28.2.08

IS THERE NOT A MISSING "NOT"? There's a new Virginia School of economics (the old being associated with Ronald Coase.) This is George Mason's Robin Hanson, in the Virginia School article.
“Economics as a discipline is really the only social science where normative claims, about what should happen, are part of the standard literature. Most other social sciences, you can read between the lines and see their agenda.”
The article goes on to caricature competing normative claims.
Adjunct professor Arnold Kling offered a terser prĂ©cis of the GMU way. “My simple way of describing it is that at Chicago they say, ‘Markets work; let’s use markets.’ At Harvard and MIT they say, ‘Markets fail; let’s use government.’ And at George Mason, we say, ‘Markets fail; let’s use markets.’” This seeming paradox means, that GMU sees plenty of deviations from the “perfect neoclassical paradigm,” which requires “perfect information, perfect competition,” but that unlike Harvard or MIT, they do not automatically “ring a bell and say, ‘We need more government.’ Markets come up with solutions to problems of information.”
"Caricature is not a pejorative here: there is enough truth in the generalization that it doesn't mislead, but there are a lot of subtleties in doing economics. Another economist, Peter Leeson, explains.

Milton Friedman’s observation that “in the end there’s just good economics and bad economics.” But Leeson wasn’t ready to give up entirely on “interesting” economics: “If my mom finds a paper interesting, that’s an indicator to me that I’m on the right path, that people outside of the small group of academics actually see some value in what we might be doing.”

But can economics be too interesting? “Results that are quirky make it difficult to persuade people that your conclusions are true. So there’s a sort of optimal amount of weirdness that you want to have. You don’t want to be so far off the deep end that nobody will listen to you, that you’ll be dismissed out of hand. But you want to be novel enough that you’re doing something interesting.”

I wonder if Leeson thinks “interesting economics” biases the scholar towards the counterintuitive. “It depends on the audience we’re talking about,” he said, “It needs to be counterintuitive to somebody, but it doesn’t necessarily have to be counterintuitive to the profession, although it probably helps if it is.” He cited a paper by a friend on moral hazard in NASCAR, specifically how safer cars led to more crashes. That, he said, is counterintuitive to the layman but not to the economist.

(The paper extends arguments of some thirty years' seniority on the Peltzman Effect.) The Peltzman Effect, however, does not bring with it a normative claim, either in favor or in opposition to tighter crashworthiness standards for cars.

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