Mankiw’s 10 Value-Laden Principles

The claim that economics is value free is a common one, and one of the many things Mankiw asserts in defence of his classes. I thought a good way to demonstrate that economics is not value free would be to highlight how many of his 10 principles are actually value-ridden. The 10 principles have been poked fun at elsewhere, and rightly so – they are simply a series of assertions about the nature of the economy. Real science sometimes starts with assertions, but the crucial difference is that those assertions are not contradicted by empirical evidence, anywhere, ever.

However, I digress. Here are the 10 principles – I have highlighted and discussed the values I deem to be implicit or explicit (please note that I do not necessarily disagree with these values; I’m merely showing they exist):

#1 People face tradeoffs#2 The cost of something is what you give up to get it#3 Rational people think at the margin, #4 People respond to incentives

These are all reflective of a view of how people value decisions; that they make decisions based on  costs and benefits. In reality, people respond to incentives based on a number of other criteria, such as the motives of the person rewarding or punishing them. These motives or ‘values’ are swept under the rug in economics, in favour of a mostly monetary/self interested view of human behaviour, where people value things based on outcomes.

#5 Trade can make everyone better off

The sentence itself is clearly a value judgement – trade increases value, so it is good for it to take place. Related is the ‘trade must be mutually beneficial otherwise people wouldn’t do it’ line of thinking, which effectively asserts that ‘market’ transactions are always beneficial. Whether this is true or not is up for debate, but it is certainly loaded with value judgements about what is desirable.

#6 Markets are usually a good way to organize economic activity & #7 Governments can sometimes improve market outcomes

‘Markets’ in this case meaning private property and contracts, and some hidden regulations like limited liability laws, with no thought as to the social relations and institutions required to sustain them, and no thought as to the historical context of those institutions. The government is somehow separate from these institutions, which we take as a given. That we choose not to judge these institutions based on their values is in and of itself a value judgement that they are desirable or natural.

#8 A country’s standard of living depends on its ability to produce goods and services

This equates material abundance with standard of living, and effectively amounts to a judgement that growth will always increase happiness*:

You may say I’m putting words in his mouth a bit here, as he is talking about objective standard of living. But what is objective standard of living? If people aren’t happier then does telling them that their stuff is shinier change that? This is exactly the kind of thing that instils an implicit value judgement in economists, leading them to assert that people should be happier with their lot despite stagnating median incomes, and that we should measure income as consumption. Consumption is higher, and our models say that should make you happier, so stop complaining!

#9 Prices Rise When the Government Prints Too Much Money & #10 Society Faces a Short-Run Tradeoff Between Inflation and Unemployment

Implicit here is that both inflation and unemployment are bad past a certain point, and in different situations one is desirable whilst the other is not. Again, a value judgement.

Economics is a study of how people behave and so by definition cannot be value free – it must contain judgements about people’s actions and the motivations for those actions, as well as judgements about what is or isn’t desirable for them. As Rod Hill and Tony Myatt highlight here and here, your average textbook is full of value judgements. This is inevitable, and would be fine if they were explicit. But the fact that academic economists continue to deny it is just another indictment of their discipline.

*Red = happiness, black = GDP per capita. Source: Scholarpedia

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  1. #1 by Tom James (@TACJ) on March 1, 2012 - 1:45 pm

    Hey, I may have mentioned this before in comments, but Hugh Stretton has written an excellent introductory textbook called “Economics: A New Introduction.”

    Stretton spends several chapters talking about economic methodology, and how the practice of economics can be influenced by the values of its practitioners. He actually cites the cause(s) of inflation as an example of how different people can have different views as to why economic phenomena occur.

    Stretton’s book is a great example of how economics textbooks *ought* to be. Other things he includes:

    1) An emphasis on historical, or institutional economics.
    2) A discussion of the uses and abuses of mathematical modelling in economics.
    3) Lots and lots of methodology.
    4) Lots and lots of interesting examples.

    Anyway keep up the good work. This is an excellent blog.

    • #2 by Unlearningecon on March 1, 2012 - 4:14 pm

      Thanks for the kind words, and that looks like a very interesting book. Economics is not only incoherent at the moment, it’s also incredibly boring. Students would be so much more interested by a textbook like that.

  2. #3 by Guillermo on March 2, 2012 - 6:57 pm

    “#2 The cost of something is what you give up to get it”

    This one is funny. No one can actually tell what they give up to get something, because each action has an infinite number of consequences. Usually this “principle” is illustrated with something like the university / work tradeoff. Going to university not only involves paying tuition (depending on which country you’re in), but also foregoing the salary of a full time job. This is the alleged “opportunity cost” of attending university. Now that’s not totally invalid and there is some useful nugget of truth there, but clearly one cannot state with certainty that the salary and tuition is the only thing that has been “given up”, and that has implications for cost-benefit analysis in general.

    • #4 by Unlearningecon on March 3, 2012 - 2:15 am

      Yes it makes absolutely no sense to me, and I think it’s absurdity was shown in that joke video where he concludes that a choice between Snickers and Mars is worse than just being given the Mars bar.

      Also, interesting link, thanks. Wolff is my favourite modern Marxist.

      • #5 by Min on March 7, 2012 - 8:44 pm

        I took another look at the routine. Thanks for reminding me of it. 🙂

        You must remember that you cannot give up what you do not have. If someone gives you a Mars bar, your cost is nothing. If he gave you a choice between a Mars bar and a Snickers bar, your cost is still nothing. Suppose that you choose the Mars bar. Your gain is still the Mars bar. But that gain can be divided in two. Part of your gain is the Snickers bar, the other part is the difference between the Mars bar and the Snickers bar. That difference is the value of the choice. For some reason economists refer to the other part of the gain as a cost. {shrug}

    • #7 by Unlearningecon on March 3, 2012 - 2:26 am

      Thanks for that, the last few paragraphs are especially interesting.