I’ve already pointed out that I think free-marketers are underestimating the impact of Mariana Mazzucato‘s work. Her book “The Entrepreneurial State” has made her a public persona; she is an effective speaker, and I fear in the next few years we’re going to see more and more of her.
Philip Booth posts here about a recent TV performance by Ms Mazzucato. On the BBC, she claimed that “There is no evidence – no empirical evidence – that cutting capital gains tax or cutting corporate income tax will increase business investment”. Surprise: Philip actually presents some empirical evidence that points in the opposite direction.
Philip comments:
The statement Mazzucato made was definitive and very precise. But, in positive economics, nearly everything is arguable except for the fact that nearly everything is arguable. Mazzucato left the impression that her claim was simply not disputable, still less that there is a huge amount of evidence that points in the other direction.
I would think Ms Mazzucato is in complete good faith. We all have selection biases, after all.
I disagree deeply with Ms Mazzucato’s “The Entrepreneurial State”: but, if it has a remarkable feature, it is the fact that she openly describes hers as a “discursive battle.” She doesn’t like the narrative of government inefficiency, and she opposes it with a narrative of government efficiency. Her examples and alleged empirical proofs are to be placed in this context: which, in a way, she herself acknowledged.
To be fair with Ms Mazzucato, I believe that television debates are not really comparable to academic discussions. They are an unlikely venue to weigh opposite evidence and try to come up with something which may resemble the truth. Opinion makers go to TV, and they are more likely to be called back on TV, precisely because they can be assertive and give people answers, rather than helping them in asking the right questions. How many politicians or TV personalities have you ever listen uttering the words “I don’t know”?
Philip is emphasizing a very serious problem. When it comes to social scientists on news stage, the public is induced to believe that somebody is an authority because of her research. But, on news programs, you are more likely to share your worldview, than your research findings. Philip suggests that “we should also have the humility (and courage) to admit when we think that the empirical evidence runs against our prior views or, at least, admit to the enormous areas of economics where the evidence cannot settle debates definitively.” But though admirable, I’ll bet such an attitude is going to be very rare. It just sounds so much better to claim we are appealing to “empirical evidence”, than to our “moral intuitions”, doesn’t it?
For some people, coming to grasp with Philip’s suggestion may be even harder. Particularly champions of the left (but that applies to some free marketers too) tend to believe that those who disagree with them do so because of some hidden motives. Holding the hypothesis that those who entertain very different ideas than ours are basically sell outs almost automatically reinforce our belief that the facts are on our side: others do not have a legitimate case, only interests they do not disclose. Unfortunately it seems to me there is no trend in contemporary politics that point in the direction of a more serene, and civilised, debate.
READER COMMENTS
CMOT
Mar 29 2016 at 9:16am
Mazzucato’s statement implies that there is no rate of capital gains and/or corporate tax rate that will impact investment decisions.
But she doesn’t believe that. From her website, in a letter Spetember 29 2011.
“If Labour wants to generate “good” companies it must create the right incentives. A first move might be to undo one of its own “bad” policies in 2002 which saw the time that private equity investment must be held before the gains from sale can be exempt from capital gains tax to be lowered from ten years to two years. Bringing this back up to at least five years will help to produce incentives that lead to “better” companies.”
http://marianamazzucato.com/2011/09/29/labour-and-bad-companies-an-uncomfortable-truth/
So here, they matter a lot.
The real problem is: how do you deal with someone who, in complete good faith, does not actually believe in the actual point she is making? I’m not calling her dishonest, but she sincerely believes irreconcilably incompatible things.
You can’t use evidence and fact to argue with someone who doesn’t care about them. Which may be why she is such an effective television personality …
ThaomasH
Mar 29 2016 at 3:33pm
This is strikes me as mainly positioning. Folks who think government interference in the economy is the source of all evil need to listen to Ms. Mazzucato. Central planners need to read Hyeck. Personally I’m more aware of Type I errors than Type II errors.
James
Mar 29 2016 at 10:39pm
ThaomasH:
When someone claims that there is no empirical evidence that capital gains taxes affect investment, they may be making that claim for purposes of positioning but it’s still a statement which is either true or false. I think it’s fair to judge people on the accuracy of their claims. Admittedy, it would be telling if Mazzucato were to justify her statement by calling it positioning.
Since you mention it my experience has been that type I errors are exceedingly rare. Rejecting a true null hypothesis requires having a true null hypothesis to reject. Null hypotheses are nearly always false.
Were you meaning to say that the empirical studies which find capital gains taxes affect investment are all are all rejecting a true null hypothesis of no effect?
David R. Henderson
Mar 30 2016 at 10:37am
@Alberto,
I finally got around to reading your Cato Journal review of Professor Mazzucato’s book. Excellent.
LD Bottorff
Mar 30 2016 at 5:48pm
ThaomosH:
If you see more Type I errors than Type II, you must hang out with a lot of hard-core free-market zealots. I realize that the government can occasionally impose a workable solution to a real or perceived market failure, but it’s hard to judge whether that market interference is really worth the cost because once implemented, most government programs obtain a constituency that makes the program hard to alter; think about sugar subsidies or the oil-well depletion allowance.
And, just as Ms. Muzzacato may be positioning by some of her statements, so too will some free-market zealots be guilty of positioning. Who is more likely to be called on it?
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