MURESIANU: Stop Citing “Basic Economics”

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Thursday, July 12, 2018


In the wake of democratic socialist Alexandria Ocasio-Cortez’s victory in a congressional Democratic primary, she tweeted about holding an economics degree. This tweet set off rounds of mockery in conservative circles. However, it’s a perfect example of the limitations of a common conservative talking point: citing “basic economics.” Here are a few reasons why citing “basic economics” is not productive when debating progressives.

  1. It’s not always accurate. In most introductory economics courses, not all concepts point to policies that conservatives or free market types prefer. Most introductory economics classes teach both Keynesian and neoclassical economic models. The difference between these two models is that the Keynesian model suggests that aggregate demand is the driver of economic growth, whereas the neoclassical model suggests that long-run aggregate supply is the driver of economic growth. At risk of oversimplifying, with regards to economic policies most frequently discussed in political debate, the Keynesian model favors expansionary fiscal policy (deficit spending, transfer payments in the form of redistribution or welfare, government stimulus), whereas the neoclassical one does not. Both models are taught in introductory economics classes, so one must explain why the neoclassical model is the model that best represents how the economy works.

  2. It doesn’t change people’s minds or improve their understanding. During Ronald Reagan’s presidency, he often took the time to walk Americans through the economic reasoning behind his policies. Conservatives on the ground should also seek to be educators on these issues. Simply being able to explain that a lower corporate tax rate means smaller disincentives on investment and it therefore will lead to more investment and economic growth is worlds apart from “just learn basic economics.” Additionally, have examples on hand. Being able to explain with a supply-and-demand graph that shows how a higher minimum wage creates unemployment is one thing, but it’s even more useful to have concrete examples from Seattle, Minnesota, and other locations on hand.

  3. It ignores disputes in higher-level economics. Some assumptions in introductory economics are challenged in higher-level areas of study in economics. For instance, behavioral economics challenges the assumption made in neoclassical economic models that individuals act rationally in their self-interest. Additionally, to reuse an issue I previously cited, some economists, such as Noah Smith of Bloomberg, believe that the labor market is not properly modeled by a basic supply-and-demand graph. Instead, they think the current labor market is best modeled as a monopsony, in which there is a single firm hiring that has the power to suppress wages. Under this model, a minimum wage would not lead to a rise in unemployment. Therefore, when debating the issue of the minimum wage, one cannot simply point to the basic supply and demand model of the labor market, but additionally show why the monopsony model does not fit the current labor market.

  4. It brushes over Republicans’ own breaks with even basic economic understanding. Economists are divided amongst each other on numerous issues, from the optimal tax rate to public versus private health care to the seriousness of the national debt problem. But one area economists are almost perfectly aligned amongst each other is on trade. A whopping 93 percent of economists believe that free trade is an affirmative good. Furthermore, immigration is an area in which economists, even ones cited by restrictionists, agree that immigration is a net good for the economy, and most agree it does not depress native wages. But Republicans don’t seem to be getting the message, considering how President Trump has staunchly pursued protectionist, anti-free trade policy and virtually every Republican immigration reform package reduces legal immigration.  

 

Ultimately, relying on the talking point of “basic economics” is no substitute for a cogent explanation of economic concepts, and when debating, it’s important to engage with and understand liberal criticisms of basic economic assumptions.


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About Alex Muresianu

Tufts University

Alex Muresianu is a member of the Tufts University Class of 2021. He has written on his personal blog for over four years. He is a longtime history buff and aspiring policy wonk, with a strong passion for the details of healthcare and tax policy.

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