CONTEMPLATING ECONOMICS.

What do policymakers know?

If we’re interested in understanding, explaining, and predicting many of the details of how people will react to changes in policy – and in tracing out the details of the consequences of these likely reactions – then of course knowledge of economics beyond that which is conveyed in an intro-econ course is necessary, as is knowledge of other disciplines and of particular institutions.  Similarly, if we want to understand more fully many observed business practices – for example, the reason that automobile dealerships so often locate nearby each other, or the reason that so many fast-food restaurants are franchisees – then knowledge beyond principles-of-economics is necessary.  No one can doubt the usefulness of such more-advanced knowledge.

But it does not follow – from the above rather trite, if true, concession – that a knowledge of only principles of economics is “dangerous.”  My strong sense, from having carefully observed public-policy making and public-policy discussion for nearly 40 years now, is that what is dangerous is a lack of knowledge of principles of economics.  The problem is not that most politicians and pundits take economic principles too literally; the problem is that most politicians and pundits are utterly ignorant even of these principles.

Regular readers recognise that a few essential elements will take you a long way, and have encountered the possibility that a potted version of the Welfare Economics Paradigm leads to dubious policy outcomes by too quickly defaulting to "warrants government intervention."

What might policymakers benefit from knowing?

Some of the words that appear more commonly in “The Economy” are “Gini” (a measure of inequality), “bargaining,” “environment,” “global,” and “democracy.” Their analysis also shows that [the course] offers greater coverage of economic history and thought, game theory, behavioral economics, and comparative international development.

Might the century-plus uncoupling of economics from politics be under review? Alternatively, are we having yet another round of radical political economy taking on the dominant paradigm?

Anders Fremstad, an economics professor at Colorado State University who teaches microeconomics from the [online freeware] textbook, told me, “Teaching a version of economics where there is no such thing as economic power, where we’re in the best of all possible worlds . . . I could see how it would not necessarily be a very interesting field for people from more marginalized groups.”

On the other hand, without some understanding of what an efficient use of resources looks like, it's not clear how the people who think of themselves as marginalized fully understand how their condition might be bettered.