Myths structure our perceptions of history and of
reality by providing guiding narratives that help
to create, define and bond communities, most
typically by giving them an origin and a destiny.
Patricia Fara.1
On his New York Times blog in 2008, Steven Levitt dubbed Robert Jensen “the
Indiana Jones of economics” and, with that persona, Jensen recounted how he and
his colleague Nolan Miller had succeeded in finding “an elusive fabled prize shrouded
in mystery [and] travel to far-off lands”. They had been searching for a “verified
example” of a “violation of one of the most sacred and holy laws in economics”, the
possibility of which had “excited and intrigued economists for over a century”. Other
economics blogs were also enthusiastic, if perhaps not quite so effusive, about the
quest.2
The occasion for the excitement was a paper by Jensen and Miller, published
in 2008 by the American Economic Review, reporting the results of a field experiment
which they characterised as providing “the first rigorous, empirical evidence of real -
world Giffen behaviour”. The experiment, which involved subsidising the purchases
of rice and wheat by poor households in China, removed the “minor embarrassment“
that economists had been unable to provide convincing evidence for their theoretical
argument that the “Law of Demand, while descriptively valid in many situations, may
not apply to the very poor facing subsistence concerns.” Although Alfred Marshall
had “first publicized this idea in the 1895 edition of his Principles of Economics” using
the example of bread, and a discussion of Giffen behaviour could be found in
“virtually every basic economics course”, empirical confirmation had been lacking for
Marshall’s “conjecture”. If subsequent work had indicated that the “demand for
neither wheat nor bread was upward sloping in Britain during Marshall’s time”, the
“standard textbook example of a Giffen good, potatoes during the Irish potato famine
of 1845 – 1849”, first published in Paul Samuelson’s Economics, was now
“discredited”. More recent laboratory experiments on the topic were of little use as
their conditions were “far removed from reality”, while other econometric work
suffered from specification problems. Jensen and Miller concluded, however, that
“the absence of previously documented cases most likely results from inadequate