Sunday, January 6, 2019

Can We Minimize Econogenic Outcomes?

I am back from the annual ASSA/AEA meetings in Atlanta.  I learned a new term that on checking I find has been around for about five years. It is "econogenic," coined by George DeMartino, who spoke on this in a session on "Ethics and Economics" held by the Association for Social Economics. It means "harm done by economists," and it is inspired by "iatrogenic," referring to harm done by physicians.  His talk focused on this and claims that the medical profession  is 50 years ahead of the economics profession on dealing with harm they do.  For physicians he praised the patients' rights movement that took off in the 1960s and has gained substantial legal support, with patients now having say on how they are treated by physicians rather than living in a world where the physician was always right.

DeMartino noted policies supported by many economists that can be defended on the grounds that they supposedly lead to gains that outweigh losses with Hicks compensation potentially able to make things right and pay off those who might be hurt.  Lots of economists have supported such policy changes when convinced that such calculations are correct.  The problem is that most of the time, indeed, the vast majority of the time, those compensating payments are not made.  And to make things worse, while those gains may exceed those losses, they often are widely spread across many people, while the costs are intensely concentrated very painfully on a smaller group of people.

His main example is increasing free trade.  Most estimates show gains outweighing losses, but those gains are widely and thinly distributed as lower prices while costs are heavilly borne by much smaller groups of people who end up losing their jobs.  While there have been some half-baked efforts in the US to provide some adjustment assistance, it has always amounted to little.  Other nations have done this far more vigorously, with those Nordics Sweden and Denmark outstanding examples.  Of course it is easier for them as much smaller and more homogeneous economies than that of the US, where growing export industries are often located far away from areas losing jobs due to imports.  These issues are not easily dealt with, but there have been amazingly few efforts to do so in the US.

Another example is "shock therapy" policies in transition and other economies.  Again, after a painful period of adjustment, most of those transition economies have ended up having higher real incomes with more democratic regimes than they had previously.  But despite these improvements in most of these nations there have remained groups of people, usually rural, older, and less well educated, who have remained worse off than they were before, although by how much has varied greatly across these nations.

Anyway, I urge more use of this term and more importantly more efforts by economists to make much more serious efforts to urge that when major policy changes happen that seriously damage identifiable groups of people that genuine efforts be made to make those compensations that can be covered by the gains from the new policies.

Barkley Rosser


AXEC / E.K-H said...


Scientifically incompetent economists bear the intellectual responsibility for the social devastation that has been caused by mass unemployment.

Iatrogenic economics

Egmont Kakarot-Handtke

Sandwichman said...

"DeMartino noted policies supported by many economists that can be defended on the grounds that they supposedly lead to gains that outweigh losses with Hicks compensation."

Sandwichman talking about the iatrogenic flaws in Kaldor-Hick compensation four years ago:

I wrote an essay about 20 years ago that I can't find discussing the iatrogenic effects of mainstream economics. See also "The Iatrogenic and Incoherent 'Theory' of Flexibility" said...

Both of you get kudos for using "iatrogenic" early on, but "econogenic" makes it clear that it is econmists and not doctors.

Oh, and Egmont, your glorious theory is of no use whatsoever in solving problems of mass unemployment, despite your delusions to the contrary.

Sandwichman said...

And props to Egmont for coincidentally posting "Iatrogenic economics," just one day after I had posted "The iatrogenic and incoherent 'theory' of flexibility." Oh, the anxiety of influence!

Sandwichman said...

"I wish I had said that."

"You will."

AXEC / E.K-H said...

Barkley Rosser

You say: “Oh, and Egmont, your glorious theory is of no use whatsoever in solving problems of mass unemployment, despite your delusions to the contrary.”

“We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price. If this is prevented by combinations in restraint of trade or by government regulations, then those impediments to competition should be removed. Applied to economy-wide unemployment, this doctrine places the blame on trade unions and governments, not on any failure of competitive markets.” (Tobin, 1997)

What “economists have all learned” is provably false. Being scientifically incompetent, though, economists have not realized it to this day.#1

The axiomatically correct macroeconomic Employment Law says that the relationship between wage rate and employment is POSITIVE and this is the OPPOSITE of what “We economists have all learned, and many of us teach”.

The Employment Law consists of measurable variables and is testable.#2, #3

Mainstream employment theory is provably false. And from this follows that economists’ policy guidance WORSENS the situation. From this, in turn, follows that economists bear the responsibility for the social devastation of mass unemployment.

Whether we call the public danger that unqualified economists constitute iatrogenic or econogenic is secondary. Econogenic is preferable because it clearly designates the profession that has caused so much social misery for 200+ years.

Because of this, it is a good idea to bring all this brain-dead blather to a close, to test the Employment Law, and then, with the scientific proof in hand, initiate a GoFundMe and finally sue economists individually/collectively for damages/fraud. Time to get serious with minimizing econogenic outcomes.

Egmont Kakarot-Handtke

#1 Wage rate and employment: the basics

#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster

#3 Go! ― test the Profit and Employment Law