Is Economics a Public Good?

|Peter Boettke|

Mario Rizzo sets off the discussion.

James Buchanan argued that economics was a public science, with the purpose of teaching citizens the basic principles of the science so that they may in turn become informed participants within the democratic process of collective action.  But that does not mean that Buchanan justified the public expenditure on the discipline.  Just because a "good" might have publicness characteristics does not mean it is the responsibility of the public sector to finance it let alone produce it.

What do you think of Rizzo's question?

Comments

[Roger Koppl]

I just commented at TM that the public goods argument Mario challenges depends on the implicit assumption that economists are truth seekers. The theory fails to model the motives of the key players, the subsidized experts. Thus, our benchmark theory of science-as-public-good assumes a motivational asymmetry between the subsidized expert and everyone else. Analytical egalitarianism repudiates such motivational asymmetries. In other words, we need to put ourselves in our models.

[Greg Ransom]

If economic research is a public good, why doesn't the profession guild, AEA, make that public good freely available on Internet?

As a taxpayer, I pay for that research, but the AEA puts that research behind a pay wall -- and wants me to pay for it again at extreme monopoly rents.

The U.S. Constitution says that copyright monopoly privileges are justified only in order to advance the spread of scientific ideas -- but monopoly protection is used by the AEA to BLOCK the near costless spread of ideas, a scarceless, non-economized non-material set of conceptions.

How public spirited is a guild which restricts the free flow of ideas, and the open criticism of ideas?

What kind of public good is subsidized by the whole population -- and then is shared only with a tiny elite of beneficiaries?

[Greg Ransom]

I note that in philosophy a number of top philosophers restrict the circulation of their taxpayer purchased research to only a handful of other top philosophers.

Kripke was famous for this, and others have imitated him.

I wrote:

"What kind of public good is subsidized by the whole population -- and then is shared only with a tiny elite of beneficiaries?"

[anon]

Is economics a public good? If one considers the beneficial effects of a better level of economic education on the citizens (better rules of the game whose beneficial effects on the economy are nonexcludable within the polity), the answer, in my opinion, is yes.

How would we know? There are two separate questions here. The first is how to know whether economic knowledge leads in fact to rules of better quality. As an economist talking to economists, I simply assume we share in the same answer: yes. The second question would be how to know whether the benefits of economics can justify public provision of a certain level of this good. Here the contractarian exchange paradigm applies: the only test of the legitimacy of an institutional arrangement (here, some level of public financing of economics) can be the voluntary and informed consent of the citizens. Just as the efficiency of market outcomes is not measured by some external qualities of these outcomes, but by the process of agreement of the market participants to the market trades they partake in, in the political process the efficiency of the political outcomes lies in the process of voluntary consent of the citizens to the "political trades" being made.

In principle, I think that there are good arguments that can be brought forward to the citizens to convince them that it is worthwhile for them as taxpayers to give up x dollars, because they would get something in return which would exceed their outlay. Some of those arguments could be empirical (the correlation between economic freedom and economic wellbeing), some arguments could be more logical-argumentative (thought experiments). Nonrivalry and nonexcludability would be central in these arguments. As economists we know enough for this, the problem would be one of persuasion and pedagogy.

In practice, the decision of the public provision of a certain quantity of the good "economics" cannot be separated from the institutional arrangement which governs the allocation of these public funds. How are decisions to be made on what is the tax-money to be spent, what organizations are it's recipients and what are the rules which govern them?

To sum up, while both questions Prof. Rizzo poses in the title of his post seem to have, in my opinion, an affirmative answer, the uncertainty ad difficulty seems to lie in the practical institutional difficulties which follow from an affirmative answer.

