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Fake Economists (and real ones)

I often wonder why economists have such a bad reputation.  Much of it has to do with which economists people encounter on the news and in the newspapers.  These folks are typically forecasters of macroeconomic events, predicting interest rates, the daily twists and turns of the stock market and so on.  In so doing, they use few, if any, of the tools of economics.  Rather they are what might be called "economic engineers," people who use statistical models to try and explain events.  Worse, many of these people work for various companies or special interest groups and convey an image of economics as a tool of special interests.

Mario Vargas Llosa
is a wonderful writer and a very good man.  He spoke last night on his identity as a liberal, a liberal in the European sense of the word, a fan of freedom and limited government.  Along the way, he criticized economists:

For example, there are liberals who believe that
economics is the field through which all problems are resolved and that
the free market is the panacea for everything from poverty to
unemployment, marginalization and social exclusion. These liberals,
true living algorithms, have sometimes generated more damage to the
cause of freedom than did the Marxists, the first champions of the
absurd thesis that the economy is the driving force of the history of
nations and the basis of civilization. It simply is not true. Ideas and
culture are what differentiate civilization from barbarism, not the
economy. The economy by itself, without the support of ideas and
culture, may produce optimal results on paper, but it does not give
purpose to the: lives of people; it does not offer individuals reasons
to resist adversity and stand united with compassion or allow them to
live in an environment permeated in humanity.

Couldn’t agree with him more.  He does go on to say:

It is culture, a body of shared ideas,
beliefs and customs–among which religion may be included of
course–that gives warmth and life to democracy and permits the market
economy, with its competitive, cold mathematics of awarding success and
punishing failure, to avoid degenerating into a Darwinian battle in
which, as Isaiah Berlin put it, “liberty for wolves is death to the
lambs.” The free market is the best mechanism in existence for
producing riches and, if well complemented with other institutions and
uses of democratic culture, launches the material progress of a nation
to the spectacular heights with which we are familiar. But it is also a
relentless instrument, which, without the spiritual and intellectual
component that culture represents, can reduce life to a ferocious,
selfish struggle in which only the fittest survive.

I think this is a misunderstanding of how the marketplace works.  It may be the result of our penchant as economists for using the word "competition."  I use it all the time.  I understand it to mean the propensity of humans to truck, barter and exchange.  But for too many, the word conveys the zero-sum game world of sports.  Maybe we should stop using it.

Ironically, Llosa later invokes an economist, Von Mises talking about the importance of culture:

A great liberal thinker, Ludwig von Mises, was
always opposed to the existence of liberal parties because he felt that
these political groups, by attempting to monopolize liberalism, ended
up denaturalizing it, pigeonholing it, forcing it into the narrow molds
of party power struggles. Instead, he believed that the liberal
philosophy should be a general culture shared with all the political
currents and movements co-existing in an open society supportive of
democracy, a school of thought to nourish social Christians, radicals,
social democrats, conservatives and democratic socialists alike.

And he closes with this lovely thought:

We dream, as novelists tend to do: a world
stripped of fanatics, terrorists and dictators, a world of different
cultures, races, creeds and traditions, co-existing in peace thanks to
the culture of freedom, in which borders have become bridges that men
and women can cross in pursuit of their goals with no other obstacle
than their supreme free will.

Then it will not be necessary to talk about freedom because it will
be the air that we breathe and because we will all truly be free.
Ludwig von Mises’ ideal of a universal culture infused with respect for
the law and human rights will have become a reality.


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