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… is from pages 189-190 of James Gwartney’s insightful 2013 paper “The Public Choice Revolution and Principles of Economics Texts,” which is chapter 13 of Public Choice, Past and Present: The Legacy of James M. Buchanan and Gordon Tullock [2] (Dwight R. Lee, editor, 2013) (original emphasis):
The omission of public choice from mainstream economics creates a central planning mentality. For the mainstream economist, economics is about deriving ideal solutions under restrictive assumptions. Essential information such as consumer preferences, costs of production, rate of return for alternative investments, and size of spillover effects are generally assumed to be known. For the proponents of this approach, economic analysis involves the derivation of “optimal” levels of taxation, subsidies, distribution of income, budget deficits, government spending, and dozens of other key variables within models containing known information. In this fantasy world, economics is about deriving ideal solutions to multi-equation mathematical models. This approach makes economics look highly sophisticated, and its practitioners appear to be engineering geniuses. No doubt, the sophistication of such models is a contributing factor to their popularity at elite schools.
But, there are numerous problems with this approach. The information incorporated into the models is generally unavailable to any central authority. The supposed “ideal” solutions often alter incentives and generate secondary effects that undermine the validity of the models. Most importantly, as public choice analysis reveals, the real-world political decision makers will be more interested in votes and winning the next election than the adoption of supposed ideal solutions.
DBx: If a clever teenager masters a particular video game we might all admire the teen’s dedication to the game and the native smarts that his or her mastery of the game perhaps indicates. But we would never conclude that this teenager should therefore be employed to advise government officials on how to go about manipulating whatever policy tools are at these government-officials’ fingertips. Economists who master this model or that econometric technique are very much akin to a clever teenager who masters a particular video game. Both are good – perhaps very good – at playing games. Neither, however, knows enough about reality outside of his or her make-believe world to be of much use in helping others to understand – and much less to ‘engineer’ – that reality.