[Alexandre Padilla]

Pete. your question is different from Mario's question I think. Mario is asking whether economics is a public good, you are asking whether if we accept the idea that economics is a public good, it means it should be provided by the public section. Those are two different questions, which I related I concede. The answer to your question is that, from a standard economic theory viewpoint, the government should provide a public good only if the market cannot provide it or cannot provide the optimal amount. Can the market provide that good? Yes, it does provide that good (aren't some private individuals funding research right now, Koch Foundation and George Soros seem to be doing that...I may be wrong). Does the market provide an efficient amount of that public good? I don't know. I don't know how much value people actually put on economics or economic research and that's the question that Mario Rizzo seems to be asking (I am sure he will correct me if I am wrong).
I am not sure right now that you can actually say that you cannot exclude people from consuming economic research. Look how technical economics has become and tell me that it won't exclude people from consuming economic research. It's not a monetary cost, it's an opportunity cost measured as the knowledge you need to acquire prior you can actually consume that good (it's like the adverse selection problem, you might have access to the information it does not mean you can understand it so the problem is not alleviated). So I would argue economics could have these characteristics of excludability. Note that most impure public goods are traditionally non-excludable but are rival. It seems that economics could be an excludable good but non-rival.
To rejoin Roger Koppl, I agree with him on that taking into account the motives of the subsidized experts as well as take into account the motives of the people who fund the research as well.

[anon]

to add to my comment above:

Because of knowledge problems the citizens would be wise to consider the question of the value of providing the public good economics as a question of reforms on the margin. If one starts from the assumption that economic knowledge does in fact improve political outcomes, one can look at the "status quo" and ask whether the good is overprovided or underprovided and whether there exist reforms of the rules of the game which can improve the allocation of the current level of funds.

To me, underprovision and misallocation seem to characterize the status quo. Maybe one reform at the margin would be to make economics classes mandatory part of high school (gains from joint commitment to rules).

[Greg Ransom]

It's almost as if ..

The job of the AEA, the academy & copyright law is to turn public goods into a club good -- subsidized by taxpayers & students -- for the benefit of club members.

[Barkley Rosser]

Some argue that economics is a public bad, :-).

Greg,

Kripke just likes being cryptic, :-).

[Jim McClure]

I think that a good case can be made that the Keynesian cross macroeconomics taught to the boomers during the 1960s and 70s was a public bad. A huge swath of the voting public is walking around with a defunct model running in the back of their brains. Politicians over the past several decades have been able to expand the Leviathan's reach more easily because so many boomers had Keynesian swill administered to them as the mother's milk of macro truth.

[Roger Koppl]

It's hard to do the counterfactual. Without the evils of hydraulic Keynesianism, perhaps more destructive views would have prevailed. We should remember how much really radical opinion existed in the US in the 30s. What would have happened after the war if "Keynesian" economics had not existed?

[Mario Rizzo]

@anon: You are thinking of economics at its best; I am thinking of economics as actually practiced today. In my mind the outstanding characteristic is its irrelevance to the actual problems of social policy and understanding real phenomena. (I am thinking of the kind of work current Ph.D. students at "top" schools are doing.)

@Padilla: I agree with your characterization of my ideas. Is "it" a public good at all, with the emphasis on the word "good"? It is easy to think that the kind of economics Pete likes is a good. But is that what the AER, for example, is all about.

I do not want to go over-board here. I do not deny that some economists do very valuable work but I do think there is a great amount of simple rent-seeking going on. I think that we need to be realistic about the profession.

@Roger: I think you are basically right. But I am reluctant to put a lot of emphasis on motives. That would get all this into the "nasty" place of questioning motives. Let's try to deal with other indicia. (If I sound like a positivist, I am sorry.)

[Richard Ebeling]

Government money drives research in a wide variety of scholarly areas.

My daughter did her PhD graduate work in physics at CalTech in Pasadena, California.

She told me that her dissertation advisers told her that a good part of the theoretical and applied physics research they would choose to focus their attention on was based on what they considered to be "fundable" from government grants that brought in hundreds of thousands of dollars into the university and to them and their research teams.

In addition, they considered that "that is the way it is," not questioning or doubting that government money was a legitimate as private-sector funding for their work.

