On Evonomics, Spelling and Basic Economic Concepts

I am a big fan of exploring economic ideas into greater depth rather than remaining on the surface of knowledge that I accumulated through my studies. As such, I am always happy when I see people trying to promote “alternatives” within the field of economics (e.g. neuroeconomics, behavioral economics, economic history, evolutionary economics, feminist economics etc.). I do not always agree, but it is enjoyable to think about some of the core tenets of the field through the work of places like the Institute for New Economic Thinking. However, things like Evonomics do not qualify for this.

And this is in spite of the fact that the core motivation of the webzine is correct: there are problems with the way we do economics today (on average). However, discomfort towards the existing state of affairs is no excuse for shoddy work and holding up strawmen that can be burned at the stake followed by a vindictive celebratory dance. The most common feature of those who write for Evonomics is to hold such a strawman with regards to rationality. It presents a caricature where humans calculate everything with precision and argue that if, post-facto, all turns out well then it was a rational process. No one, I mean no one, believes that. The most succinct summary  of rationality according to economists is presented by Vernon Smith in his Rationality in Economics: Constructivist and Ecological Forms. 

Such practices have led me to discount much of what is said on Evonomics and it is close to the threshold where the time costs of sorting the wheat from the chaff outweighs the intellectual benefits.

This recent article on “Dierdre” McCloskey may have pushed it over that threshold. I say “Dierdre” because the author of the article could not even be bothered to write correctly the name of the person he is criticizing. Indeed, it is “Deirdre” McCloskey and not “Dierdre”. While, ethymologically, Dierdre is a variant of Deirdre from the Celtic legend that shares similarities to Tristan and Isolde, the latter form is more frequent. More importantly, Dierdre is name more familiar to players of Guild Wars. 

A minor irritant which, unfortunately, compounds my poor view of the webzine. But then, the author of the article in question goes into full strawman mode. He singles out a passage from McCloskey regarding the effects of redistributing income from the top to the bottom. In that passage, McCloskey merely points out that the effects of equalizing incomes would be minimal.  The author’s reply? Focus on wealth and accuse McCloskey of shoddy mathematics.

Now, this is just poor understanding of basic economic concepts and it matters to the author’s whole point. Income is a flux variable and wealth is a stock variable. The two things are thus dramatically different. True, the flux can help build up the stock, but the people with the top incomes (flux) are not necessarily those with the top wealths (stock). For example, most students have negative net worth (negative stock) when they graduate. However, thanks to their human capital (Bryan Caplan would say signal here), they have higher earnings. Thus, they’re closer to the top of the income distribution and closer to the very bottom of the wealth distribution.  My grandpa is the actual reverse. Before he passed away, my grandpa was probably at the top of the wealth distribution, but since he passed most of his time doing  no paid work whatsoever, he was at the bottom of the income distribution.

Nevermind that the author of the Evonomics article misses the basic point of McCloskey (which is that we should care more about the actual welfare of people rather than the egalitarian distribution), this basic flaw in understanding why the difference between a stock and flux leads him astray.

To be fair, I can see why some people disagree with McCloskey. However, if you can’t pass the basic ideological Turing test, you should not write in rebuttal.

Advertisements

4 thoughts on “On Evonomics, Spelling and Basic Economic Concepts

  1. I started reading Evonomics on the first day it was published, and am pretty sure I was the initial person to post a comment. I have stopped reading it completely despite the fact that about a fourth of the articles were actually pretty interesting. The problem is the rest of the articles.

    The first month or so of articles, for example, had one of the editors writing an article on how classical liberalism is a memetic brain virus. Wilson — one of the key organizers of the site — wrote an article on how Hayek was a racist, another on how Hayek was a monster (if memeory serves the words racist and monster were both in the titles), and finally an article on how we all just need to quit calling each other names. Seriously?

    I suspect that Wilson and Turchin and a few others involved in this site are some type of modern day semi-Socialists who don’t so much have any comprehensive ideas of how do organize society as much as they are sure that they want free markets to have less importance. In other words it is a site of people who primarily share a disdain for anything resembling free enterprise and are seeking to assault its foundations.

    One part of their strategy is to define anything real or imagined in classical liberalism, libertarianism, markets or conservatism under he umbrella term of “neoliberal.” This allows them to define the term any way they would like. It ends up as some type of evil secret society formed at Mont Pelerin.

    My favorite silly article was on how money is causing our brains to shrink (evolution!).

  2. Even if you focus on income, McCloskey’s assertion is still without merit. Ample empirics demonstrate that progressive taxation and redistribution profoundly change end-of-day income concentration over the long term, are arguably the only things that do it. Read Lane Kenworthy. Or more forcefully if less academically, Matt Bruening. And over decades, they are the primary or only means controlling economically and politically pernicious and extreme wealth concentration.

    Hell, even a dyed-in-the-wool market predistributionists have to raise their eyebrows at findings like these:

    http://voxeu.org/article/tax-reforms-and-top-incomes

    • Steve,

      Could you please clarify your point. Certainly we would assume that significantly less progressive taxation will lead to those in the top percent that year making more after taxation than otherwise. That is kind of the point, right? The idea is that those adding value to society should be fairly allowed to keep it, especially since doing so incentivized them to continue to add value.

      The next set of charts looks like cherry picking as they are not even measuring the same things across nations. But even as shown they reveal slight to moderate gains in income share for the next level in two of three nations. Right?

      Of course, it is critical to remember that the makeup of who went into the distributions was changing annually in every case. The top one percent is not a set group, indeed most studies I have seen show that most people are in the top one percent for usually only a single or few years. In other words, you are pointing out that in the year they “won” that the payoff was a bit higher.

      The third set of charts seems to show that per capita GDP growth continued fine in all three cases, and if I am reading it right, growth was actually slightly higher than the model in two of the three examples. I could be misreading though.

      So, how are we supposed to be raising our eyebrows?

      And what evidence have you supplied that shows that there is anything pernicious, let alone politically pernicious about the situation? Could you please clarify?

Please keep it civil

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s