Those Right-Wing Economists

17 May 2006 at 9:34 am 16 comments

| Peter Klein |

Several posts below allude to arguments by Jeffrey Pfeffer, Sumantra Ghoshal, and others that economic models and concepts (agency problems, transaction costs, opportunism, and the like) are taking management theory in the wrong direction and are harmful to management practice. A subtext of these arguments is that economists are ideologically biased toward the free market, against community and informal social ties, and toward cynical, atomistic, and even “reactionary” views of human nature. (Even if we’re not actually dismal.)

Surveys of economists’ political preferences reveal a more complex picture, however. A forthcoming article in Public Choice by Daniel Klein and Charlotta Stern analyzes a 2003 American Economic Association member survey:

The responses show that most economists are supporters of safety regulations, gun control, redistribution, public schooling, and anti-discrimination laws. They are evenly mixed on personal choice issues, military action, and the minimum wage. Most economists oppose tighter immigration controls, government ownership of enterprise and tariffs. In voting, the Democratic:Republican ratio is 2.5:1.

A Democratic-to-Republican ratio of only 2.5 to 1 may seem shockingly low to our colleagues in sociology or cultural studies, but hardly seems to indicate pervasive “right-wing” bias.

Entry filed under: - Klein -, Classical Liberalism, Management Theory, Myths and Realities. Tags: .

Myths and Fallacies in Strategic Management – Part II Capabilities as Compensation

16 Comments Add your own

  • 1. Jung-Chin Shen  |  17 May 2006 at 2:05 pm

    I guess one question here is whether or not political tendency is endogenous. Experimental results show that students whose major is economics are more likely to be self-interested and less cooperative. Is it an influence from economics education, or a result of self-selection process given the professional requirements and atmosphere? Also, political tendency is a produce of several factors, such as family background, socio-economic status, working environment and so on. How important is a person’s economic belief in determining his or her political tendency?

  • 2. Peter Klein  |  17 May 2006 at 2:35 pm

    These are great questions. My sense, based on nothing more than anecdotal empiricism, is that the endogeneity is huge, not only for explaining the distribution of political beliefs among academic disciplines, but also the differences in political beliefs between the typical academic and the typical "normal" person. (Of course this was one of Hayek's main points in "The Intellectuals and Socialism."

  • 3. Jung-Chin Shen  |  18 May 2006 at 12:43 am

    If so, how can we account for endogenous political belief change? Or put it in a low-Fog-index way, if a person’s political belief is largely a process of self-selection, how do we explain the person’s change in political beliefs? I remember that James Buchanan once talked about his political belief change from very left (student) to very right (professional economist). This process is very familiar to many people from developing countries who have experienced political regime change from authoritarian to democracy. As far as I know, thousands of thousands university students from South Korea and Taiwan had experienced the change in early 90s. So when James Coleman uses the case of South Korean student movement to illustrate the concept of social capital, it makes a lot of sense to me immediately. Unlike communist countries, the change in the two countries was political but not economic. I had deeply involved in Taiwan student movement during that period, and what we commonly read were Foucault, Marx, Marcuse and so on. After I join the PhD programme, the only time I heard Foucault was at INSEAD-HEC joint PhD student workshop. Although I have the opportunity to observe many real cases on the issue, including my personal experience, I am reluctant to make any conclusion at this moment. But my friends and I who share similar experiences all question if methodological individualism can fully explain the whole change here. Or we need something similar to Williamson’s economics of atmosphere? lol.

  • 4. Peter Klein  |  18 May 2006 at 8:40 am

    Jung-Chin, what a great question. I don’t know the answer. Hayek himself says he started out as a mild Fabian socialist, and was converted to classical liberalism from reading Mises’s Socialism in 1922. Such conversions appear pretty rare, however.

    Perhaps ideological change is simply exogenous, explanans rather than explanandum. How’s that for ducking the question? :-)

  • 5. Esbern David Pontoppidan  |  18 May 2006 at 4:15 pm

    Hi,

    I think this is a very interesting discussion, and although I’m somewhat reluctant to involve myself too much in it, because I’m still just a bachelor student and have no special expertise in this area, I think Jung-Chin’s question is interesting.

    “If a person’s political belief is largely a process of self-selection, how do we explain the person’s change in political beliefs?”.

    I deduct from your posts that you are a methodological individualist, which I admit I can see several good reasons to be. Still, I feel that there is sometimes a difference in the methodological individualism taught and understood within the economic sciences, and the one used in sociology, although I may be wrong about this. However, there is a risk that we may be talking past each other when discussing the relevant question you asked, which is inappropriate.

    I sometimes see the economic understanding of methodological individualism and invidual action as opposed to this sociological way of including the individual actor in the question of social order. It can indeed be quite astounding to see the startingpoints some economists base theories on, taking for granted a world consisting of completely free individuals with no strings attached. Something I find is both a misuse of the term methodological individualism as well as a somewhat naïve assumption (without even touching on the area of rational behaviour…)

    I personally don’t see methodological individualism as standing in contrast to the idea of being influenced or controlled by exogenic forces, whether you call that biopower or discourse as Foucault would, or zeitgeist, paradigms etc. Where I do see a distinction between e.g. Foucault and methodological individualism is in the societal view and the point of origin.

    To Foucault the individual does not exist. In fact he writes this specifically in an article – “L’individue n’existe pas”. I’ll refrain from getting into Foucault here, but merely point out that without individuals, there can be no point of origin for actions in an individual actor.

