Saturday, July 1, 2017

What Motivates Economists?

In a post at the Independent Institute, Robert Higgs writes:
People on both the right and the left routinely commit the funding fallacy when they assess research and writing. This fallacy is a variant of the hoary rule, Follow the money. The idea is that if an institution or person funded an analyst’s work directly or indirectly, that analyst was ipso facto a hired gun who merely strove to do the funder’s bidding.

I have been around university and think-tank research and writing for half a century, and I can testify that this belief is, as a general rule, incorrect. Not that no specific instances occur; of course they do, especially in think tanks and related organizations, but sometimes in universities as well. Nevertheless, the more accurate general rule is that analysts do what they believe to be good work regardless of who funded the work or why.
I would argue that different individuals react in different ways.

Ludwig von Mises and Murray Rothbard certainly weren't going to alter their analyses for pay or a prestige appointment. They only found work with institutions that agreed with them or at least allowed them to speak their minds.

On the other hand, there were many around Mises, from his Austrian days, who certainly appeared to have altered their positions in a Keynesian direction to gain prestige appointments that were never made available to Mises or Rothbard.

There are certain economists now at influential Beltway institutions who appear to pull their punches to keep their paychecks coming. I have no proof so I won't name names.

On a broader spectrum. it is hard for me to believe Paul Krugman believes half the nonsense he puts out at the New York Times. He frequently contradicts even what he has written in his economic textbooks.

Another name that comes to mind is Ben Stein's father, Herbert Stein. He certainly knew that price controls were evil but still while an adviser to President Nixon as head of the Council of Economic Adviser he endorsed them. How could this have been anything but a desire to stay close to power? In fact, he pretty much admitted it in his book, Presidential Economics:
The CEA [Council of Economc Advisers] shared Nixon's deep aversion to price and wage controls. Indeed, the CEA was "purer"than Nixon in its aversion to "incomes policies"-- efforts of government by persuasion or threat but with mandatory or comprehensive rules to restrain the wage- or price-raising decisions of companies and unions.
The CEA regarded these measures as wicked in themseleves and steps on the slippery slope whose logic led invitably to controls. 
But then:
The meeting at Camp David on the weekend of August 13-15 1971 was one of the most exciting and dramatic events in the history of economic policy. That was not only because the participants knew they were making extremely big and startling decisions...

The whole atmosphere and particularly the isolation from the outside, served to separate the group from the realities of economic and political life. They acquired the attitudes of group of scriptwriters preparing a TV special to be broadcast on Sunday evening. The announcement - the performance - was everything. It had to be a dramatic and smooth as possible with no loose ends trailing. ..

The suspension of realisim enabled the participants to overlook a number of questions that would have been considered at length if the decision had been made in a less exotic environment. It was agreed that there would-be a frieze of up to ninety days on prices and wages.
As for the majority of mainstream economists who do not have the opportunity to gain great power or major financial gain, I suspect they are caught up in a type of Stockholm syndrome. They on some level are sharp enough to recognize the logical fallacies promoted by the elites but they just don't have the steely mental strength to break away from their mental captors and thus they, instead, promote nonsense. They are not paid off, their minds, instead have been captured.

 -RW



3 comments:

  1. Does the intellectual do the bidding of his funding sources or do his funding sources fund him because his work is useful to them?

    People knows what pays and advances their career and what doesn't. They know if they rock the boat and pursue areas that are not favorable to the funding sources they will have a tough career. It takes a lot to go against the herd and accept the consequences of doing so.

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  2. I also think that not all funding and research is equal.

    If research is privately funded, then over time I would expect (with one exception) that any artificial biases will be weeded out, because if these biases lead to research conclusions which are contrary to reality then the funders will withdraw their funding, since the research will lead to losses. Research funding is just like any other form of investment.

    The real problem is research that is funded directly or indirectly by the state. First, the actual funding violates private property rights since it is forcibly extracted from the private sector. Second, since there is no market feedback mechanism, if there are biases leading to incorrect conclusions this won't necessarily lead to the funding drying up, as the state can just keep extracting the funding forcibly from the private sector even if the incorrect conclusions lead to the wasting of resources. Hence state-funded climate change research can continue to thrive.

    The one exception to which I alluded earlier is privately funded research that is directed toward supporting cronyism, i.e., supporting a private sector firm's claim for subsidies from the state, or to get regulations written in its favor against new competition. In this case the research funding may not violate private property rights, but even though the conclusions might be artificially biased and contrary to reality, the investment in the research can still be profitable as a result of successful cronyism. However, this is a problem with the existence of the state, not with the research; if there were no state, there would be no opportunities for cronyism.

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