Seattle proves economics is not physics

The ongoing fight about min wage in Seattle magnifies some of the things wrong with mainstream economics. In 2014 the city council voted to phase in a $15 wage over the next few years and in 2015 increased the wage floor from $11 to $13 per hour. Recently, the University of Washington conducted a study that showed the increase caused low-wage workers’ annual pay to go down and overall low-wage jobs to also shrink.

Keep in mind that mainstream economists cling to their gods, guns and economic models because, as they insist, math makes economics a science like physics. Yet with all of the veneration of the math and statistics, I have seen no econometric study such as this one change anyone’s mind or change mainstream economics in my 40 years of watching the game. The usual suspects in economics greeted the study in the same old way they have met with similar studies for the past half century: the right (free market) celebrated and the left (socialists) poo-pooed it.

No one sees such behavior in the truly math oriented sciences such as physics. There aren’t five schools of physics that dispute gravity or the speed of light as there are five different schools of macroeconomics. But why aren’t the econometric analyses of economic data more convincing? The problem lies with the subject matter. Physics is child’s play compared to economics because gravity and light and electrons always act the same way under similar circumstances. Humans, the subject of economics, don’t. And the number of relevant variables in a physics problem is small compared to those in economics, not to mention the complex interactions.

Mamas don’t let your babies turn out to be economists

The credibility of mainstream economics took a punishing punch from the Great Recession that hit in 2008. It should have been a fatal blow, but the profession had made itself nearly impervious to the effects of empirical data. The field took so much criticism that Harvard economist Dani Rodrik decided to write a book to defend it - Economic Rules: the rights and wrongs of the dismal science.

This is the book readers should give to any poor soul considering a degree in mainstream economics. Hopefully it will discourage them. It’s easy to read. Rodrik is a much better writer than most economists. And it’s not too long, about 200 pages.