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Thursday, June 6, 2024

Responding to Reich, Part 1: Is Economics Objective?

Robert Reich says economics can’t be separated from politics or morality. Here’s why that’s wrong.

Image Credit: YouTube screenshot - Robert Reich

Robert Reich is arguably one of the most fervent anti-capitalists of our day. A prolific commentator, he is one of the chief proponents of left-wing economics, focusing on issues like inequality, Medicare for All, and the labor movement.

In a new video series, Reich is setting out to debunk 10 “myths” that he sees in economic discourse. And as usual, Reich is essentially using this as an opportunity to take aim at free-market talking points.

More candidly, he’s taking direct aim at people like us here at FEE.

Noticing some egregious errors right off the bat while watching the first video, I figured it would be worth doing a response article. And, seeing as he’s planning a 10-week series—which I can only imagine is pretty much entirely attacking our ideas—it seems fitting that we offer 10 articles in response, one for each video. So that’s the plan. This article thus represents Part 1 of a series I’m calling Responding to Reich (inspired in part by the legendary Contra Krugman podcast).

There are a few reasons why I think a response series like this makes a lot of sense. For one, Reich is really a perfect antagonist for FEE. Unlike many on the left, he really focuses on economic arguments, so he is directly engaging with our ideas. Reich is also quite famous and credentialed, having been the Secretary of Labor under Bill Clinton, so going after him is hardly picking on the little guy.

The other great thing about a response series is that it allows us to use these videos as teachable moments to explain what we think and why. Many on the left have never heard the free-market position on these issues, at least not from free-market proponents. And many people who agree with us could also use a better understanding of our philosophy so that they feel more equipped to respond to left-wing arguments.

So, with that in mind, let’s take a look at the first video in the series, Myth 1: “Economics is Objective.”

Fallacious Reasoning

Reich cuts right to the chase in the beginning of the video:

Have you heard this lie: Economics is an objective science that has nothing to do with politics or morality. Bunk!

Economics is not an objective science? That seems like a bold claim. Let’s see what he says to back it up:

If you really want to understand the economy, you have to understand politics and also morality. They’re treated as separate fields, separate disciplines. Each has its own experts and specialists. But the three are completely intertwined. In fact, through most of the 1800s, the field of study that we call economics was called political economy. People who studied it saw that the two fields were the same.

Adam Smith, the Scotsman who wrote The Wealth of Nations in 1776, is considered the father of economics, especially by conservatives, but he never called himself an economist. He called himself a moral philosopher. Why? Because he was really interested in the meaning of a good society.

That’s what it’s all about—or should be all about: what sort of society do we want? These are basically moral questions.

Reich then talks for a bit about some of the moral questions facing society, and then continues his argument:

In the late 19th century, economists began to deemphasize politics and morals. They started treating economics as more of a science and less of a philosophical study that took into account morality. Alfred Marshall’s monumental work Principles of Economics established economics as its own science in 1890. But economics, politics, and morality can not be separated. We need to see the moral underpinnings of economics.

Reich is correct to point out that the way economics is viewed has evolved in recent centuries. The rigorous insistence on the objective or “value-free” nature of economics only came along later. But why should this mean that this insistence was wrong? I am certainly no adherent of the Whig Theory of History—the idea that scientific understanding only improves over time and never regresses—but in this case it seems perfectly reasonable that the older economists were misguided and the more modern economists understood things better.

Reich’s argument amounts to an appeal to tradition, which is a logical fallacy. The form of the fallacy is “this is right because this is how it was done in the past.” In this case, Reich is arguing that “understanding economics as necessarily intertwined with morality is right because that’s how people used to think about it.”

But just because people used to think of economics that way doesn’t mean that’s the correct way of thinking about it. That’s a non sequitur. The conclusion does not follow from the premise.

Having walked through the history, Reich concludes by stating that “economics, politics, and morality can not be separated. We need to see the moral underpinnings of economics.” But this is simply restating his thesis, not making an argument for it.

How We Know Economics Is Objective

Reich is not wrong to point out that economics has bearing on moral issues, but he goes too far when he says the two disciplines are inseparable. There is an objective science of economics that is universally true, and we know this because we’ve been able to identify universally valid economic laws, such as the law of diminishing marginal utility, the law of returns, and the law of comparative advantage.

No matter what values we bring to the table, these laws don’t change and can’t be violated, just like the laws of geometry or logic. That means there’s something objective here, something that’s just true about the cosmos regardless of our opinions about right and wrong.

The economist Ludwig von Mises had this to say about the objectivity of economics:

The teachings of praxeology [the study of action, of which economics is a subdiscipline] and economics are valid for every human action without regard to its underlying motives, causes, and goals… In this sense we speak of the subjectivism of the general science of human action. It takes the ultimate ends chosen by acting man as data, it is entirely neutral with regard to them, and it refrains from passing any value judgments. The only standard which it applies is whether or not the means chosen are fit for the attainment of the ends aimed at.

…It is in this subjectivism that the objectivity of our science lies. Because it is subjectivistic and takes the value judgments of acting man as ultimate data not open to any further critical examination, it is itself above all strife of parties and factions, it is indifferent to the conflicts of all schools of dogmatism and ethical doctrines, it is free from valuations and preconceived ideas and judgments, it is universally valid and absolutely and plainly human.

So there you have it. Contra Reich, economics is an objective science. And while we should certainly use our understanding of economic laws to inform our value judgments, we should never make the mistake of thinking that objective economic laws don’t exist just because we also have values.

Now, looking closely at the video, it seems like “Myth #2” is going to be “Government Obstructs the Free Market.”

That’s a myth? I guess I’ll keep an open mind, but consider me skeptical.

Additional Reading:

Debunking the Economic Fallacies in Hugh Jackman and Robert Reich’s Simpsons Episode by Patrick Carroll

  • Patrick Carroll is the Managing Editor at the Foundation for Economic Education.