Economists Are Irrational; Is Anyone Else?
George Stigler is notorious for his dogmatic belief that any stable feature of the social world is efficient. Since people are rational, they quickly spot and bargain around inefficiencies. I was a little surprised, then, to read these words in Stigler’s 1982 Nobel acceptance speech:
[T]here is no simple or known relationship between environmental changes and changes in economic analysis. During the Industrial Revolution, economists adopted the law of diminishing returns but ignored the most sustained and widespread growth of output that the world had yet observed. The vast governmental income redistribution programs of the last hundred years have only recently attracted the attention of economic theorists. The scholars who create economic theory do not read the newspapers regularly or carefully during working hours.
While I’m a big fan of economics profession, Stigler’s words ring true. My main comeback is just: “Everyone else is worse!” Since Stigler rules out my comeback, I have to wonder how he would have accounted for his observations. I guess he would point to his other work arguing that policymakers and voters ignore economists anyway. But why exactly would the people with the only analytical tools that Stigler respects be uniquely deluded?