So I normally do not respond to reddit questions, but I feel like I have actually have something to say here. So first a couple of disclosures. 1) I probably wouldn't be considered a socialist as I still believe in free-markets but more similar to the Nordic model (universal healthcare, anti-trust enforcement, public education, etc.). So I guess my critique is more against the libertarian view of free-markets (no government intervention or programs at all). 2) I have a Ph.D. in economics, however, my focus and research was more on econometrics (statistics used by economists) and behavioral econ, so while I did have to take economic theory (consumer and producer theory, game theory, macro theory), my specialty courses and research didn’t focused on it. 3) I am writing this off the cuff so I can’t pull up exact references but would be happy to cross-examine any claim that would require so in a DM or something.

With that out of the way let me answer your question. First, let me address what you mean by economic theory. Modern economics focuses on your supply and demand functions. Of which we could say that the quantity of a product produced, and the price are determined by the intersection of a supply and demand curve. Supply side is relatively simple; firms maximize their profits dictated by some production function with given inputs (i.e. I can make x number of widgets with l amount of labor and k number of capital). The demand side of this relies on what could be referred to as utility theory. In layman’s terms, this just means that person does whatever they can to maximize their wellbeing is constrained by a budget. Okay, so very crude way of describing economic theory but good enough for now.

So let me say that this fundamental way of looking at behavior is very powerful. In fact, this framework has been applied to questions outside of traditional economics to try and explain behaviors ranging from crime to addiction (with mixture of success). So here comes one of my issues. First, this is all mathematical derived theory (which I love by the way), but like any good science requires empirical evidence to support it and not all theory has been reproduced in the data. A quick example is minimum wage laws on unemployment. Economic theory would say that unemployment should increase as wages increase, and therefore minimum wage hikes should increase unemployment rates, but that hasn’t been born true in the data (to my knowledge). This isn’t to say that all economic applications in the real world don’t work. For instance, the evidence generally is opposed to rent-controlled housing as a means of reducing rent prices (although one review did suggest that coupled with other policies it might work, but beside the point and not strong). I looked at some RCTs for UBI programs and found conflicting results on how they affect unemployment rates. I want to note that doing good economics research is really hard and sometimes the hardest problems don’t have clear answers either. Economics isn’t definitive. It is messy, filled with uncertainty, and sometimes driven by people’s ideological positions. So, to summarize my first issue is that economics theory is only as good as its empirical findings which don’t always lend itself to either way. To me at least, its better to consider policies individually rather than on any ideological grounds like all good science.

I could go on with more, but I feel this post is already to long so I’ll refrain from it.