She also told me that she once asked her senior adviser if there was, in principle, any theoretical argument or factual evidence that would make him reconsider the role of government in scientific research (as well as government intervention, in general). His answer was, "No."

Why? Because he said that he just "felt" it was the right thing for government to do, in these areas of life. So much for reason or logic over feeling and emotion!

Richard Ebeling

[Roger Koppl]

Mario,

I'm not sure I'm with you. If I call something "rent seeking," am I not painting an unflattering picture of the rent seeker's motives?

[Richard Ebeling]

Roger,

Surely, it is reasonable, conceptually, to distinguish between "market-based profit-seeking" and "political-based profit-seeking."

That is, whether one attempts to earn desired income through the marketing of some good or service voluntarily offered on the market to potential buyers. And attempting to acquire some (or all) of that desired income through the use of political transfers -- which may take the form of protectionist trade barriers; regulations restricting competition in one's domestic market; direct redistribution through taxation in the form of welfare payments or subsidies, etc.

If I wish to acquire support for some type of scientific research they I am (or would like to be) engaged in and I pursue the desired funding through government research grants, subsidies, or other forms of tax transfers to myself, rather than persuading private sources to fund me, or through some private market contracting, it seems to me that I am "rent-seeking" (political-based profit-seeking").

It need not carry a negative connotation. It merely describes a form of income earning pursuit.

Richard Ebeling

[Roger Koppl]

We do need to be careful about the meanings of words, Richard. I'm not sure I'm off base, however. Rent seeking is trying to get a monopoly rent. So the prospect of monopoly power forms part of the idea as we got it from Tullock and from Krueger. Am I mistaken to think that the desire to restrict or exclude competition is something about the rent seeker's "motives"? And isn't it generally considered bad if you want to restrict or exclude competition?

[Rafe Champion]

Looking for some common ground between Roger and Richard, quite likely both would have similar ideas about what counts as good research and a question is, how much good research does not get done because funding flows to other kinds of research? And behind that is the question, who decides (or to depersonalise it, what are the criteria) for deciding where the money goes?

[soccerjerseys]

Nice blog. I get plenty of visits to my blog http://www.soccerjerseysmall.com, but even begging on facebook has gotten me no useful comments. I like the "curse often" recommendation, but I'm trying to be family-friendly myself. Maybe the comment cluster idea...

[Bill Butos]

It is not clear to me why the motives of scientists matter. The institutions which govern science can accomodate all sorts of intentions; more importantly, what makes science an emergent knowledge-generating system - even if science is funded by government - are the interactions of scientists filtered through the evolved (and evolving) institutions that confer some sort of legitimacy on putative scientific claims. If we take science as a largely non-catallactic "spontaneous order," the intentions of scientists should not matter, much in the same sense that the voluntary transactions of the catallaxy produce certain outcomes whether its participants are public-spirited or nasty.

I think a full analysis of the market failure argument of science is yet to be penned. Thomas McQuade and I hurled a few shots across the bow in a 2006 paper that appeared in The Independent Review. Of course, lots of excellent treatments can be found of the ways in which taxpayer funding of science via government imposes costs and pitfalls for the functioning of science; the work of Savage, Barnett, Kealey is relevant here.

[Richard Ebeling]

Roger,
The significance (or normative view) of "monopoly," and the attempt to gain it or maintain it, is all contextual.

For example, following the Second World War the United States attempted to maintain a "monopoly" on atomic weaponry. Many in the U.S. at the time considered this to be a desirable goal, because the "alternative" was to have an atomic "rival" -- Stalin's Soviet Union.

(Of course, like all attempts to establish or retain a monopoly position, this one failed, also. First, there were the "spies" who during the war years and after supplied the "secret" of the bomb's construction to the Soviet Union, not for money but for ideological reasons. Second, the scientific knowledge of constructing an atomic bomb was not exclusionary. The Soviets had top-notch physicists -- they ended up copying the stolen design for the construction of their own first atomic bomb because they were told that if it did not work, well, Siberia is a very faraway and cold place.)

