Avatar of admin

by

The Trouble with Pop Economics

July 18, 2014 in Economics

By Matt McCaffrey

Freakonomics

John Lott writes in Barron’s that we should be sceptical of the populist economics trend that’s been prevalent in the past few years. Specifically, Lott criticizes Steven Levitt and Stephen Dubner, authors of Freakonomics, for peddling a kind of “naïve economics” that fascinates readers, but doesn’t hold up to serious scrutiny (rather than “naïve economics,” maybe “economics for the naïve” would be better).

I’ve been working through some similar ideas myself, especially in a new paper criticizing aspects of the pop econ literature. I should point out that these books—including Freakonomics and its many imitators—do have a reasonable goal, namely, to bring the economic point of view to the general public. Now, the fact that economics needs a special literature to explain its ideas to the public is telling, and to some extent an indictment of how the profession has developed (e.g. into an abstract and often excessively technical discipline). Still, as writers like Hazlitt show, it’s a great advantage to be able to communicate economic ideas simply and powerfully. But while in general we should welcome economic writing for non-economists, too often pop econ forgets to stop when descending the ivory tower, and ends up on the intellectual parking sublevel.

Of course, there is a lot that could be said for and against pop writings, which come in all shapes and sizes. But there are a few common threads in the literature that I think give a misleading view of what economics is fundamentally about. One of these is the tendency of pop writers to define economics as the study of incentives. This idea goes back at least to Steve Landsburg’s book The Armchair Economist (1993), which was basically the founding document of pop economics. As he puts it, “Most of economics can be summarized in four words: ‘People respond to incentives.’ The rest is commentary” (p. 3).

The same idea is repeated in other books in the pop genre. Freakonomics, for instance, states that “Incentives are the cornerstone of modern life. And understanding them—or, often, ferreting them out—is the key to solving just about any riddle” (p. 13; emphasis in original). The hyperbole about incentives is impressive: “An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation” (p. 20).

The trouble with the incentive-based view of economics is that it is far too narrow. An incentive is …read more

Source: MISES INSTITUTE

Leave a reply

You must be logged in to post a comment.