The worldly turn: A return to economics that studies the real world

The sections of this article which are descriptions of current work being done by several Clark medal winners are reasonably accurate and fair summaries.

The rest is a complete mess written by someone who is uninformed at best. The discussion of tobacco taxes and the discussion of wages in the Premier League are both particularly bad. Please don't take it seriously as a description of what's going on in the field or what the current problems are.

When I teach my freshman undergrads supply and demand in two weeks I will make very clear to them that we do not have that much empirical support for the claim that minimum wages increase unemployment and that it is an unsettled question. This is the first college-level economics class they will take in our department and I am going to make sure they understand that point. I would be willing to bet that nearly every one of my colleagues teaching similar classes throughout the US and abroad will do the same when they discuss minimum wage policies.

Economics is and has always been ideology disguised as “facts” or “science”. There are many incompatible schools of economics that constantly battle for supremacy. And the current winner is always the school that best support/explain/justify the current ruling class. So you can almost predict who the ruling class is at any given time based on the school of economics most taught at Universities at that time. Kinda obvious when you think about it since the ruling class decide who the economists are that teach at Universities.

> First, employers in the US and Europe have reported that they can easily pass on minimum wage increases to customers. To ‘blackboard’ economists this makes no sense – after all, if customers were prepared to accept higher prices, the companies would have already tried to increase them

Wouldn't competition between businesses for those customers keep prices low than the max customers were willing to bear, and then a minimum wage just raise the min bar?

"... the academic review of published work on the minimum wage, which opponents of the minimum wage use most frequently in defence of their position, had actually said it couldn’t find strong evidence that the minimum wage caused unemployment"

He seems to create a lot of straw men and then claiming he has defied economics by showing those examples turned out wrong.

I am not an economist but I remember from the basic textbook that nobody actually knows the supply and demand curve. So his claims that economist predicted explicit values for tobacco seems unusual. Also his example of more poor people ending up smokers than rich people - does he think the numbers would be reversed if smoking would have remained cheaper? Also even if prices were increased via taxes, it doesn't mean demand could not also be increased for some other reasons? People don't smoke because they want to spend money, after all.

Minimum wage of course comes up all the time. Here in Germany (which is also mentioned in the article), I don't thin unemployment is measured in a very concise way, as it is also a political number. Politicians want to be able to say unemployment went down.

So there are lot of people who are not actually being counted in the official number, like if they are not actively seeking employment, or only doing side jobs. Minimum wage increases usually are also not that high. I think there might still be jobs lost, just not those that are being counted. An example would be a pensioner doing a side job to earn a little extra income. If her job falls away, she doesn't file for unemployment because she already is a pensioner. Student jobs might be another example.

I guess it is true that it is difficult to predict some things, but surely, if you can present a theory that is good at predicting, it would make a dent in economics? No need to declare classical economics silly and claim to be inventing a new kind of economics.

Badness of the article aside much of the axioms that make up the foundations of Economics are simply not true imo. The bedrock of the field is that people act rationally. But they don’t. Firms do. And maybe groups of people do: but individuals don’t. Not always.

I always thought the field could use updating to reflect more of what we really see and not what the theory suggests we should see.

"The law of supply and demand" is never going to fit everything the way the law of gravity does. It's a rough guideline that applies to artificial models better than it does to the real world.

It seems like economists need to admit it when a minimum wage law don't have the effect they think it "should" instead of stubbornly insisting they're right.

However, you can tell a "journalist" wrote this...

>Isaiah Andrews, one of these new ‘empiricists’, won the 2021 John Bates Clark Medal – the most distinguished economics prize in the United States. Andrews has worked on the problem of publication bias – whereby research that confirmed prior beliefs could have a better chance of being accepted by academic journals

I don't see what this has to do with supply & demand. "Confirmation bias" is more of a social science study area, not economics.

> In 2020, the UK government appointed Mark Carney – a former governor at the Bank of Canada and the Bank of England – as climate change adviser. Carney was quick to declare the problem to be essentially a mispricing of the cost of emitting carbon. Neither Sunstein nor Carney are experts in climate economics, let alone climate change.

Whatever "climate economics" is and how it differs from just "economics."

> The problem is one I call ‘free lunch thinking’. Milton Friedman popularised the saying that there was ‘no such thing as a free lunch’, yet his worldview was that, if government just stepped back – didn’t spend money solving problems, didn’t trouble itself with regulation, and left all the messy decisions around how to organise society to the ‘market’ – things would hum along and we’d all get richer magically. That sounds a lot like a free lunch.. [italics added]

No, it's not "free lunch thinking." It's describing how laws work. It's not magic if you turn on the burner under the teakettle and the water gets hot.

> Yet there is no reason why adhering to the scientific method of basing conclusions and world views on observable facts should be more challenging in economics than in physics. Except that the incentives are against it. If you have a dogmatic neoclassical view of how the world works, you’ll always have a solution to the economic problem of the day.

Actually, there IS a reason: in physics you can do experiments quite easily, and in the social sciences and economics, you can't. Thus Freakonomics and successor books focus on "natural experiments," like the two school districts in Canada whose boundaries seem to be randomly drawn. Minimum wage increases in one state or city are not a natural experiment.

This is a good article. But it's too kind to contemporary economics. Contemporary economics especially neoliberalism is simply a pseudo-scientific justification for crushing workers rights globally and maximizing profits for those at the very top.

Economists told us for decades that wages are tied to productivity, when all the data points in the exact opposite direction. Economists told us that opening up developing countries' markets would result in their development and increase in standard of living. How's that going in 2022?