Do the words, "intervention," "regulation," "income transfer" or "redistribution," carry negative connotation, per se?

Mises is sometimes credited for being one of the economists who formalized the meaning of the term "interventionism" in the German language in the 1920s. In spite of his rhetoric, sometimes, he attempted to show, other things equal, what are effects on markets from price interventions (maximum or minimum price controls) or production interventions (regulations on methods, types, and forms of production as it impacts supplies and uses of factors of production).

The only "normative" aspect, for Mises' analysis, at least, was: did the results or outcomes of such interventions generate the outcomes or results publicly stated as the goal or purpose of the interventions? Or did they generate outcomes contrary to the stated purpose in mind?

Surely, a similar conceptual framework can be used to analyze (at least part) of the nature and outcomes of "rent-seeking" -- political-based profit-seeking, in comparison to market-based, profit-seeking.

In other words, in principle, the concept could be
"value-neutral."

Richard Ebeling

[Leonardo Baggiani]

I gathered that the argument is whether economics - in the sense of the knowledge resulting from economic research - is a pubblic good, and the necessarily related problems of funding it. May I suggest a different point of view on the matter?

Could we look not at "availability of knowledge" (the mentioned fact that its use does not reduce its availability implies that knowledge lacks of scarcity, which is necessary for goods to be "economic"), but "availability of economic researchers" as a pubblic good?
Then we could deal with scarcity (credible researchers are necessarily scarce, as well as the resourches need to lead the research, and all this involves opportunity costs) and even include the parrot-like researchers who simply infinitely repeat the messages their funding State wants to spread...

Is this enough a foolish way to see the problem?

[Roger Koppl]

I guess I'm not tracking, Richard. I'm all for Wertfreiheit. I'm also against the germs and for the people. Mises says somewhere that it's not deviation from value freedom if the economist calls this "good" and that one "bad." It's just that the economist is taking for granted the idea that we want people's lives to be better, not worse.

[Richard Ebeling]

Roger,
This sort of gets us to "full circle" with Pete's original post.

Not everyone, at all times, has wanted to see a betterment of people's lives -- at least within certain short-run time frames.

For instance, for both German communists and Nazis, the worse the situation got in Germany in the early 1930s, the better each of these movements, respectively, considered the greater the opportunity for events to "turn their way."

Of course, taking the longer-run view, both German communists and Nazis wanted the betterment of the German people -- once they, respectively, were in power to assure it according to their own world-view of how to bring that betterment about.

Even a classical liberal can take the view that a (short-run) worse situation make create the circumstances for a possible better (long-run) situation.

For instance, if one accepts Mancur Olson's analysis in "The Rise and Decline of Nations," it is possible to believe that until and unless a serious social crisis emerges it will be difficult to break the existing spider's web of special interest group power and manipulation that is maintained by the network of interventionist policy tools.

If the climate of public opinion has been influenced in the right direction, for example, a major fiscal crisis could serve as the catalyst to bring down the existing interventionist-welfare state and bring a transition to a more limited government and freer economy.

When the Great Depression worsened in 1930-1931, the climate of opinion was open to "experimentation" with regulatory and planning policies. If the climate of opinion had been different -- by which I mean the general public's understanding of what had caused the crisis and that market "remedies" rather than interventionist and planning ones were the way out -- the crisis might have served to move the country into a more free market direction.

So, if I believed the climate of opinion was moving in a more classical liberal direction today (which, alas, I do not consider to be the case), then I might "welcome" a sovereign debt and banking crisis, via debt default or restructuring, as a short-run policy means to a longer-run institutional reform end.

What the economist might consider "good" or "bad" in terms of a policy and its likely impact is contextual, including in terms of "short-run" vs. "long-run."

Richard Ebeling

[Reklama allegro]

Yes, I think the same, this post is interesting,