The Transformation of Economics.

A great piece in the Wall Street Journal today about what has happened to Economics and Economics education.

I took an Economics class in college in 1957 and it changed me to a Republican. My first vote was for Richard Nixon in 1960. My family was furious as they thought we were related to the Boston Kennedys and they had always been Democrats. I wonder if an Economics class would have that effect today?

And that political economy and my assessment of it has changed over a career spanning more than half a century. Here are five developments I would emphasize:

I agree with his appraisal.

1. Diminishing returns to research. A core economic principle is the Law of Diminishing Returns. If you add more resources, such as labor, to fixed quantities of another resource, such as land, output eventually rises by smaller and smaller amounts. That applies—with a vengeance—to academic research. Teaching loads have fallen dramatically (although the Education Department, which probably can tell you how many Hispanic female anthropologists there are teaching in Arkansas, does not publish regular teaching-load statistics), ostensibly to allow more research. But the 50th paper on a topic seldom adds as much understanding as the first or second.

This has been characteristic of Medicine, as well as other academic subjects.

Emory University’s Mark Bauerlein once showed that scholarly papers on Shakespeare averaged about 1,000 a year—three a day. Who reads them? How much does a typical paper add at the margin to the insights that Shakespeare gave us 400 years ago?

That isn’t all he has shown.

The attitude touches the President’s favorite pastime. Tevi Troy reported in Commentary how much Obama enjoys television, particularly SportsCenter and the middlebrow series Homeland and Mad Men. The New York Times added Breaking Bad and The Wire in its article “Obama’s TV Picks: Anything Edgy, with Hints of Reality,” and while it warned of the foolishness of “psychoanalyzing” a president based on “the books he reads or the music he listens to or the television shows he watches,” the story mentions not a single book. One would expect Marxists, feminists, queer theorists, post-colonialists, anti-imperialists, and media theorists to chide Obama for his bourgeois, masculinist taste, but as far as I know they have remained silent.

Obama’s taste runs more to sports and rap music.

Nobody who has paid attention to the deterioration of the humanities should be surprised at this evolution from principled objection to the canon in the 1980s to informal disregard in the 2010s. The process has unfolded through a deceptive dialectic of hard radicalism and soft liberalism among the professorate. The first group denounced the standard literature course as racist, sexist, and imperialist, assailing Eurocentrism, Western Civ, Great Books, and the Canon as gross political formations. Their in-your-face accusations demanded vast multiculturalist adjustments in syllabi, the major, and humanities research, and they wore the “tenured radicals” label with pride. Seeing them exposed and ridiculed in the public sphere, however, another faculty contingent arose, moderate and broad-minded, who claimed that multiculturalist revisions weren’t hostile or negative at all. They marked an opening, an enrichment, so they said: Shakespeare and Alice Walker. These learned liberals objected merely to the hegemony of Dead White Males, not to literary-historical tradition and great art.

Now, the “science” of Economics follows.

2. Economics as ideology in camouflage. Economists who achieve fame for genuine intellectual insights, like Paul Krugman, sometimes then morph into ideologues—predominantly although not exclusively on the left. The leftish domination of American academia is partly explained by economics. Federal student-loan programs, state appropriations, special tax preferences and federal research-overhead funds have underwritten academic prosperity, even at so-called private schools. The leftish agenda today is one of big government; academics are rent-seekers who generally don’t bite the hand that feeds them. The problem is even worse in other “social sciences.”

Global Warming comes to mind when thinking of rent seekers.

3. A disconnect between economic reality and public policy. Three examples come to mind. First, the Keynesian orthodoxy of fiscal stimulus of the 1950s and 1960s, with its Phillips curves and the like, was shown to be spectacularly wrongheaded. The U.S. experience of the 1970s and the Japanese “lost decade” of the 1990s are two demonstrations. Second, centrally planned authoritarian states with no private property or free markets (e.g., the former Soviet Union or North Korea) have been shown to be monumentally inefficient and not permanently sustainable. Third, nations with some free-enterprise capitalism but with growing redistributionist welfare states start stagnating economically—Europe beginning after 1970, the U.S. after 2000. Yet many economists (including at the Federal Reserve) still champion Keynesian policies and welfare-state expansions such as ObamaCare.

