John Stossel tells us what Thomas Sowell can teach us about standing up to the mob.
The heights of the economics profession are increasingly inhabited by people who disdain price theory. Reliance on the economic way of thinking in solving problems is viewed as obsolete and unscientific. The data jockeys think they’re cutting-edge, but they’re merely repeating old mistakes. In the late 19th and early 20th centuries, economists of the German Historical and Old Institutionalist schools thought they could make do with history and statistics alone, unconstrained by theory. In the end, they got so bogged down in details that they came up with very little that lasted.
A common anti-price-theory trope is that its practitioners are political ideologues masquerading as scientists. The opposite is closer to the truth. Old-school economics recognized that trade-offs and constraints are everywhere. There are no free lunches. Armed with price theory, economists resisted the politically appealing but economically unsound proposals of both the right and left. Today’s economists, innocent of price theory, have no such armor.
The atheoretical approach of contemporary economists makes them particularly susceptible to the technocratic pretensions of the center-left. If, contrary to the claims of price theory, there are no enduring laws of economics, then there is no reason to stop the technocrats from tinkering. Many of these economists don’t realize they have been politically compromised. They see it as “just the facts, ma’am” pragmatism. In reality, it is ideology sneaking in through the back door.
Dan Mitchell asks if France is suffering from too much austerity.
Jessica Melugin works to help keep straight antitrust’s dismal historical record.
John Tamny could not put down Kevin Williamson’s new book, Big White Ghetto.
David Henderson doesn’t share Alan Blinder’s enthusiasm for Joe Biden’s “stimulus” scheme.
Richard Rahn calls the minimum wage “the cruelest tax on job growth.”
RAJAGOPALAN: In this South Korean story, how much of it is free trade and prosperity, and how much of it is industrial policy? Because this is one constant source of discussion between trade economists and development economists. How much is trade part, or outward embracing of global markets part, of the success story of South Korea?
PANAGARIYA: Shruti, in this, I must say that the proponents of this industrial policy school have so obscured the reality of South Korea, and I must say that a lot of the people on the side of free trade advocacy have not done a great job, actually, on defending. Often, they give in, “Yeah, yeah, yeah,” you know. This is what I separate out, when does Korea start? About 1963 is the turning point. This starts with liberalizing the economy, and 1963 to 1973 there is no industrial targeting.
Even when I started looking at all the evidence, I came in thinking that Korea was doing some industrial targeting all through. Then from ’63 to ’73, I see no industrial targeting….
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Some people like Ha-Joon Chang, et cetera, really tried to make their case by saying, “Oh, look, we protected the auto industry, and it is such a successful industry today.” This is a post hoc fallacy. Post hoc ergo propter hoc, whatever you say. “After this, therefore, because of this.” But I’ve never understood—just because you did something before, and eventually some industry succeeds, that doesn’t mean anything, and moreover, what about the ones that failed?
I don’t have it in the book but actually, Anne Krueger pointed out to me that they put up this very, very large ball-bearing factory in S. Korea, and it was so inefficient, there was no way it could compete on the global marketplace. And it was so large that the S. Korean market was not large enough to consume it, so it became a white elephant and eventually had to be closed down. Nobody remembers it. Only successes are remembered. Failures are gone. That also gives a bit of a bias to this.
