Might I also add that claimng that economists assume ex hypothesi that “markets work as they are supposed to” is almost the reverse of the truth – if that was all economists had to do the subject would lack both intellectual and empiric interest. In fact, economists spend most of their time studying market failure – that is, why markets don’t work perfectly and what, if anything, can be done to make them work better. Free-market economists (of whom I’m not one) generally argue for non-intervention on the grounds that in real life the cure of intervention carries unintended consequences which are worse than the disease – they parody Churchill’s defense of democracy in saying that the market is the worst system possible except for all the others.

Whether that’s the best way to think about this is exactly what’s at issue. It may be right that these processes are market failures. Or it may not. You can think about the problem without conceptualizing it either as a market that’s failing to happen or as a process driven by rational individual choices under perverse circumstances. Doing so lets you ask different questions, and focuses your attention on different issues.

claimng that economists assume ex hypothesi that “markets work as they are supposed to” is almost the reverse of the truth

Actually, I didn’t claim that at all. I said that a certain sort of economist tends to think that way. And other economists (like the ones I was explicitly contrasting that sort with) don’t do this. In my experience, the closer an economist is to the data, the less likely they are to want to make heroic assumptions about markets. (It’s an unfortunate fact about economics that being closer to the data also tends to be bad for one’s status, though. E.g., labor economists.)

Free-market economists (of whom I’m not one) generally argue for non-intervention on the grounds that in real life the cure of intervention carries unintended consequences which are worse than the disease

The gap between this view and the tendency to think markets work as they should is small: if you believe intervention hardly ever does any good, you will be more likely to try to identify ex post what set of rational choices might have brought a particular situation about. (Incidentally, my original post didn’t make any claims about free markets vs intervention.)

“Studies like Bertrand & Mullainathan’s upset economists because, according to the prevailing view, only education and skill (ie, “Human capital”) differences should matter to employers, who after all are supposed to be rationally looking for the best workers for the lowest price in the labor market.”

are misleading at best. Only estimated education and skill (potential productivity, actually – which is not quite the same) should matter to employers. In the economic model of discrimination this difference is what leads to individually rational, but socially sub-optimal, decisions by employers.

Its true you didn’t put all economists in the ‘market fundementalist’ category – but my point is that you have mis-characterised even these fundamentalists. Whatever their views, no-one likes to see markets fail because it means a loss of human welfare. But I know no working economist, even the most right-wing ones, who would deny the fact that markets do fail – they are never perfect and sometimes very imperfect. People mainly differ (albeit strongly) on what can be done about it.

To fail to understand this is to risk setting up straw men – something that is, alas, all too popular in political debate.

Devah Pager won this year’s Dissertation Award from the American Sociological Association. (I wrote about her work last year, and it’s worth mentioning again.) Devah studies the effect of incarceration on labor market outcomes, a topic whic…