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Archive for April 20th, 2009

Daniel Little’s post about objectivity in media reporting has me thinking about the positive vs normative question in economics. The claim often made by neoclassical economists, when talking breathlessly about profit and utility maximization in the name of efficiency, is that these are positive goals. In other words, we can use GDP as an objective measure of economic well-being because, well, everyone would agree that more is better.

Or would they?

This is where things become tricky. Perhaps the existence of GDP as a primary economic indicator is a normative condition, where the values of certain decision-makers have seeped into the chosen measures.

This is not a new idea, obviously. I’m wondering, though, if an honest economics requires a new standard for discourse. In other words, a code of conduct whereby economists put all their cards on the table and honestly put forth the biases of where they are coming from.

Regarding journalism, Little writes,

In order to arrive at such an account, the honest reporter needs to exercise critical good sense about the sources and the interests that the conveyors of the information have: the biases of the government, the press, and the parties as they provide evidence and interpretation of the events. And we want this account to be as free as possible of the interfering influences of bias and political interest. We want an honest and comprehensive synthesis, not a one-sided spin.

Economics is not journalism. When discussing a hot-button issue, such as a minimum wage, you could argue that the neoclassical argument be presented alongside a feminist argument. But what about the Marxian argument? Or the institutionalist argument? Things begin to get crowded quickly. The easy way out seems to be just presenting the two most common views and the premises used to arrive there, but that entails a normative judgment as well, i.e. that the two most common views deserve the most airing.

I don’t have any answers on this issue. A good first step would be for everyone to stop pretending they are objective, state their premises clearly upfront, and move forward mindful that their premises are not the only ones possible.

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Over the weekend, I attended that 4th annual South Bend Forum on Community Development, where I was surprised to hear of an effort to launch a local currency. Michiana Community Currency is hoping to launch a local currency by the fall of 2009. Their hope is that a local currency will encourage local development in and around South Bend by keeping money in the community rather than letting it drain out through national chains as well as encourage those who are unable to find jobs in the formal economy to contribute productively to society.

Local currencies have been a rising trend across the US and the world. Among the most popular local currencies in the US are the BerkShares in MA and Ithaca Hours in NY, which have had several million US dollars worth traded since 1991.  The Michiana Community Currency could be the next big success story. But they are still looking for a name for the currency. If you have any ideas, suggestions can be submitted on the website.

Interestingly, local currencies are absurd according to neoclassical theory, as the value theory is not monetary. And yet these movements are happening around the nation. I wonder if there is something wrong with the real world, or is the problem with the theory?

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