Saturday, July 14, 2007

Are economists free-market ideologists?

Yes, according to a recent article in the New York Times. Read the article's opening paragraph:
For many economists, questioning free-market orthodoxy is akin to expressing a belief in intelligent design at a Darwin convention: Those who doubt the naturally beneficial workings of the market are considered either deluded or crazy.
The brighter side is, according to the author, there is "a Growing Will to Debate Fundamental Assumptions."

Of course this is an overstatement. Even Dani Rodrik, himself quoted in the article as one of the 'outside-the-box economists,' agreed so.

The degree of disagreement among economists are greater that the article portrayed.Like religion, surely there are zealots or fanatics. And that can happen in any discipline, not just economics. (There are fanatics in the environmental science, gender studies, philosophy etc., are they?). But still many economists critically believe in market mechanism. That said, the 'debate over fundamental assumptions' have been consistently happening . Not just recently, as the article suggests.

And what happened to those who dispute the free-market fundamental assumptions? They (well, at least some of them) got the Nobel Prize, said Greg Mankiw:
Many economists in the past have questioned "free-market orthodoxy"--for example, Samuelson, Tobin, Modigliani, Solow, Sen, Stiglitz, Akerlof, Phelps,.... Does the economics profession consider these guys "deluded or crazy?" No, we give them Nobel Prizes!
And not all fields within economics are the same. For example, on how theoretical versus empirical they are, said George Borjas:
There are some fields in economics--for example, labor--that are heavily empirical. The voice of the data rules. There are other fields in economics that are much less empirical and have a much stronger tradition of theoretically derived prescriptions. For example, trade.
As for me -- maybe because I was trained in a School of Government (as opposed to the traditionan Econ Department) in the East Coast (as opposed to the 'freshwater' tradition), I used to see free-market believers argue for 'what is the right intervention to a specific problem.' Some people, like these guys, are even establishing their own 'sect' which aim is to calculate the impact of a certain intervention.

And, contrary to the common perception, nowadays it's harder to find free-market believers in this place.

Related stories:
  • SBY's speech, a very bad one, about his catch on ideologies and economic systems.
  • How a recent policy on public transport safety was a typical Chicago-school solution.


  1. Not quite. Economists are free-riders of free-market ideology?

  2. Interesting! Especially that the orientation in UI has changed, away from free market thinking. Is that something that took shape after the 97 crisis or does that have other reasons? And is that specific for UI or also in other universities in Indonesia? I'd be interested to know!

  3. IMO, most competent economists take interventionism and non-interventionism on a case by case basis.

    Unfortunately, interventionist proposals give economists something to do, so there is always the temptation for them to go that route unnecessarily...