the weaknesses of analogical reasoning

This article, shared recently by Marginal Revolution, got Anti-Mankiw's blood boiling, for all the wrong reasons. The core issue was the defense of mainstream economics through the use of particular analogies that we believe are fundamentally flawed.

As we explain elsewhere, analogies are often a deceptive way of explaining the core analytical framework of a concept, because an analogy between A and B is only as good as the likeness between A and B. It seems better to start off by explaining the core logical framework from within the language of economics, instead of alluding to its likeness to other sciences. Unfortunately, that is not the approach taken in Mankiw's textbook -- as early as chapter 2 he analogizes the study of "economic science" to physics.

What are the specific offenses that the article makes?

1. Saying that economics is like other sciences, such as medicine. As the article states,

"Galbraith’s and Varoufakis’s worry [that economics has become too mathematical] has been around for 20 years, says Grossman at Princeton. “It comes and goes. It particularly comes when economic times are hard, when it appears that the old way has let us down.” Did the old way let us down? “No,” he answers, “which is very different from saying we know everything. … I don’t think medicine has let us down because there are diseases we don’t know how to cure.”"

Economics is not like medical science. In medicine, all hypotheses go through rigorous empirical testing before they can be accepted by the field, and even at that point, caution is exercised when it comes to making generalizations. Also, in medicine, we don't have to make assumptions about how cells or molecules behave, while with people, making such assumptions is not only very important, but subject to a much wider menu of possible interpretations, often with dramatically different, and political, implications.

2. The idea that there is a "free market" in economics departments, so that graduate students can pick the ones that seem to be offering the most realistic version of economic theory out there. As the article states,

"Harald Uhlig, chair of the economics department at the University of Chicago, another of the No. 1-rated economics graduate schools in the U.S., offers a kind of a model of his own. In an e-mail, he writes: “Above all, I do not believe in central planning. What is true in private markets is true in PhD education as well: It is good to see different places try different approaches, to let the PhD students decide where they want to be educated, and to let the marketplace for future scientists decide what works and what does not. I am sure that if the new PhD program in Athens is successful and produces the top young economics researchers of the next generation, many other PhD programs will take notice.”

Such a comment ignores the very real differences between top graduate programs and lower-ranked schools in terms of prestige -- something that often goes hand-in-hand with support for the status quo and getting top (influential) jobs, and refraining from any radical criticism of the current paradigm (which is what economics needs at this point).

The thing that concerns us most about these analogies is that, for the casual reader who doesn't know much about the field of economics, it is very easy to take these analogies for granted. Without any rigorous knowledge of the field, understanding is made easier by analogy.

But for those who have an advanced understanding of the field, the weakness of the analogical approach is clear. We are, indeed, actively promoting ignorance by taking such an approach, instead of being honest about our flaws and about the structure of graduate education.

an A for ideology, an F for technique

In this article Greg Mankiw describes the argument behind a New York Times opinion piece written by Yoram Bauman, of "10 Principles of Economics, Translated" fame. The thrust of Bauman's thesis is that economics majors, by drilling ideas about incentives, private property, and self-interest into their heads for their classes, are thereby trained to be more selfish. It is supported, supposedly, by evidence showing how the economics majors were less likely to contribute to two charities presented to them when registering for classes.

Greg Mankiw doubts this implication of Bauman's findings. Mankiw basically takes issue with the following quote from Bauman's article:

You may question whether these groups actually serve the common good, but that’s mostly beside the point. Regardless of the groups’ actual social value, a purely self-interested individual would choose to free-ride rather than contribute; after all, a single $3 donation is not going to make a noticeable difference in tuition rates.

Mankiw, in criticizing this passage, makes a fair point: the supposedly positive externalities of any public good do need to be carefully examined and analyzed, even for small values of contribution, and someone with a social science background, particularly economics, may be well-equipped to do so. They might be less willing to dole out cash to a random charity, but their education is put to use in other ways that are beneficial to society.

