The Torah Speaks of Four Sons

Our broken economic debates have four of their own.

One of my favorite parts of the Passover Seder is the story of the Four Sons: one wise, one wicked, one simple, and one who does not know how to ask. These are archetypes, illustrating the different ways that people might engage with a religious tradition, and as our family’s Haggadah notes, their behaviors are all ones in which we engage at various points on our own lives. I found myself thinking about this Midrash over the weekend, as the angry tweets accumulated in response to my rather straightforward observation that “economics isn’t a science.”

Debates over the efficacy of economics as a discipline, and the role it should play in public policy, tend to bring forth defenders of the status quo who themselves fit four archetypes—call them the Simple Son, the Unwise Son, the Son Who Does Not Know What’s Going On, and John Podhoretz.

The Simple Son, what does he say?

The Simple Son has become so thoroughly indoctrinated in the tenets of market fundamentalism that he no longer seems aware that he is espousing a particular and highly contested ideology rather than a self-evident truth. Writers on the Wall Street Journal’s editorial board generally fall into this category. Their ahistorical pronouncements tend to be easily disproven by anyone familiar with the various Western intellectual traditions, the trajectory of American economic development, or basic empirical data.

But no matter, the pronouncements are not intended as subjects for debate, they are recitations for the faithful flock. Thus, they come unburdened by factual support, substantive analysis, or consideration of counterarguments. The fundamentalist does not defend the scripture, he expounds upon it.

One of my favorite recent examples came from Journal columnist Andy Kessler:

Free-market skeptic Mr. Cass recently tweeted, “Free trade, free markets, choose one.” How dumb. This thinking exposes corrupt biases and appetites for power. Manufacturing enabled by free trade helps developing countries move up the value chain and afford to educate their next generation. Better jobs and education—that’s freedom. Without free markets, you don’t get free people.

Notice that, for all the uses of the word “free” in this paragraph, there’s no attempt to address the question of whether free trade (with an authoritarian regime like China) promotes or undermines free markets. Rather, free trade leads to a more highly educated population, which is freedom, and because people aren’t free without free markets, if free trade leads to freedom ergo there must also be free markets. I think? If this is meant to be an argument, it’s rather insulting to the intelligence of the Journal’s readers. But as a homily, it has some zing.

Another outstanding example is Matthew Hennessey’s recent effort, which triggered this whole economics-as-a-science debate. In Hennessey’s view, “the market just is.” Concern that “markets exploit the weak and release corrosive social forces has always been popular on the left,” not with True Conservatives. Markets “are governed by the laws of economics the way the physical world is governed by the laws of gravity.”

I wrote about the problems with all this last week, in “Is Economics Like Gravity?” which you should check out if you missed it. But for purposes of this discussion, the important thing to note is that such challenging of the Simple Son tends to bring forth the ire of the Unwise Son.

The Unwise Son, what does he say?

The Unwise Son believes himself quite wise, and is certain that he can defend the fundamentalist precepts of the Simple Son with arguments and data. Surely that support must exist, the Simple Son just didn’t get around to mentioning it. He leaps into the arena, armed with a sword he discovers only too late is made of paper maché.

This week’s example comes from Noah Smith, who took umbrage at “Is Economics Like Gravity?” and so wrote his own piece titled, “The Anti-Economists Have Overreached.” I’m not sure what an anti-economist is, nor is Smith, I don’t think, seeing as he never uses the term again. But apparently he means me, and he is hungry for the fray.

The puzzling thing is that he seems mostly to agree with me. Adjudicating the debate over whether markets are a tool, he says “markets are, quite literally, a tool.” He continues, “A pendulum clock works by harnessing the force of gravity. A market works by harnessing the forces that drive people to buy and sell things. Vance is right that markets should be shaped to serve our desired ends, rather than being an end in and of themselves.” I honestly don’t know how that’s different from my observation that, “The physical world is governed by the laws of gravity. But it is not governed only by the laws of gravity. ... To understand and operate in the physical world—and to ensure that its outcomes promote human flourishing—requires familiarity with many other laws too, and an enthusiasm for engineered interventions that channel the various forces productively.”

Nevertheless, he is very angry that I would suggest, “Economics is nothing like physics. Its principles are not generated from repeatable experiments, nor do they hold consistently across space and time.” Apparently he read several other Understanding America posts that did not discuss particular experimental results in economics, and on that basis concluded:

If Cass is aware of any economic models other than comparative advantage and the basic Econ 101 supply-and-demand model, he plays his cards close to his chest. He doesn’t mention gravity models of trade, which some economists use to try to predict the effects of tariffs (with some success). Nor does he mention Paul Krugman’s New Trade Theory, which implies that countries can sometimes benefit from targeted tariffs against other countries’ national champions (but which wouldn’t recommend the kind of broad, sweeping tariffs Trump has tried to implement).

Neither of those theories is outside the mainstream; both were invented by economists who went on to win the Nobel. Why doesn’t Oren Cass mention them, or grapple with their implications, or use their existence to inform his criticisms of the field of economics? My guess — and this is only a guess — is that Cass is completely unaware that these theories exist, that he has no interest in discovering whether such theories exist, that if he did discover them he would have no idea how to evaluate them, and that even if he did know how to evaluate them he would have no interest in doing so.

This is unwise, and a peculiar methodology for arriving at so harsh a conclusion. Understanding America is a Substack about… understanding America. It’s not where I discuss the details of economic models. I mean, I just reviewed several of Smith’s own recent posts and can’t find him condemning pedophilia a single time, but I’m at least willing to reserve judgment.

