we are the only nation in the world that combines guns with news sensationalism. That is the deadly combination. Let’s just think about that for a moment and see what we come up with. Thoughts?

    • 1 comment
    • First comment 11 Jul 2022 by Jason Kilgrow
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  18. Folk Economics

    • Folk economics addresses the problem of ignorance combined with political power. Economic ignorance is a negative externality—the citizens who vote on economic policy have misconceptions about economic consequences. Correcting negative externalities is often put under the control of government, but in this case it is not clear what could be done. Politicians have less of an incentive to change folk economic ideas than educators do. The folk misconceptions that Rubin mentions (international trade, a protectionist policy in industry, taxes on business, etc) all tend to demand activist government policies and controls. Laws and regulations will increase the political power and scope of the government, which many politicians have an incentive to do.

      More importantly, the feedback mechanism for the success or failure of an economic policy is nearly unidentifiable, as changes in the economy can be attributed to a number of variables (try asking an economist and a friend what caused the Great Depression in the United States—the answers are not likely to be the same). The idea that an economy could work independent of a central government and dependent on the individual actions of millions of people is difficult to comprehend when a person lives in a society where he is subject to that central government.

    • 1 comment
    • First comment 11 Mar 2011 by Ariel Nerbovig
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  19. From Friedman to Wittman: The Transformation of Chicago and Political Economy

    • Caplan offers a balanced and even favorable description of Wittman’s argument in “Why Democracies Produce Efficient Results” (1989). Wittman objects to most of the public choice literature because it assumes extreme voter stupidity. Instead of assuming voters are ignorant, critics of the government are actually assuming that voters are systematically biased in their beliefs. Wittmann also points out that voters are not as gullible as public choice theorists assume. They use parties like brand labels, which make the voting problem much easier than it might appear. Wittman is also skeptical about complaints of a lack of political competition. He points out that very few unpopular policies persevere because unpopular policies lose votes. Furthermore, incumbents are reelected because they are better than the competition. Wittman finally points out that democracy lowers negotiation and transfer costs.

      Caplan perceptively points out that Wittman’s position is valid, but not sound. While his assumptions lead to his conclusion that democracy is efficient, he commits a fatal flaw by assuming that voters are rational. Caplan’s work in economic beliefs and the systematic bias that exists among non-economists and the less educated weakens the validity of this assumption. Caplan’s theory of rational irrationality, that people are more irrationality when the cost goes down, seems to be the nail in the coffin for Wittman’s theory. Rational public opinion is in fact a public good. Adam Smith had it right when he asserted that perverse policies were the result of systematically biased beliefs.

      The most important message from this article is that empirical testing is necessary for good theory. We cannot assume that voters are rational without testing if that is really the case. Economists must move beyond blackboards and untested behavioral assumptions if we are to make any real progress in our field. Caplan is a brilliant example of this philosophy.

    • 1 comment
    • First comment 11 Mar 2011 by Echo Keif
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  20. The Adam Smith Problem in Reverse: Self-Interest in Wealth of Nations and Theory of Moral Sentiments

    • “Das Adam Smith Problem” has been used to describe a fundamental inconsistency between Adam Smith’s two books, The Wealth of Nations and The Theory of Moral Sentiments. Many have claimed beginning with German scholars that the two books seem to present different views of human nature, self-interest, and the ultimate social result. Paganelli suggests contrary to the Adam Smith problem, both books account for self-interest and the Adam Smith problem never existed if we understand public choice concepts when reading the WN. Of the two books TMS demonstrates a much more favorable account of self-interest than WN.

      The primary idea of the article is that the Adam Smith problem can potentially be solved by paying attention to the behavior and role of institutions. The two books present different mechanisms through which self-interest is restrained. In TMS, the restraint is natural. An individual will restrain excessive self-interest and its consequences are beneficial. Self-interest demonstrates the virtues of prudence, benevolence, etc. In the WN, the natural constraints break down because of the role of government and the incentives of bureaucratic and legislative officials. Government perverts the natural mechanisms that normally keep self-interest from exploiting the populace. The consequences can be ruinous.

      TMS presents a picture of self-interest more closely resembling self-interest as traditionally presented in economics. When we pursue our individual self-interest through virtuous actions, both the individual and society are happier. The TMS version of self-interest is kept in check though our desire to be both praised and praiseworthy.

      Paganelli introduces a few misinterpretations of Smith that serve as a distraction and detriment to an otherwise insightful article. She takes her premise to an extreme claiming that in the WN “self-interest cannot successfully constrained, leaving individual and society more susceptible to its abuses” (372). In TMS “self interest is always successfully constrained” (373). These claims ignore Smith’s acknowledgment of a proper role for government such as requiring party walls between adjacent dwellings (WN II.2.94), and self-deceit in TMS. She misconstrues the TMS China earthquake example suggesting that “we would naturally choose to save our little finger and snore placidly through the night” (372). Also in TMS self-interest is constrained when there is an equal-equal relationship, but not necessarily with a superior-inferior relationship. This essential point would have provided an important context to the entire article.

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    • First comment 14 Nov 2012 by Martin Heinze
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Jt Article Discussions

Most recent article-specific discussions at Journaltalk.

03 Apr

A Critique of an Urban Studies Article on the Housing Supply Impact of Land Use Reforms
Online Grocery Shopping in Russia: A Comment on Olumekor, Singh, and Alhamad
Reply to “A Critique of an Urban Studies Article on the Housing Supply Impact of Land Use Reforms”
Reflection after Five Papers about Climate Change
The Impartial Spectator Rises
Power Analysis is Essential: High-Powered Tests Suggest Minimal to No Effect of Rounded Shapes on Click-Through Rates
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