The Real Science Deniers

 

barack-obama

Its professors and students lovingly refer to the field of economics as “the dismal science.” The pervasive cynical humor of economists aside, economics is very much a science, complete with experiments and theories. It is a science in the same way that say something like climatology is science, albeit far less difficult. With that established, comments made by President Obama about economics while at a “climate change” conference in Paris struck me with brutal irony like a bolt of oblivious lightning from our Commander-in-Chief:

This is a classic market failure. If you open up an Econ 101 textbook it’ll say the market is very good about determining prices and allocating capital towards its most productive use, except there’s certain externalities…

It was an impressive display of glossary terms. Mr. Obama is correct; this is what a basic economics textbook will tell you. It just seems strange that for most of his presidency, Mr. Obama has completely ignored it.

Several of the significant economic policy positions of the Obama administration fly in the face of widely accepted economic theories, even those taught in Economics 101. Mr. Obama said in his press conference this morning, “The market is very good about … allocating capital towards its most productive use.” This is a fundamental economics lesson that Sowell, Friedman, Hayek, Mises, Smith, and on and on and on have been trying to beat into the heads of those with political power for centuries in order to prevent things like taxpayer bailouts of major corporations such as General Motors and Chrysler. Of course, this didn’t stop Mr. Obama from doing just that and giving billions of taxpayer dollars to the companies, which they could not otherwise earn by convincing people to buy their products. In short, the market was allocating resources away from unproductive uses (building cars and trucks nobody wanted), until the government under Mr. Obama and the Democratic Congress stepped in and said otherwise.

Of course, many will point out that the auto companies survived following the massive cash injection. Yet another fundamental lesson in economics, championed by Bastiat and later Hazlitt, reminds us to consider the seen versus the unseen. We see General Motors and Chrysler (the latter now under Italian ownership) still producing cars and trucks, yet we do not see what free Americans could have otherwise done with the billions of dollars taken from them and given to corporations who didn’t meet their demands.

What other companies could have filled the void? Would Americans have invested more in other forms of transportation? Would they have made investments in reducing their dependence on motor vehicles entirely and increased investments in thriving businesses such as Amazon and telecommunications companies that eliminate the need to leave the home for work and shopping altogether? Perhaps they would have simply just bought better cars and certainly more efficient ones. Funny enough, all of the above would have undoubtedly helped achieve the goals of Mr. Obama and his allies at the Paris climate talks. The science of economics teaches us that there is a price to pay for poor allocation of resources, even if it isn’t readily obvious.

It should be noted that this is the same way the favored industries of climate activists are kept alive: on the backs of taxpayers. Production tax credits have transferred billions of dollars to the solar and wind industries over the last several years only to have these power sources fail to meet the needs of our grid. All of our wind and solar provided our nation with a combined 2.2 percent of the energy we consumed in 2014, much of it at market-distorting prices.

Speaking of prices, the price system was also mentioned by Mr. Obama as one of the ways the market is “very good” at allocating resources. But he and many politicians like him forget that the economic principles behind prices also apply to the labor market. Mr. Obama has routinely called for increasing the minimum wage to over $10 an hour, nearly a 40 percent increase from the current federal minimum of $7.25.

Democratic Socialist Senator and presidential candidate Bernie Sanders backs a hike to $15 an hour, which is more than a 100 percent increase! Yet if either of them or their ideological allies actually read the Econ 101 textbook Mr. Obama referred us to in defense of his climate strategy, then they’d know that setting a price floor above the market equilibrium results in a surplus of supply and a deficit of demand. In the case of the labor market, this situation is better known as higher unemployment. This kind of unemployment strikes particularly hard at younger and poorer people, eliminating job opportunities where they could gain valuable skills and a firm footing at the bottom of the economic ladder. Instead, minimum wage policies only pull up the ladder even higher.

This goes beyond theory. Low-wage jobs held by young and low-skilled people are simply eliminated. We see evidence everywhere, from the social crises caused by record youth unemployment, particularly in minority communities, to the mundane. When was the last time an usher led you to your seats at the theater or someone pumped your gas for you outside of New Jersey?

The list of policies proposed and enacted by the Obama administration and Democrats in Congress that simply defy the laws and widely accepted theories of basic economics is practically endless. Yet, ironically, these are the same people who scold anyone who is even remotely skeptical of the latest climate catastrophe theory, be it global warming, global cooling, climate change, or whatever it is being called these days to avoid inconvenient truths. Some even go so far as to suggest criminalizing this dissent.

The term “science denier” is frequently hurled at those who have any question relating to the relationship between human activity and our immensely complicated climate system and its associated science. Yet those who hurl this stone tend to be the same people who ignore the most basic tenets of our beloved yet dismal science of economics. Any suggestions as to what we ought to call them?

Published in Economics, Science & Technology
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  1. Could be Anyone Inactive
    Could be Anyone
    @CouldBeAnyone

    Although I do concede that there are differing schools of thought on whether economics is A Priori or A Posteriori (Chicago vs Austrian), I would argue that economics is based in A Priori concepts. An example would be that supply is categorically more important than demand. You work (produce) in order to buy (consume), not buy (consume) in order to work (produce). You never need to test this really, its deductive truth. It is derived by our human nature.

    Therefore they are not science deniers (from my perspective) but rather (assuming they do know something of economics) to be arrogant fools. Science is based on testing hypothesis against empirical research. Dogma is not wrong ever, it is always right. I cannot think of a counter argument to the supply is more important than demand issue. Yet, as you noted, we have Keynesian economics being trumpeted everyday about how we need to consume or create consumption as evidenced by Bernie Sander’s rhetoric on the minimum wage and how he thinks it will “spur economic growth” (that stupid Robert Reich virtuous cycle BS). He believes you have to consume in order to produce, he couldn’t be more incorrect.

    Yet from the dawn of our species man first produced then consumed. He never got meat magically handed into his hands. He had to produce it by hunting and then cooking it. He had to grow the wheat first then consume it. Its a travesty that so many are blind to this.

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  2. Percival Thatcher
    Percival
    @Percival

    Patrick Hedger: Any suggestions as to what we ought to call them?

    Mathematically challenged.

    Patrick Hedger: Its professors and students lovingly refer to the field of economics as “the dismal science.” The pervasive cynical humor of economists aside, economics is very much a science, complete with experiments and theories.

    Major in Econ. At least then you’ll know why you can’t get a job.

    – Graphitto seen on a study carrel in the Undergraduate Library, University of Illinois circa 1979.

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  3. I Walton Member
    I Walton
    @IWalton

    We can’t conduct replicable experiments so it’s not science as we think of it.    So what do we call these dishonest demagogues? Demagogues, charlatans, rent seeking liars, or just fools?   On the other hand if folks call Darwinian biology science we’re way ahead of them in applying the same analytical model, we can look back and use numbers because most transactions leave numerical trails which honest people can use if they are really rigorous..   After all Darwin got his model from Adam Smith and Hayek took the model the  next several steps.   Macro, on the other hand, is just accounting that is really useful for the rent seekers and consultants  but contains no science, and no way to conduct a replicable experiment or look back and verify the a prior hypothesis.

    • #3
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