Thursday, March 10, 2011

Economists, left and not left

Tyler Cowen provides lists of mistakes of left and non-left economists. I think he is pretty much on target throughout. My favorite was this one, from the left list:
12. Implicitly constructing a two-stage moral theory, which first cordons off the sphere of the nation-state (public goods provision, etc.) and then pushing cosmopolitan questions off the agenda in the interests of expanding a social welfare state. (In fairness, many individuals on the right don't give cosmopolitan considerations even this much consideration, although right-oriented economists tend to be quite cosmopolitan.)
I'd like to add some additional differences between left and non-left economists:

1. Left economists tend to think the marginal social cost of public funds (the direct and indirect cost of raising a dollar of tax revenue with a distortionary tax system) is very low while non-left economists think it is very high.

2. Left economists tend to think all behavioral elasticities related to taxes and transfers are very small while non-left economists think they are very large. Tyler's item about non-left economists and the effects of marginal tax rates is a special case of the more general rule, which also shows up in discussions of transfer programs.

3. Left economists tend to approach unions morally rather than analytically. So do non-left economists, but the morals are different.

4. Left economists focus on the bits of psychology that suggest market failures and bolster the case for government intervention while paying less attention to the bits of psychology that do the reverse. Non-left economists focus on the bits of psychology that suggest government failure and bolster the case for markets while paying less attention to the bits of psychology that do the reverse.

I would also argue that there are some areas where all economists do poorly:

1. Taking account of the implications of mass domestic imprisonment for US labor markets and for other outcomes among the disadvantaged.

2. Explaining why such a high fraction of low-skill Western Europeans work despite the availability of relatively attractive transfers.

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