Here is the last paragraph of what I posted earlier, plus some text that
goes into more detail about the subject. Any suggestions would be
appreciated.
Most economists are dismissive of any theory not built on what they
consider to be solid micro-foundations -- economists' jargon for this
patently unrealistic model. Mainstream economists feel threatened by the
suggestion that work, workers, or working conditions could be a legitimate
subject of economic inquiry. As a result, any challenges to their
theoretical position get treated to a hostile reception.
In one famous case, in 1944 Richard Lester published an article questioning
whether labor markets actually operated in the manner that mainstream
economics suggested. Lester had extensive experience in industry after
having recently served as chair of the Southern Textile Commission of the
National War Labor Board. Using government data, as well as surveys of
industry leaders, Lester found evidence at odds with the assumptions of
mainstream economic theory (Lester 1944). For example, his results
suggested that an increase in the minimum wage would have little or no
effect on employment, a conclusion that infuriated major defenders of the
faith, led by George Stigler, later a leader of the Chicago school of
economics and a Nobel laureate (see Prasch 2007).
Exactly a half century later, using an entirely different approach, Alan
Krueger of Princeton and David Card of the University of California,
Berkeley walked back into the same hornet's nest (Card and Krueger 1994).
As might be expected, they too met with hostile criticism from fellow
economists, some sponsored by the fast food industry. Card and Krueger
were both distinguished economists. In fact, Card had won the John Bates
Clark award from the American Economic Association given to the outstanding
economist under the age of 40. In the face of the controversy, Card
eventually dropped this line of research because of the personal costs of
challenging the discipline. He explained:
I've subsequently stayed away from the minimum wage
literature for a number of reasons. First, it cost me a lot of friends.
People that I had known for many years, for instance, some of the ones I
met at my first job at the University of Chicago, became very angry or
disappointed. They thought that in publishing our work we were being
traitors to the cause of economics as a whole. [Clement 2006]
Lester and Card did not fail to convince their fellow economists because of
errors in their work. Economists either ignored their results or, worse
yet, rejected them out of hand because they conflicted with economists
cherished beliefs. As Stigler's colleague, Milton Friedman, once wrote:
"Nothing is harder than for men to face facts that threaten to undermine
strongly held beliefs, to change views arrived at over a long period. And
there are no such things as unambiguous facts" (Friedman 1968, p. 14; cited
in Diesing 1985, p. 61).
Yet, Chicago economics is famous for rejecting empirical evidence. Dierdre
McCloskey, a former Chicago faculty member, recounts how people who used
data that called the theory into question would "be met by choruses of "I
can't believe it" or "It doesn't make sense." Milton Friedman's own Money
Workshop at Chicago in the late 1960s and the early 1970s was a case in
point" (McCloskey 1985, p. 140).
Melvin Reder, another Chicago faculty member, offered further insight in
the way that Chicago refuses to give ground in the face of evidence that
calls the micro-foundations into question:
Chicago economists tend strongly to appraise their own
research and that of others by a standard that requires [inter alia] that
the findings of empirical research be consistent with the implications of
standard price theory .... The major objective is to convert non
economists to their way of thinking .... However imaginative, answers that
violate any maintained hypothesis of the paradigm, are penalized as
evincing failure to absorb training. [Reder 1982, pp. 13, 18, and 19]
Economists regard this stubborn resistance to be good science.
Predictably, the troubling questions raised by Lester and Card had no
effect. Economists' beloved micro-foundations and their faith in market
efficiency remained invulnerable -- so much so that economists today rarely
even bother to publish research about the core of economic theory. In this
environment, economists can continue to use their transaction-based theory
without the inconvenience of dealing with work, workers, or working
conditions. But by removing work, workers, and working conditions from
their theory, economists blind themselves to the kind of inefficiencies
that this book shows, especially in Chapter 9.
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu
michaelperelman.wordpress.com
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