On July 11, New York Times reporter Patricia Cohen wrote an article titled, "In Economics Departments, a Growing Will to Debate Fundamental Assumptions." The article begins with, "For many economists, questioning free-market orthodoxy is akin to expressing a belief in intelligent design at a Darwin convention: Those who doubt the naturally beneficial workings of the market are considered deluded or crazy." Cohen then reports interviews with several prominent economists, one being Princeton professor Alan Blinder, former vice chairman of the Federal Reserve Bank.
Blinder said, "What I've learned is anyone who says anything even obliquely that sounds hostile to free trade is treated as an apostate." Continuing his criticisms of mainstream economists, he adds that efforts to intervene in markets, such as mandatory minimum wages, industrial policy and price controls, are also viewed negatively.
First, let's establish a working definition of free markets; it's really simple. Free markets are simply millions upon millions of individual decision-makers, engaged in peaceable, voluntary exchange pursuing what they see in their best interests. People who denounce the free market and voluntary exchange, and are for control and coercion, believe they have more intelligence and superior wisdom to the masses. What's more, they believe they've been ordained to forcibly impose that wisdom on the rest of us. Of course, they have what they consider good reasons for doing so, but every tyrant who has ever existed has had what he believed were good reasons for restricting the liberty of others.
Tyrants are against the free market because it implies voluntary exchange. Tyrants do not trust that people acting voluntarily will do what the tyrant thinks they ought to do. Therefore, they want to replace the market with economic planning, or as Blinder calls it industrial policy.
Economic planning is nothing more than the forcible superseding of other people's plans by the powerful elite. For example, I might plan to purchase a car, a shirt or apples from a foreign producer because I see it in my best interest. The powerful elite might supersede my plan, through import tariffs and quotas, because they think I should make the purchases from a domestic producer.
My daughter might plan to work for the hardware guy down the street for $4 an hour. She agrees; he agrees; her mother says it's OK, and I say it's OK. The powerful elite say, "We're going to supersede that plan because it's not being transacted at the price we think it ought be the minimum wage."
Cohen also interviewed professor David Card, saying that he's done "groundbreaking research on the effect of the minimum wage." Literally hundreds of studies show that increases in the minimum wage cause unemployment for the least-skilled worker, a group dominated by teenagers, particularly black teenagers. But Card's study asserts that increases in minimum wage actually increase employment. Besides the fact that reviews of his study show flawed statistical techniques, that assertion doesn't even pass the smell test. If it did, then whenever there's high unemployment, anywhere in the world, governments could eliminate it by mandating higher minimum wages.
Robert Reich, President Bill Clinton's labor secretary, said that economists who question free market theories really "want to speak to the reality of our time." That's incredible. Reality doesn't depend on whether it's 1907 or 2007. Reich probably thinks the reality of the laws of demand depends on what year it is. I wonder whether he thinks the reality of the laws of gravity does as well.
Walter E. Williams is a professor of economics at George Mason University.