BUSINESS GOVERNMENT RELATION
  RHETORIC OF ECONOMICS

This course will assist students in converting economics into a practical tool for policy discussion and design. Economics is usually learned in a sterile environment, in which the complexities of the political and economic world are absent. Many students have great difficulty in translating the academic models and theories of economics into tools which bridge the academic-practical gulf. To achieve that end, it is important to understand what economists do, and to distinguish that from what they claim that they do.

Economists often complain that they are not as influential in policymaking as they should be. Here are some economists' views on why that is.

 Values and Economics— Is economics a value-free science? The answer appears to be that it is not, but that its value systems are well hidden.

 Mathematics as Philosophy: The new classical school and the new Keynesian response—This section considers a particular debate to reveal the political philosophies which underlie the mathematics of economic theory. Methodology determines outcomes of research programs. In economics, as in other fields, there has been a long‑standing debate on what economists do, and what they should do.

 The Methodology of Economics—How should we judge good models? An essay by Milton Friedman argued that economic models should not be judged by the realism of their assumptions, but by the accuracy of their predictions. Paul Samuelson, among others, have argued that Friedman's suggestions defy the

basic rules of logic. What differentiates a good model from a bad one? Is it even the case that the economic approach is scientific; and what are the alternatives?

 Econometric Evidence: Taking the Con Out of Econometrics—Statistical research is widely viewed as scientific, objective and reliable. These readings establish just how wrong that view is.

 The Rhetoric of Economics—So how do economists make arguments? This section discusses the role of rhetoric in economics.

 Applications in International Trade— In this section, we review some debates and policy questions in international trade. The primary purpose is to study the instances when theory does not meet policy recommendations, or when theory does not meet with empirical implications. When do economists abandon the precise predictions and normative implications of theory? And how seriously should policymakers take economic theory?

Free Trade and the New International Economics—The popular view of international economics is summed up by the old adage that "free trade is good in theory, but not in practice". After the development of the new international economics of the early 1980's, economists adopted exactly the opposite view: filed trade is not wise in theory, but it is in practice. How can theorists develop models of trade that show gains from intervention, and then object when policy makers put them into practice? The answer is a lesson on the difference between economic theory designed to increase economists' understanding of the way the world works, and theory designed to provide immediate policy recommendations.

 Qualitative Predictions and Empirical Relevance: Wage Inequality—Standard models of trade make precise predictions about changes in relative wages caused by trade liberalization. In recent years, these predictions have been exploited to argue that trade liberalization is responsible for the increase in wage inequality observed in the United States during the 1980s. Empirical research, however, has shown that other factors appear to be far more important. While the predictions of the trade models are qualitatively correct, they do appear to be quantitatively important. These readings also highlight the need to test all aspects of a theory, and not just the punch line.

David Colander (1987). Why aren't Economists as Important as Garbagemen? Journal of Economic and Monetary Affairs, July.

 Robert W. Clower ( 1989). The State of Economics: Hopeless but not Serious, in David Colander and A.W. Coats, eds. Tire Spread of Economic Ideas, New York: Cambridge University Press.

 Schultz, Charles L. (1972). Is Economics Obsolete? No, Underemployed, Saturday Review, pp.50‑52, 57, reprinted in R. Heilbroner and A. Ford, eds., Economic Relevance. A Second Look, Pacific Palisades, CA: Goodyear Publishing Co.

 Heilbroner, Robert L. ( 1973). Economics as a Value‑Free Science, Social Research, (Spring), pp. 129-43. 

Fusfeld, Daniel R. The Philosophy of Individualism, in D.R. Fusfeld, The Age of the Economist, Glenaview, IL: Scott, Foreman and Company.

 Schotter, Andrew (1985). Free Market Economics. A Critical Appraisal, New York: St. Martin's Press.

 Colander, David (1988). The Evolution of Keynesian Economics: From Keynesian to New Classical to New Keynesian, in Omar Hamouda and John Smithen, eds., Keynes and Public Policy after Fifty Years, Aldershot: Edward Elgar.

 Colander, David and Robert Guthrie (1980). Great Expectations. What the Dickens do Rational Expectations Mean?, Journal of Post Keynesian Economics, 3(2).

 Klamer, A. (184). Conversations with Economics: New Classical Economists and Opponents Speak out on the Current Controversy in Macroeconomics, Totowa, NJ: Rowman and Allanheld.

 Friedman, Milton (1953). On the Methodology of Positive Economics, in M. Friedman Essays in Positive Economics, Chicago: University of Chicago Press.

 Samuelson, Paul A. (1963). Problems of Methodology ‑ Discussion, American Economic Review, Papers and Proceedings, 53:231‑236.

 Leontief, Wassily (1971). Theoretical Assumptions and Nonobserved Facts, American Economic Review, 61:1 ‑7.

 Boland, L. (1979). A Critique of Friedman's Critics, Journal of Economic Literature, 17:503 522.

 Mayer, Thomas (1980). Economics as a Hard Science: Wishful Thinking or Realistic Goal?, Economic Inquiry, 18(2): 165‑ 178.

 Darnell, Adrian and J. Lynne Evans (1990). Empirical Analysis as Scientific Explanation, in The Limits of Econometrics, Aldershot: Edward Elgar, 26‑39.

 Darnell, Adrian and J. Lynne Evans (1990). Econometric and Positive Economics, in The Limits of Econometrics, Aldershot: Edward Elgar, 40‑57.

Leamer, Edward (1983). Let's Take the Con Out of Econometrics, American Economic Review (March).

 Leamer, Edward (1988). Things that Bother Me, The Economic Record, (December).

 Denton, Frank T. (1984). Data Mining as an Industry, The Review of Economics and Statistics. 124‑127.

 Henderson, W. (1982). Metaphors in Economics, Economics 18(4):147‑153.

 Kornai, J. (1983). The Health of Nations. Reflections on the Analogy between Medical Science and Economics, Kyllos, 36(2): 191 ‑212.

 McCloskey, Donald (1983). The Rhetoric of Economics, Journal of Economic Literature, 21:481‑517.

 McCloskey, Donald (1986). The Rhetoric of Economics, Madison, WI: University of Wisconsin Press.

 Krugman, Paul R. (1987). Is Free Trade Passe?, Journal of Economic Perspectives, 1(2): 131 ‑144.

 Krugman, Paul R. (1993). The Narrow and Broad Arguments for Free Trade, American Economic Review, Papers and Proceedings, 83(2):362-366.

 McCulloch, Rachel (1993). The Optimality of Free Trade: Science or Religion?, American Economic Review, Papers and Proceedings, 83(2):367-371.

 Mussa, Michael (1993). Making the Practical Case for Freer Trade, American Economic Review, Papers and Proceedings, 83(2):372-376.

 Lawrence, Robert Z. and Matthew Slaughter (1993). International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup?, Brookings Papers: Microeconomics 2, 1993, pp. 161-226.

 Burtless, Gary (1995). International Trade and the Rise in Earnings Inequality, Journal of Economic Literature, 33(2):800-816.

 Hanson, Gordon H. and Ann Harrison (1995). Trade, Technology, and Wage Inequality, National Bureau of Economic Research, working paper no. 5110, May.