It is beginning to feel abusive, so I promise to stop.  Next post on this will be positive – some sort of attempt to explain wage differentials, perhaps.

Adam Smith Institute has a useful, unsentimental discussion of the nef paper.

The report neglects the true reason for differences in wages: the need for certain skills. Almost everybody could go around a hospital with a bottle of antiseptic, but it is unlikely that many of us would be able to understand opaque tax laws that highly-paid accountants have to. To have jobs priced according to their social (read ‘political’) value and not the scarcity of required skills would result in a chronic misallocation of labour.

Tom Papworth in fine form.

“New Economics Foundation” is an oxymoron. Economics is an a priori science. One might as well talk about a new mathematics. The witch-doctors at the NEF think that the rules of economics are man-made rather than natural, and that we can change those rules at will.

Edmund Conway (whose book I have just bought and may have a go at reviewing) is responsible for a lot of the traffic to this site this week.   He is relatively generous:

Unfortunately, judging by the drubbing the research has received from various experts, including Giles Wilkes and Chris Dillow, NEF employed some rather dubious assumptions in order to get to their final figures. I say unfortunately because the idea behind their paper is an extremely important one. The biggest problem we are facing at the moment is working out just how much to restrain bankers in the future

I still think generous, because, as Chris’s piece seems to imply, working out what anyone is worth is impossible a priori, IMHO.  And the horribly illiberal consequences of some central agency working out “you are worth £X” are too nasty to conemplate.  nef have already demonstrated how biased it can be – using one technique for one set of people, another for another.

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10 thoughts on “More nef bashing?

  1. Well, it is and it isn’t. Ideas like “if the demand curve lifts up then price and quantity will rise” are not settled by experience. Ideas like “the demand for nursery workers fell last year” can be.

  2. I’m not sure what an “a priori science” means (it might even be an oxymoron)… economics does make some positive (empirical) predictions, and isn’t really worth much as a purely abstract pursuit. Doesn’t the word ‘science’ have empirical connotations? Although I take your point that lots of economics is like maths or analytical philosophy. I’ve no objection to wanting a “new economics” – plenty of good economists do (say, Herb Gintis, Axel Leijonhufvud, Philip Aghion) – even the NEF idea of thinking harder about social welfare and less about output efficiency might be a nice direction for economics to move in (lots of hard analytical philosophy type thinking to do there).

    The problem is that NEF are so spectacularly inept. As far as I’m concerned keep bashing them until The Guardian and others start to realise they are about as credible as … um, I need an example of something lacking credibility.

  3. you are right, of course, that there’s no such thing as an a prioir calculation of value – a society of 99 nurses and one chef is going to place different values of those jobs than one of 99 chefs and one nurse.

    amazingly, one of the authors of that report has an Msc in economics – you’d have though she’d have remembered a few things about supply, utility, consumer surplus … and price.

  4. What annoys me is the intrinsic arrogance of going ‘beyond’ economics, which is a difficult subject that has tendeed to have thought about many of the topics its detractors claim to have spotted. If Nef first showed that they could do the proper, even-handed economics, then they could move on. But if they can’t even get past basic mistakes like double-counting, they have no right to claim to be beyond anything, except help.

  5. I found your original post on the nef report really helpful – especially as a non-economist. The headline claim about bankers’ worth was clearly tendentious when you point out, as you did, that they didn’t take a longer-term view of the value of the City to the UK. And even I found the executive summary of the report felt pretty short on details and long on rhetoric.

    Still I maintain that economic principles cannot be a priori, even with regard to the kind of ideas you suggest. It is always possible to say, ceteris paribus, that an increase in x will lead to an increase in y. But in economic affairs all else is never equal. I’d argue the alternative view is a kind of fetishism in the Marxian sense.

    But as I say that doesn’t affect your analysis of the nef report…

  6. TO be fair to myself, as I always am, it was Tom Papworth who first mentioned the a priori point. I actually find nef’s report is TOO a priori itself, because it does not ask what would happen if you followed through on what their report recommends. Would paying nursery workers and hospital cleaners (and bankers) £20k each increase the total economic output of the UK? hmmmm

  7. ““New Economics Foundation” is an oxymoron. Economics is an a priori science. One might as well talk about a new mathematics. The witch-doctors at the NEF think that the rules of economics are man-made rather than natural, and that we can change those rules at will.”

    Ditto a lot of what Luis Enrique said. (Though Luis: analytic philosophy is certainly not an a priori science. OK, some weird logicians want it to be. But they just end up doing bad philosophy).

    How can economics be “an priori science” when it deals with human agents who, even when postulated as having and acting upon rational preferences (which, personally, I think is dubious, but…) are not held to be rational automata “all the way down” and hence can’t be predicted, guided and quantified from the abstract comfort of an armchair. Papworth sounds like he’s spouting pap.

    Furthermore, his analogy with mathematics is fairly idiotic. Highly able and ground-breaking mathematicians do discover or pioneer “new” forms of mathematics. That mathematics is a priori isn’t really relevant to this fact (perhaps because Kant may have been right to postulate mathematics as “synthetic a priori”, i.e. dictated by the rules of logic but knowable only via experience nonetheless).

  8. Sure, highly able mathmos find new ways of doing it. But they learn how to count first.

    You learn about real numbers with blocks, before negative numbers, and then imaginery numbers like the square root of minus 1. nef seem to have vaulted all the way to something beyond the last stage. It’s like they are building a space rocket to ride through the 6th dimension, and have not yet worked out how to weld steel.

  9. “Whatever the de-merits of the nef paper, economics is not an “a priori science”!”

    Speaking as a post-grad oxbridge economist, Hear Hear!

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