Science and subterfuge in economics

[Celerity]

A big argument of neoliberal economics is that unemployment is reduced by labour-market deregulation. Lack of robust evidence doesn’t seem to get in the way.

https://www.socialeurope.eu/science-and-subterfuge

Mainstream economics has a tendency to decide on some ‘established’ conclusions, and then hold to them, notwithstanding all evidence to the contrary. This is bad enough, but what may be worse for a discipline that lays claim to being a science is the lack of insistence on the replicability of empirical results. This is both standard and essential in most natural sciences; in economics, by contrast, there is mostly indifference and occasionally even fierce resistance to it. In some cases, the data that must be used to replicate conclusions are denied to other researchers.

The reason is often deeply political, because the results which are promoted and disseminated accord with visions of the economy that support particular ideological positions and associated policy stances. For example, empirical work that supports fiscal austerity or market deregulation is cited extensively and becomes the basis for advancing those particular policy outcomes. Very rarely is such work subject to the scrutiny—for example, challenging its assumptions and questioning its statistical procedures—that would be the norm for research in the natural sciences.

Consider the claim made by Stephen Moore and Arthur B Laffer that the Trump tax cuts in the US would not only pay for themselves but actually bring down the government deficit while generating more private investment. Their claim was completely wrong but somehow economic reality seems to have had little impact on those who continue to believe the assertion of the ‘Laffer curve’ that lower tax rates will generate higher tax revenues.

Famous trope

Now, a new paper by Servaas Storm effectively demolishes another famous trope of neoliberal economics—the argument that labour-market ‘rigidities’ depress output and employment. One of the empirical investigations most often cited for this argument is a paper by Timothy Besley and Robin Burgess, using manufacturing data across Indian states for the period 1958-92. Besley and Burgess claimed to show that pro-worker regulations in some states resulted in lower output, employment, investment and productivity, and even increased urban poverty, relative to states that did not adopt such regulations.

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[guillaumeb]

1. Recommended.

There is no evidence supporting the fallacies behind supply side economics, but it gives the appearance of justifying tax cuts for the rich.