Economism is the tendency of (neoclassical) economists to see the world in terms of:
- demand and supply operating in equilibrium,
- competitive markets, and
- rational, self-interested behaviour
When, instead, the world:
- is in flux,
- has markets restricted in location and time, with many non-price mechanisms for market clearing, and
- considers altruistic behaviour as a critical component of social life
Taken from James Kwak’s Economism:
1. Economism’s claim is that the minimum wage causes unemployment and harms poor people. The more likely reality is that the minimum wage has little impact on unemployment and reduces poverty.
2. Economism’s claim that people’s earnings are closely based on the value of their work. The more likely reality is earnings are very roughly related to productivity and highly dependent on bargaining power
3. Economism’s claim that reducing tax rates on labor causes people to work more, increasing economic growth. More likely reality is tax rates have a small affect on work, primarily for married women.
4. Economism’s claim that reducing tax rates on investments causes people to save more, increasing economic growth. More likely reality is savings rates are not affected by tax rates around current levels.
5. Economism’s claim is that cost sharing [with insurance] causes people to make smarter choices, reducing waste and improving health. More likely reality is cost sharing causes people to spend less on all types of care, sometimes harming their health.
6. Economism’s claim is that competitive markets are the best way to give high-quality affordable healthcare. More likely reality is countries with universal government sponsored systems have lower costs and equal or better outcomes.
In financial markets:
7. Economism’s claim is that people only buy financial products that are good for them. More likely reality is many people make poor choices about complex products, such as option ARMs
8. Economism’s claim is that complex financial products improve the allocation of capital. More likely reality is that extreme complexity can produce excessive risk-taking and systemic instability
In international trade:
9. Economism’s claim is that international trade makes everyone better off. More likely reality is that international trade may benefit people on average, but make some people much worse off.
10. Economism’s claim is that free trade agreements contribute to overall prosperity. More likely reality is that some free trade agreements have less to do with free trade than with corporate rights.
Kwak, J. (2017) Economism: Bad Economics and the Rise of Inequality, Knopf Doubleday Publishing Group, ISBN: 1101871202, 9781101871201. Available on Google Books.