One would think the “lost decade” of Japan, which seems to never end, might bring some humility to Keynesians.

4. The rise of the nonuniversity research centers. A reaction to the liberal ideological orientation and inefficiencies of colleges has spawned this phenomenon. When I was attending college around 1960, the Brookings Institution, National Bureau of Economic Research and the Hoover Institution were among relatively few major independent think tanks. Today there are many, especially ones funded on the right to provide intellectual diversity, including nationally or regionally oriented centers such as the American Enterprise Institute, Cato Institute, Heritage Foundation, Heartland Institute and the Independent Institute, as well as dozens of state-policy think tanks.

I agree this is largely the result of academic programs becoming irrelevant. When Marx rules academia, practical people begin to look elsewhere for solutions. Obama hired Alan Krueger, an economist who wrote a weak paper advocating higher minimum wages, as his Chair of Economic Advisors.

Although available research cannot precisely answer these questions, I am confident that a federal minimum wage that rises to around $12 an hour over the next five years or so would not have a meaningful negative effect on United States employment. One reason for this judgment is that around 140 research projects commissioned by Britain’s independent Low Pay Commission have found that the minimum wage “has led to higher than average wage increases for the lowest paid, with little evidence of adverse effects on employment or the economy.”

His analysis of minimum wage raises in the fast food industry has been disputed rather convincingly.

Back in 1994, Princeton economists David Card and Alan Krueger claimed that they’d looked at Garden State fast-food outlets in the wake of the state’s 1992 minimum-wage hike — and found that employment increased relative to similar restaurants in next-door Pennsylvania.

But six years later, the Card & Krueger study was debunked in the same economics journal that originally published it.

The Jersey study first gained notoriety when President Bill Clinton cited it in support of his proposal to increase the federal minimum wage in the mid-’90s. The economists’ work provided for a compelling story: Telephoning restaurants in New Jersey and Pennsylvania before and after Jersey hiked its minimum wage, they reported an increase in employment.

But other economists were skeptical. After all, just over a decade earlier, a seven-volume report from Congress’ Minimum Wage Study Commission had established conclusively that each 10 percent increase in the minimum wage reduced employment for young people by as much as 3 percent.

As it turned out, there was good reason to be skeptical. A team of researchers from the Employment Policies Institute (where I’m now research director) collected actual payroll data from 25 percent of the franchised restaurant locations that Card and Krueger had telephoned — and found that the hard info had little resemblance to what the economists (actually, students working for them) had gathered via phone interviews that used an ambiguous set of questions.

Well, it was good enough for government work.

5. A major cause of America’s economic malaise: the government’s war on work. My own research with Lowell Gallaway has stressed the importance of labor costs in explaining output and employment fluctuations. If the price of something rises, people buy less of it—including labor. Thus governmental interferences such as minimum-wage laws lower the quantity of labor demanded, while high taxes on labor reduces labor supply, as do public payments to people for not working.

One reason living standards in the U.S. have stagnated: There were 12.7 million fewer Americans working in January than there would have been with the 2000 employment-population ratio. Disability insurance claims have roughly tripled in the past generation

It goes on and on. Academia has become the rent seeker subsidiary of government and those seeking solutions must go elsewhere.

Something similar has happened to other academic pursuits like Psychology.

On January 27, 2011, from a stage in the middle of the San Antonio Convention Center, Jonathan Haidt addressed the participants of the annual meeting of the Society for Personality and Social Psychology. The topic was an ambitious one: a vision for social psychology in the year 2020. Haidt began by reviewing the field that he is best known for, moral psychology. Then he threw a curveball. He would, he told the gathering of about a thousand social-psychology professors, students, and post-docs, like some audience participation. By a show of hands, how would those present describe their political orientation? First came the liberals: a “sea of hands,” comprising about eighty per cent of the room, Haidt later recalled. Next, the centrists or moderates. Twenty hands. Next, the libertarians. Twelve hands. And last, the conservatives. Three hands.

And so it goes.