Mankiw: The Scientist is also the Philosopher

In his New York Times post today, Harvard economics professor Gregory Mankiw wrote that the “dirty little secret” of economics is that policy recommendations nearly always include political viewpoints as well as economic analysis. While this should come as no surprise to Michigan economics students, it does present a serious discussion of how economic data is presented.

Mankiw brings up the Democratic position as being for societal good. Decisions are made that may not be beneficial for all, but can help a majority. To demonstrate this, he gives two moving examples.

“Imagine that you are on a bridge and see a runaway trolley car below you, hurtling toward three children playing on the tracks. A fat man is standing next to you. You can push him off the bridge and into the path of the trolley, killing him but saving the children. What do you do?”
– Mankiw (2014)

In this scenario, with relatively clear protagonists (innocent children) and what Mankiw paints as an antagonist (a fat man – note that including the description of being fat does nothing but decrease the value Mankiw wants to portray on this man’s life), Mankiw argues that many wouldn’t hesitate to save the children. However, he gives a second example that makes the decision cloudier.

You are a doctor with four dying patients. One needs a new liver, one needs a new heart, and two need a new kidney. A perfectly healthy patient walks into your office for his annual checkup. Are you still willing to pursue the utilitarian course of action? – Mankiw (2014)

In this second example, Mankiw argues that it is harder to make the decision to sacrifice one person’s life for others due to his natural rights. So how can we translate these sensitive personal decisions into a person’s economic beliefs? Mankiw references the Affordable Care Act, which ended many people’s perfectly good health insurance plans in order to make insurance available for others. For some, especially in rural areas, insurance costs have increased by more than 100%. Small businesses have had to significantly add to their expenses by offering insurance to their full-time workers. Overall, the question for what to look at comes back to whether the ACA was a utilitarian decision – helping Americans get access to previously inaccessible coverage – or unfair to people perfectly happy with their coverage.

With so much data, it is more important than ever to understand the motives behind the numbers. Has the data been “cooked” to fit the argument? One example that I believe is a perfect example is the argument for increasing the minimum wage. Even in our class blog, articles have been posted which reference data supporting both sides. My own prior post references that a raise to $10.10 would reduce the quantity of low-wage jobs by 16%. This recent revised post, on the other hand, argues that the same increase wouldn’t reduce the amount of jobs available. In both cases, Mankiw is spot on when he stresses the importance of understanding the purpose of the data before interpreting the results.