Refutation of Dogmas by Empirical Economics

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Much of the economics recited by libertarians is Derp, but many older economics ideas have had a long evidence-free existence that is now being clearly refuted by modern empirical economics methods.


Assuming Theory Applies To A Real World Example (9 links)
Without knowing the specifics of the relevant institutions, you cannot assume a particular economic model will make valid predictions. The commonest example of this fallacy is assuming a free market model.
Discredited ideas [More...]
Libertarians have at one time or another adopted every erroneous view to avoid Keynsianism: Austrianism, Structuralism, Treasury View and Monetarism (Milton Friedman). All four have been refuted by history.
Does Money Matter in the Long Run? Effects of School Spending on Educational Attainment [More...]
"... this paper provides important evidence that increases in [primary] school spending improve students’ long-run outcomes that are of ultimate concern to policymakers." Why the rich use expensive private schools instead of underfunded public schools.
Economic Ideas You Should Forget (book) (1 link)
By discussing problematic theoretical assumptions and drawing on the latest empirical research, 71 authors question specific hypotheses and reject major economic ideas from the “Coase Theorem” to “Say’s Law” and “Bayesianism.”
Everything We Knew About Sweatshops Was Wrong [More...]
"People who worked in agriculture or market selling earned about as much money as they could have at the factory, often with fewer hours and better conditions. We were amazed: By the end of a year only a third of the people who had landed an industrial job were still employed in the industrial sector at all."
Homo economicus (10 links)
AKA Economic Man. The idea that humans are rational, economic maximizers. A common, simplifying assumption in most economic models, also known as economic rationality. It is also commonly agreed that this assumption is false. Behavioral studies with the Ultimatum Game are good evidence that it is false.
Individual Choice (1 link)
Individual choice is a misleading concept: individuals do not control the choices available and are heavily influenced by advertising, propaganda, and other irrational factors. It also focuses attention away from alternatives, such as social choice.
Minimum Wage (16 links)
Contrary to Economics 101 dogmas, minimum wage law has no harmful effects on employment according to many real-world studies. And definitely not the harmful effects long claimed by its opponents. Minimum wage does effectively reduce poverty.
Optimal Solutions (3 links)
There are no optimal solutions for real-world economic problems. There are only second-best (or worse) solutions because the requirements for optimality (in markets or government) can never be met in the real world. Sometimes markets are second best and sometimes government is second best.
Privatization (32 links)
There is an enormous history of privatization which shows that while it is sometimes beneficial, often it does not give the results its proponents claim. Privatization is often a form of crony capitalism, and often results in a different and less desirable product.
Supply-Side Economics (8 links)
A failed Reagan-era crank theory used to cut taxes and services. It promised a boom in productivity and never produced one. Instead, it created an ever-increasing concentration of wealth in the hands of the rich. Featuring the Laffer Curve. Also called voodoo economics. Considered a gross failure.
Taxes And Growth (15 links)
Low taxes do not produce more growth, though democracy does. Successful reduction of poverty by tax-funded programs does not reduce growth either.


[...] lacking the experimental method, economists are not strictly enough compelled to reduce metaphysical concepts to falsifiable terms and cannot compel each other to agree as to what has been falsified. So economics limps along with one foot in untested hypotheses and the other in untestable slogans.
Joan Robinson, "Economic Philosophy" , 1962, pp. 26-28.
Chile's neoliberal experiment eventually produced the worst economic crisis in all of Latin America.
Dani Rodrik, "Rescuing Economics from Neoliberalism"
Critics often point out that this emphasis on economics debases and sacrifices other important values such as equality, social inclusion, democratic deliberation, and justice. Those political and social objectives obviously matter enormously, and in some contexts they matter the most. They cannot always, or even often, be achieved by means of technocratic economic policies; politics must play a central role.
Dani Rodrik, "Rescuing Economics from Neoliberalism"
A journalist calls an economics professor for his view on whether free trade is a good idea. The professor responds enthusiastically in the affirmative. The journalist then goes undercover as a student in the professor's advanced graduate seminar on international trade. He poses the same question: Is free trade good? This time the professor is stymied. "What do you mean by 'good?'" he responds. "And good for whom?" The professor then launches into an extensive exegesis that will ultimately culminate in a heavily hedged statement: "So if the long list of conditions I have just described are satisfied, and assuming we can tax the beneficiaries to compensate the losers, freer trade has the potential to increase everyone's well being." If he is in an expansive mood, the professor might add that the effect of free trade on an economy's long-term growth rate is not clear either and would depend on an altogether different set of requirements.
Dani Rodrik, "Rescuing Economics from Neoliberalism"