While Mankiw may have a point, we at Anti-Mankiw strongly disagree that Bauman's essential claim that economics is ideological evaporates in the face of Mankiw's criticism. In fact, published studies have been done on surveys of students who have successfully completed an introductory course to economics in which the mainstream view is presented without any critical perspective, and these studies offer an interesting take on how ideology matters in the classroom.

The findings? The majority of students 6-12 months after taking such a course recall most quickly the normative aspects of the course but are relatively less able to solve simple problems related to these ideas (to see how they might work or not work in practice). Ideas like "taxes are bad for efficiency, though not for equity", and "prices not set by the free market lead to welfare losses and are therefore undesirable" are common, but give them a question to solve on calculating consumer surplus, for example, and they cannot deliver. These are consistent with our own experiences in teaching introductory courses offering a mainstream view, and indeed, on a certain level makes sense: most cases, you may just get the main point of an argument and not necessarily the details behind the argument. But nevertheless, it's presented as an argument, and therefore not of course the only perspective!

[See Bartlett, Ferber, and Green's "Political Orientation and the Decision to Major in Economics" in International Review of Economic Education; and Faravelli's "How Context Matters" in Journal of Public Economics for two resources. These ideas were also reflected on based on a correspondent's current dissertation research which we are not allowed to cite openly.]

The lesson learned?  That market-centric views and market-centric efficiency criteria are at the center of any policy evaluation of a student, leaving no room to discuss how efficiency is not a scientific concept. (See this article by Rick Wolff, entitled, "Whose Efficiency?" which does a great job of breaking down the different models. Duncan Kennedy and Frank Michelman also have a nice piece as well entitled "Are Property and Contract Efficient?".) Second, it is highly questionable whether an intro course "enlightens" the student in the way Mankiw believes it does. Admittedly, part of the problem here is with education itself -- how we train our students and so on -- but Mankiw, writer of the currently most successful textbook, is therefore part of the problem, not the solution.

It's a short step from this final point to the idea that a better economics textbook -- which either clears away the ideological content and works more like the seminar room or offers a critical approach that draws on many different worldviews (or both) -- is just on the horizon...

give thanks to capitalism

An "In the News" excerpt in chapter 7 of Mankiw's Principles of Economics (4e) is titled "The Miracle of the Market" and begins with the following proposition:

An opinion columnist suggests that the next time you sit down for Thanksgiving dinner, you should give thanks not only for the turkey on your plate but also for the economic system in which you live.

The topic is Thanksgiving dinner and the argument is that we owe our Thanksgiving turkey to the division of labor, supply chains, and the pursuit of private gains. Of course, the article -- an opinion piece from the Boston Globe (does that count as "In the News" to you?) -- is meant to support the "argument" laid out over the previous 13 pages that "the price of turkey at the supermarket is fair", from a social efficiency standpoint, as long as free markets are the means by which scarce resources are allocated. Central planning would require vast amounts of information and time to do what a free market economy does completely on its own.

Fair point about central planning -- but why bring it up in the first place? Why does the author's argument about the coordinating miracle of the free market have to be compared to the extreme opposite of a completely centrally planned economy?

While we can never be certain of the author's intentions, let us offer a response: perhaps elements of a planned economy trickle into the author's story in ways overlooked or simply ignored by him. In other words, it appears to us as though the tactical use of attacking the "central planning" argument is to divert attention from more important and empirically relevant matters, such as the following:

Who determines the price of gasoline used by the trucks delivering the turkeys to the store? Oil cartels play an important role in determining prices at the pump. 

Who coordinated work at the factories which produce the feed and raise the turkeys? Most likely, these tasks were performed by a manager and other centralized authority figures. 

Who regulated the quality of the Turkeys or facilitated their transportation? Government laws and statutes were necessary for these things. 

Upon reflection, it seems that there does exist an essential economic planning element to your Thanksgiving dinner. Imperfectly competitive markets and the organization of economic activity which takes place in the firm are important examples of cases in which economic agents act collectively to plan and alter economic outcomes.

So this year, give thanks to capitalist social relations for the meal on your plate. While Mankiw has tried time and again to assert the universality of the "free market" model and its relationship to Thanksgiving, a simple look around at how economies actually function suggests otherwise.