Stop Making Sense

August 31, 2011
Posted by Jay Livingston

Stephen Moore, in a Wall Street Journal editorial, says that he is “surprised how many students tell me economics is their least favorite subject.”  I’m surprised too, surprised that all these students are talking to Moore.  As far as I know, he has never held a teaching job.  Presumably, they are the students he meets in the WSJ editorial room or at Arthur Laffer’s firm, not exactly a random sample.  Whatever. The reason these many students dislike Econ, says Moore, is this:

Too often economic theories defy common sense.

It’s not just students.  In the title of the article and the closing line, Moore expands the anti-economics population:

Why Americans Hate Economics

For us sociologists, that’s strange, because we’re told that the trouble with sociology is that “it’s just common sense.” 

So students – and (let me be Moorishly grandiose here) Americans  – dislike economics because it defies common sense, and they dislike sociology because it confirms common sense.   Go figure.

What Moore means by “economics” – the kind that students and Americans hate – is Keynes.

the “invisible hand” of the free enterprise system, first explained in 1776 by Adam Smith, got tossed aside for the new “macroeconomics,” a witchcraft that began to flourish in the 1930s during the rise of Keynes.

Others have criticized Moore’s economics (see here and here for example).  It’s the common sense part that interests me.  For example, Moore ridicules an Obama spokesman’s defense of unemployment insurance  – that it pumps money into the economy, and people use the money to buy stuff they otherwise couldn’t.

But Moore says, “That's a perfect Keynesian answer, and also perfectly nonsensical.” 

I’m not sure why.  To me, it sounds like common sense.  To meet the increased demand, the suppliers buy more materials and hire more workers.  It’s all good for the economy. Wasn’t it George Bush who, when the economy got tough, encouraged people to go shopping?

I would think that for many people, it’s that invisible hand that defies common sense – and not just because it requires  belief in something that is invisible.  The basic idea of classical economics is this: if you set a bunch of greedy suppliers free to pursue their own selfish interests, you’ll wind up with greatest good for greatest number – lots of stuff at low prices.  It’s Gordon Gecko’s dictum “Greed is good,” and it may be true.  But it is not common sense.   

Free market economists (like Robin Hanson) also tell us that getting rid of immigration restrictions will similarly lead to good things.

We economists tend to expect open immigration to increase overall wealth and value (and liberty), and to reduce inequality. . . . Open those borders!

Again, It may be true, but it is not common sense.

Here is Moore again:

“All economic problems are about removing impediments to supply, not demand,” Arthur Laffer reminds us.

Since Moore quotes this favorably (he works for Laffer’s firm), he must believe that it’s common sense.  But when I think about, say, the economic problems in the housing market, my common sense tells me that the source of the problem is that people aren’t buying houses.  It does not tell me that the problem is builders being impeded from supplying more houses.* 

It all makes me wonder if common sense is a useful idea.  In these economics examples, common sense is not held in common.  What’s common sense to the Keynesians is not common sense to the supply siders. 

In either case, if economics were common sense, professors wouldn’t have to spend semesters teaching it.** Teaching common sense – that’s sociology.
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* I myself am trying to sell a condo in Pittsburgh.  I encountered no real impediments in supplying this condo to the market.  My problem is that I haven’t encountered any buyers.

** I would guess that when you add up the student semester hours, classical free-market economics courses far outnumber Keynesian courses.  So I don’t know why Moore seems to think that what’s turning students off is the Keynesian domination of the field