Strong Claims Need Strong Evidence

In every semester of teaching Principles of Microeconomics, there is a common question that I pose to my students on exams. This question revolves around a scenario where Joe, an employee at a local supermarket, notices a situation where the price of oranges increased from $0.75 to $1.00, and the quantity sold also increased from 200 to 400. Joe then questions the validity of the law of demand, stating that the price increase led to an increase in quantity demanded, thus suggesting that the law of demand may be incorrect.

The correct response to Joe’s statement lies in understanding the concept of ceteris paribus, which means holding all other factors constant. The law of demand states that, all else being equal, as prices rise, the quantity demanded will fall. In Joe’s case, the observed increase in both price and quantity demanded can be explained by an increase in demand. When there is an increase in demand for a product, buyers are willing to pay more for it, leading to both higher prices and higher quantities sold.

This question serves as a pedagogical lesson to emphasize the importance of being skeptical when someone claims to overturn a scientific law. The law of demand has been tested and validated over time, with numerous examples supporting its validity. As noted by George Stigler in The Theory of Price, the absence of exceptions to the law of demand is not due to a lack of effort in trying to find them. Any economist who could provide robust evidence overturning this law would receive significant recognition and acclaim.

When it comes to economic commentators making claims about the negative impacts of international trade on America, it is crucial to apply the same level of skepticism. Millennia of evidence and experience suggest that trade strengthens nations, and turning away from it weakens them. Claims that contradict well-established economic principles, such as the law of comparative advantage, require substantial and rigorous evidence to be taken seriously.

While scientific knowledge is constantly evolving, overturning established economic laws like the law of demand or the benefits of international trade requires extraordinary evidentiary backing. Historically, attempts to challenge these laws have lacked scientific merit and often proven to be false. The examples of John Snow, Louis Pasteur, and Robert Koch overturning miasma theory serve as a reminder that scientific understanding can evolve, but it requires substantial evidence to do so.

In conclusion, the law of demand and the benefits of international trade are well-supported by evidence and experience. Any claims to the contrary must meet a high standard of evidence to be considered valid. As with any scientific law, skepticism is warranted, but so too is the recognition of the robustness of established economic principles.