You’ll be unsurprised, dear reader, to know that Smith has fired wide of his target. I discuss Krugman’s New Trade Theory here, for instance. And I frequently cite Hausman and Ricardo’s work on the economics of complexity. Here's what I wrote in the New York Times a few months ago about several trade models:

Committed to their discredited framework, economists continue to rely on the models built on it. The Peterson Institute, for instance, uses a model known as G-Cubed to predict that the United States would suffer higher prices, lower incomes and reduced manufacturing output if it withdrew the permanent normal trade relations granted to China in 2000. Economists have been using that model since the 1990s to produce studies guaranteeing that free trade will always work out well for all sides. The Budget Lab at Yale has produced its own negative assessments of Mr. Trump’s proposals using the Global Trade Analysis Project model, which one recent Federal Reserve study warned “had essentially zero predictive accuracy” in its efforts at forecasting results from previous trade deals.

Here’s a good discussion of a bad tax model. Here’s my contribution to an in-depth debate on various economic analyses of immigration models, which I’m pretty sure Smith is aware of, because it was with him. Here’s a paper on the methodology behind various measures of inflation. Here’s an in-depth critique of cost-benefit analyses with various concrete examples. Here’s a long discussion I did recently with MIT’s David Autor on his research on the China Shock. Here’s a long discussion with the University of Chicago’s Gary Kaplan on the evidence of private equity’s impact. Here’s my discussion at a feature panel of the American Economic Association’s annual meeting, touching on the shortcomings of general equilibrium models.

I could go on. But I shouldn’t have to, because the thing is, Smith’s attack is purely ad hominem. Whether I’m in fact familiar with this or that model doesn’t tell you anything about whether I’m right or wrong. If I’m wrong, and economics is like physics, one would think Smith could wisely deploy his superior knowledge of these models to make his point. But he doesn’t, because he can’t, because they do not support his point, because economics is nothing like physics. Indeed, as he writes, “studying mass human behavior is different than studying the motions of the planets, in a number of important ways.” No kidding.

Smith laments that “the intellectuals who loftily declare that economics ‘isn’t a science’ don’t seem like they’ve bothered to think very hard about what those differences are, or when and why they matter,” and he “suspect[s] that very few of the econ critics have thought seriously about these questions, and that far too few have even heard of natural experiments.” An inconvenient challenge to that rather uncharitable theory is that many of the preeminent economists of the past century have presumably been familiar with their discipline, thought about it quite hard, and reached the same conclusion as mine.

John Maynard Keynes: “Economics is essentially a moral science and not a natural science. That is to say, it employs introspection and judgments of value.”

Friedrich Hayek: “Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones.”

Paul Samuelson: “Economics is not an exact science. It’s a combination of an art and elements of science. And that’s almost the first and last lesson to be learned about economics.”

Robert Shiller: “I think that the economics profession suffers from physics-envy. I really do. We all wish we could be Einstein. It’s too strong a model, we can’t all develop the theory of relativity. The world of people isn’t like that. … Economists will see empirical regularities in the data and become famous for having named some empirical regularity and then shortly after that it stops happening.”

Ha-Joon Chang: “Recognizing that the boundaries of the market are ambiguous and cannot be determined in an objective way lets us realize that economics is not a science like physics or chemistry, but a political exercise.”

If I were to conclude this section in Smith’s style—indeed, his exact words—I might say, “My guess — and this is only a guess — is that Smith is completely unaware of all this, that he has no interest in discovering it, that if he did discover it he would have no idea how to evaluate it, and that even if he did know how to evaluate it he would have no interest in doing so. A sophisticated understanding of this debate is not useful to Noah Smith’s project, which is to denounce intellectual rivals on Substack.” But that, too, would be unwise.

The Son Who Does Not Know What’s Going On, what does he say?

An interesting feature of the modern public square is the enthusiasm with which people unfamiliar with the details of some debate will nevertheless pile into it on the basis of affiliation rather than reason. The Twitter pile-on is seen as an end unto itself and tends to reflect which side has the most people least engaged, rather than anything about the merits of the underlying arguments.

Thus for every Noah Smith we tend to find several Richard Hananias, eager to repeat claims uncritically and use them to drive home purported points that don’t actually make any sense. According to Hanania:

Noah Smith is absolutely brutal on Oren Cass: “Cass does not name or criticize any specific economic theories in this post. He cites zero papers and names zero researchers.” Right-wing economic populism is nothing but a bunch of vapid slogans that don’t have any real engagement with the world of ideas. Oren Cass doesn’t even seem to know about theories that would help him make arguments similar to his that have been developed by economists.

Here, Hanania seems not to know what my post was about or whether citing papers and naming researchers would have been relevant to its arguments. He certainly has no idea whether I am familiar with any particular theory or what I might have cited previously. He dislikes right-wing economic populism and thus will boost claims that reinforce his dislike.

John Podhoretz, what does he say?

“[Hayek] said this. You’re right. Now why don’t you figure out why what he was saying invalidates your grifter project. Or aren’t you smart enough.”

You can see the devolution, as the fundamentalist claim gives way to the futile effort at its defense, which gives way to the unthinking amplification of bad ideas, which ends in bitter grousing.

It’s ideological bankruptcy in action, with different people responding in different ways to the same underlying problem that their project has lost contact with reality.

If I were the market, I would be filing a claim of ineffective assistance of counsel. The case for the market isn’t that it “just is,” or that supply and demand are “undefeated,” in Hennessey’s words. The case for economics isn’t that it’s a science because someone did an experiment in auction theory. Hayek can be right that markets are complex systems about which people have incomplete knowledge and it can also be the case that policies to constrain market forces generate positive outcomes.

The new conservatives are articulating a better case for markets and offering a more effective role for economics than the preachers of a singularly unappealing and empirically unsupportable faith. The case that markets can work is far more believable than the promise that they will, and provides a much stronger foundation atop which to rebuild American capitalism.

- Oren