    As you know Max Weber would disagree tremendously with Foucaults perception of the world, being the father of the sociological school of thought entitled methodological individualism. As described in “Die Protestantische Etik und der Geist des Kapitalismus”, capitalism is the construct of specific individual intended and unintended actions and behavioural patterns.

    However this does not, in my reading of Weber, negate exogenic and controlling structures, such as the “cage of rationality”. Just because something originates from individual actions does not mean that it cannot have a controlling power over others or gain a momentum of its own (e.g. the state).
    This can be termed a discourse just as well as an exogenic force, controlling individual actions to some extent (sometimes to an almost full extent, other times in a non-existent degree) or controlling the latitude within which individuals can form ideas and act.

    In many ways Jung-Chi’s question can also be seen as the question of the chicken or the egg. Do people with a certain political attitude naturally become economists, or are people who study economy so heavily influenced by environment that their political stance changes. My sociological experience would point to the latter, without wavering, and still maintaining that a methodological individualism can be practised within that understanding.

    And yes – the 2.5 to 1 ratio is certainly staggeringly low. Even more so for a right-wing sociologist ;-)

  • 6. Peter Klein  |  18 May 2006 at 4:28 pm

    Esbern, you are attaching a greater ontological significance to methodological individualism than I think is warranted. For most economists MI is simply a principle of explanation, an instrument that is metaphysically (not to mention ethically and politically) neutral. It assumes nothing about the extent to which people's preferences actually "are" influenced by their environment, embedded in particular social structures, or whatever. You have to start somewhere. If one rejects MI, where does the analysis begin — with "controlling powers"? How are they in turn explained?

    More important, how did a comment containing the word "Foucault" get past our spam filter? Nicolai will be very upset! :-)

  • 7. Nicolai Foss  |  18 May 2006 at 4:47 pm

    Esbern,
    I have to disagree with my co-blogger here. I think that MI is pretty meaningless if it is not ultimately grounded in ontological individualism.
    One can build very nice formal theory, beginning from structures (perhaps á la Harrison White). Thus, the need to “start somewhere” is not, and would perhaps even say, emphatically not, the reason why social scientists endorse (and should endorse) MI.

  • 8. Peter Klein  |  18 May 2006 at 5:10 pm

    Actually, I quite agree with Nicolai. I did not mean that the need for a "starting point" is itself the main justification for MI. I was merely trying to rebut the claim that the existence of "controlling powers" or other social structures invalidates the use of MI, which I took to be Esbern's concern. My apologies for clumsy phrasing.

  • 9. Esbern David Pontoppidan  |  19 May 2006 at 5:55 am

    Dear Peter and Nicolai

    I’m glad that I am supposedly wrong in my concern of the general use of MI within the economic sciences.

    This should also, I think, make it easier to give an answer to Jung-Chins question:
    “If a person’s political belief is largely a process of self-selection, how do we explain the person’s change in political beliefs?”, which I tried to do in my post.

  • 10. Bart Doorneweert  |  21 May 2006 at 2:14 pm

    I came across a passage in Knight’s Ethics of Competition compilation which might “add” to the discussion. Knight quotes Fichte: “Was fur eine Philosophie mann wahlt hangt davon ab was fur ein Mensch mann ist”. But as Knight writes, “like most aphorisms this may be turned around without ceasing to be equally true”, i.e. the person one is depends on the philosphy one chooses.
    No point made really, I know, but it shows what I think is the implicit need for taking up more issues of philosophy in economics

  • 11. Jung-Chin Shen  |  22 May 2006 at 8:53 pm

    Hi, Esbern,

    I find an extremely interesting paper by Andrei Shleifer, which provides some clues for the question. Hope you find the paper is useful.

  • 12. Jung-Chin Shen  |  22 May 2006 at 8:55 pm

    oops. Sorry, the link of the paper is here: http://post.economics.harvard.edu/faculty/shleifer/papers/market_aea.pdf

  • 13. Esbern David Pontoppidan  |  28 May 2006 at 6:22 pm

    Dear Jung-Chin

    Thank you very much! My exams are almost over so I’ll be sure to read it when I have a spare moment :-D

    All the best

    Esbern David Pontoppidan

  • 14. catallaxy » How economists vote  |  28 May 2006 at 10:14 pm

    [...] Some recent empirical evidence on economists’ political preferences which once again, deals a blow to the myth that they are stereotypical right-wingers (link via Peter Klein: The responses show that most economists are supporters of safety regulations, gun control, redistribution, public schooling, and anti-discrimination laws. They are evenly mixed on personal choice issues, military action, and the minimum wage. Most economists oppose tighter immigration controls, government ownership of enterprise and tariffs. In voting, the Democratic:Republican ratio is 2.5:1. [...]

  • [...] Addendum: Another article in the same issue of the Chronicle asks — as we've discussed here, here, and here — if economics (agency theory, in particular) is responsible for Enron. Rakesh Khurana, Herbert Gintis, and Lynn Stout, while not exactly saying Yes, seem sympathetic to the idea. Michael Jensen, not surprisingly, demurs. [...]

  • 16. Constantine  |  2 November 2006 at 4:35 am

    Great post, I see racial self-segregation all the time, and I want to investigate the issue more thoroughly.
    I always find something new and interesting every time I come around here – thanks.

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