Saturday, January 21, 2012

An Example of Economics Laced With Values

Much more in the US than here, right wingers, and particularly Libertarians, command huge audiences. Following on from our discussions these coming weeks about values in economics, here is a whopping great example of value-laced economics - an attempt by a libertarian to promote the research of a think tank that has clear ideological and hence political leanings.

The research suggests that the tax rate on capital gains should be lower than others have suggested. Now, was that research by an independent, value-free, positive economics think tank? The think tank is called IRET, the Institute for Research on the Economics of Taxation, and the blogger, David Henderson, possibly deliberately, makes us believe that it's linked to Ohio State University by immediately after writing the IRET's name, he lists the researcher's university.

Is IRET unbiased, politically de-linked, and hence able to construct positive (what could happen), rather than normative (what should happen)?  The website paints a reasonably sensible picture of what the organisation does, although given it is set up to influence politicians is suggestive, but not indicative, of it holding some political motive. However, it reveals the founder of the Institute was an advisor to the Reagan government in the 1980s, and involved in many policies cutting taxes and keeping them low. The bottom line is, this is not an institution that looks politically neutral - when analysing tax, it will suggest taxes are kept low. I could be wrong, but I'm sceptical.

So what is my point here? Are we not to believe anyone at all who writes about economics? Of course not, we are not to stop believing everything we read. But we must be careful about what we read; if we want our economics to be value free, we must ensure that it is informed by those that are, as much as possible, value free. Think tanks that are not overtly political do exist; the Institute for Fiscal Studies in the UK is an excellent example, critiquing the tax and spend policies of all the major political parties around election time.

We are not to take refuge in cynicism, but instead to be careful about what we read!

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