Apparently, They Aren’t Really All That Smart

by Don Boudreaux on May 28, 2020

in Economics, Truth-seeking & ideology

Until I read this excellent essay by Phil Magness I was unaware of the brouhaha over economist Kevin Hassett’s use of the phrase “human capital.” To get the details of the astonishingly stupid reaction to Hassett’s use of this long-standing and quite commonplace – at least among economists – scientific term, please read Phil’s essay yourself. But I want here to flag one particular thing that struck me.

In his essay, Phil offers this report:

Sen. Elizabeth Warren chimed in, saying the phrase revealed a prioritization of “corporate profits” over the health and safety of workers. Congresswoman Alexandria Ocasio-Cortez went a step further, accusing Hassett of “racialized” terminology in a series of tweets.

“Progressives” never tire of praising themselves, their ‘leaders,’ and their philosophy as being unusually enlightened, scientific, and smarter-than-thou. Because their ranks swell with intellectuals and academics, “Progressives” fancy themselves to be unique on the political and ideological scene with brains. They boast of being guided by “the facts,” being objective, and being oh-so-learned.

Yet above we have two darlings of “Progressives,” Ms. Warren and Ms. Ocasio-Cortez, each of whom apparently is as utterly ignorant of basic economic terminology as is a kindergartener of string theory. It’s no crime to be unaware of economic terminology. But Ms. Ocasio-Cortez supposedly while in college studied economics. And Ms. Warren – formerly Prof. Warren – taught at Harvard Law and often wrote on economic topics. How ever did either of these brilliant women miss out on the perfectly innocent, scientific meaning of the term “human capital”?

Reading about Ms. Warren’s and Ms. Ocasio-Cortez’s evident ignorance of something that every modestly intelligent and reasonably learned person with some encounter with economics knows called to mind the evident ignorance of another “Progressive” darling: Joseph Stiglitz (he a Nobel-laureate economist).

On at least a few occasions, Stiglitz praised Nancy MacLean’s Democracy in Chains as being “important” because it helped to expose (as he described it in one essay) “the intellectual origins and organizational mechanisms of the Republicans’ assault on democracy.” Patrons of Cafe Hayek will recall that MacLean’s book is a fictional work about the Nobel-laureate economist James Buchanan, but a work masquerading as a work of history.

Presumably Stiglitz read MacLean’s book – otherwise, surely he wouldn’t praise it publicly. And so I wonder what Stiglitz thought when he read this passage in MacLean’s book:

Elected president of the Southern Economic Association in 1964, he [Buchanan] used his bully pulpit to prescribe “what economists should do.” They should cease focusing on problems of resource distribution – what the field called “allocation problems” – because the very idea that inequality was a bad thing led to looking for remedies, which in turn led the discipline toward and applied “mathematics of social engineering.”

Even college freshmen learn that when economists talk about the “allocation problem,” economists are talking about the challenge of allocating scarce resources optimally among their many different possible uses. The “economic problem,” as it is often described, is typically said to involve allocating resources in ways that, ultimately, maximize utility by directing those resources into their ‘optimal’ uses in production and consumption. Contrary to MacLean’s uninformed interpretation, Buchanan was not here speaking of income or wealth distribution or of economic inequality.

As I wrote a few years ago:

Buchanan’s call for economists to stop focusing so heavily on problems of resource allocation was emphatically not, contrary to MacLean’s claim, a call for economists to stop worrying about or studying income or wealth distribution.  Buchanan there said absolutely nothing at all about income or wealth distribution; “What Should Economists Do?” is not an article on, in any way, questions about income or wealth or economic inequality.  Not even close!  Yet MacLean misinterprets Buchanan’s quite conventional (among all economists) use of the term “allocation” to mean something akin to “income distribution” or “wealth distribution.”  This misreading by MacLean of Buchanan would be hilariously funny were it not used by her to portray Jim Buchanan as someone who he most certainly was not.

If MacLean errs on so fundamental a matter as what Buchanan (and the typical economist generally) means by the term “allocation,” she has earned everyone’s distrust in her skills as a scholar.

So, again, what are we to make of Stiglitz, a Nobel-laureate economist, failing to catch MacLean’s dumbfounding display of ignorance about a topic that is central to her book? Why did he not recognize this significant error as one that calls into question the quality of MacLean’s ‘scholarship’? And what are we to make of Sen. Warren’s and Rep. Ocasio-Cortez’s evident ignorance of the term “human capital”? I leave it to the reader to answer these questions.

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