Reich argues economics is just 'political economy.' But positive economics works hard to establish facts without value judgments intruding

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Robert Reich, Bill Clinton’s secretary of labour and currently a professor of public policy at UC Berkeley, is on a campaign to de-bunk myths about economics. The first video criticizes the concept that “economics is objective.” If it’s representative of his 10-part series, I won’t be spending any more of my scarce time on his junk science.

Perhaps because of Reich’s rich inter-disciplinary training in politics, philosophy and economics, his definition of economics is distorted: “if you want to understand economics, you have to understand politics and morality — the three are intertwined.” There’s some truth in that. “Normative” economics is value-based, asking questions like: what type of society do we want? what is the best tax structure? should housing be free?

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But what’s critical — and Reich misses entirely — is “positive” economics, which is the value-free, basically objective study of how people allocate their scarce resources. If the price rises for a product, how much does consumer demand fall? How much more are firms willing to produce? If governments run deficits, what impact does that have on employment and inflation? Values have very little to do with such “what happens if?” questions.

Ultimately, what does happen comes down to the problem of........

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