I came across two articles recently that caught not just my attention but also my ire. They were excellent examples of what is wrong with much of the policy material that comes out of the ‘dismal science’.
Simply put, the presentation of evidence and the offered arguments built on this evidence are too scant to be respectable. The conclusions reached are too certain with no countervailing opinions considered or addressed, except in passing. The tones of the articles are too much schoolyard ‘see I told ya so’ and too little of the scholastic ‘let’s weigh all sides and pick the best path, regardless of who is right.’ Their logic is faulty and their argumentation depends on tautologies and equivocation rather than well-formed formulas required. In short, they are polemical opinion pieces better suited for a candidate running for office than they are serious pursuits of truth. And the validity of their conclusions is, shall we say, dismal.
The first example is a recent article about economic inequality by Christine Lagarde, entitled Equality is key to global economic growth. Lagarde is currently the managing director of the International Monetary Fund (IMF). A lawyer by training, she has held a variety of economics-related roles, including as an antitrust and labor lawyer and as France’s Trade Minister and Minister of Economic Affairs. So I had hopes that her article would offer a well-thought-out support of the position so concisely summarized in her title.
Instead, I found a fluff piece with numerous examples of equivocation. For instance, the third paragraph of the article reads:
Surely a definition of ‘excessive inequality’ would be coming after such a lead-in. Does she mean wealth inequality, income inequality, or some other form of inequality? After all, the inequality between Warren Buffet and the average wage earner in the US is much smaller when considering their incomes versus net wealth. Buffet makes a comparatively small income (defined as wages and salaries) every year but resides over a vast fortune.
But alas no. Lagarde does say about inequality that:
What kind of logic is being used in this sentence? It is almost certain that wealth inequality is a necessary by-product of economic activity. But where did income inequality creep in. And what is excessive inequality. At what value of the Gini Coefficient does income inequality become excessive? And so what if there is income inequality; it doesn’t mean anyone is poor. Both the players and owners in the National Football League are quite well-off, even though there is a distinct income inequality between the scant millions earned by the players versus the meatier hundreds of millions and billions earned by the owners.
Without any additional support, Lagarde then goes on to say that:
How much faster and how much more sustainable is the growth – would 0.1 % be statistically significant? How little is little adverse effect on growth – would 20% be little? Sigh…
Lagarde ends with this chestnut
There is no rational statement in that sentence other than to say the ‘excessive inequality’ (still undefined) makes people say that they feel bad.
So much for Lagarde!
The next candidate in the bad logic hit parade is the article entitled Free Trade With China Wasn’t Such a Great Idea for the U.S. by Noah Smith. Smith’s bona fides tell us that he is an assistant professor of finance at Stony Brook University. So I had hoped for a well-reasoned discussion. But those hopes were soon dashed.
Smith is more subtle with his equivocation and, as a result, his misdirection is harder to spot. His starting position is that:
Nowhere is this evangelism clearer than on the issue of trade. Ask any economist what issue they agree on, and the first answer you’re likely to hear is “free trade is good.” The general public disagrees vehemently, but economists are almost unanimous on this point.
These two paragraphs, examined closely, open all sorts of questions about Smith’s positions. First, by his own rules, should we be regarding Smith as a preacher rather than a scientist, since he is talking in public? Second, is being a preacher bad or, perhaps, is Smith revealing both his ignorance and his bias when it comes to faith and science? Anyway, let’s leave these questions aside and focus on the question he would like us to focus on. Is free trade with China bad?
To support the premise of his title, Smith provides us with this little gem:
Increased trade equals free trade? How many workers constitute many? Is 3% of the workforce many? And how many counter-examples are there on free trade? Would 10 papers out of 100,000 be enough to paint a 'very different picture'? I don't know the statistics and since Smith doesn't say how he defines free trade and what criteria he uses to say that the picture is different, I never will know.
Smith then argues that:
My response is – so what? I feel for these people who have been hit hard and have not recovered. Collectively, we as a nation should do something, and individually, me as a person should do (and am actually doing) something. But where is the evidence that free trade is the culprit?
How do I know that some economists or lawyers or professors of finance haven’t rigged the trading with China to favor themselves? After all, income inequality (or is it wealth inequality) has to come from somewhere. Or maybe government policy has left trade unfettered but has prevented these displaced persons from finding other jobs. Perhaps welfare and unemployment benefits are perversely constructed so that the displaced worker has no incentives or options to support himself while he looks or trains for new jobs. Perhaps, in an imperfect world, the benefits to society as a whole far outweigh the localized losses, as painful as they may be.
There are lots of questions and no forthcoming answers because Smith avoids examining these questions entirely. He seems to simply want to inflame the passions of a populist subject. Just the kind of behavior I would expect to see from a fly-by-night preacher.
So let me close by saying that one should stay on one’s toes when reading articles that pass for economics but are really politics. When the author argues without defining terms, without presenting quantitative evidence, and with liberal shortcuts through logic, the article probably isn’t worth one’s time.