Who Understands Economics?

— Tyler Cowen discusses a poll of members of the Public Choice Society

When you ask (a broader group of) economists whether markets, in the absence of transactions costs, achieve efficient outcomes, 57.1 percent say yes. This is itself odd, since I would interpret the proposition as a tautology, but it appears some people simply can’t bring themselves to praise the market. 70.3 percent of the public choice economists say yes, showing that this group has a stronger belief in markets. 22 percent of the surveyed political scientists say yes, showing a far greater skepticism about the market economy from those quarters.

No doubt Tyler’s right in that some folks are just loathe to say anything positive about the market. But I’ve got a different take on the results. As Tyler says, it’s a tautology that the market is efficient given zero transactions costs. That’s right. But given that that’s right, it’s not really PRAISE to say that zero transactions costs markets are efficient. It’s just definitional, given the assumptions of the model. So isn’t the correct interpetation of the poll that some economists, and most political scientists, don’t understand the model? Public choice economists understand economics better than economists as a whole, and political scientists are clueless. That’s my interpretation.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center