The Chronicle of Higher Education
has just published an astoundingly ignorant and confused piece
about the state of modern economics.
To begin, note that the article avoids asking a very important question: what are the optimal boundaries of academic disciplines? This question would seem to be of interest to readers of the Chronicle of Higher Education
but is not even touched on by the article. Unlike some other social sciences - sociology and political science come immediately to mind - economics as a discipline does not spend a great deal of time engaged in long-running internal debates about methodology. Instead, because mainstream economics (which means well over 90 percent of the profession - and probably more than 95 or even 99 percent) shares a single, but broad and flexible, empirical and theoretical methodology, it can devote its attention to advancing the state of knowledge rather than to methodological in-fighting. I think a strong case could be made that the lack of internal methodological strife has been an important contributor to the relative success of economics as a discipline in recent decades.
On a separate, but not unrelated, point, does it really make sense for economists to try and become second-rate sociologists or psychologists? Or does it make sense for economics to teach economics, and leave the sociology to the sociologists and the psychology to the psychologists? This is not to say that economists should not pay attention to what is going on elsewhere in the social science, but rather to say that there is value in specialization. Moreover, students are free (and, indeed, in most universities, required) to take courses in a variety of disciplines. Surely it is optimal for them to get their sociology from the sociologists rather than from the economists? This is another important and interesting issue that is completely missed by the author of the Chronicle
The article then provides some real howlers:
Critics call this ideology "free-market fundamentalism," and it rests on certain core tenets: The market is the most efficient way to allocate resources; people generally make rational decisions when buying goods and services; and government regulations are to be minimized because they risk undermining purer market forces and can lead to corruption.
Embraced by presidential administrations from both political parties, this view of economics is most often associated with prestigious academic departments in the Ivy League, at Stanford University, and the University of Chicago. But it has devolved into dogma, critics say.
Critics want an alternative vision—or visions—of the discipline to be more widely accepted. "We need an economics that aims to secure long-run human well-being, not an economics preoccupied with maximizing short-run output and profits," reads the mission statement of a new group, called Econ4, which was started at the University of Massachusetts at Amherst in September.
I must have missed all those administrations that embraced a "free market ideology". Last I looked, the government just keeps getting bigger, politically connected businesses keep getting their subsidies, politicians kept arguing for, and acting on, the view that demand curves don't slope down and so on. Oh, and just in case the author of the Chronicle
piece is unaware, it may be helpful to note here that subsidies to politically connected businesses are not a neoliberal or a classical liberal sort of enterprise.
And where is this economics that is "preoccupied with maximizing short-run output and profits"? I have somehow missed that entire part of the discipline despite spending 31 years as a student and teacher of economics. How about all those life-cycle models one finds in labor economics? What about all those models in macro that emphasize expectations of future events? What about the whole debate in the economics of climate change on what the appropriate discount rate should be? In what sense are these types of models and sorts of discussions, which dominate large parts of the discipline, about the short run? It is not surprising that the undergrads in Econ4 do not know about the literature, and cannot distinguish between model assumptions designed to describe behavior in a positive sense and the normative goals underlying intellectual inquiry in economics, but shouldn't someone who writes about economics for the Chronicle of Higher Education
know at least something about the literature and shouldn't such a person be able to manage basic distinctions between normative and positive?
And what about this idea that "free market fundamentalism" is primarily associated with top-ranked departments? That is simply a bizarre notion and the author, rightfully given that it is incorrect, does not offer any evidence for it. So then why make the claim? Shouldn't someone writing about economics for the Chronicle
know even a teeny, tiny bit about how the academic side of the profession works?
And then there is the math:
Part of the problem is that they have embraced mathematics too fervently, according to one view. This embrace has bolstered the prestige of the discipline, making it appear more intellectually rigorous and academically selective. But it has also made economics more abstract and divorced from the illogical or inconsistent ways that people, and large groups of people, can behave.
This simple statement covers a multitude of misunderstandings. First, the point of formalism (of which the use of mathematics is but one manifestation) is to make sure that what is being said is logically consistent and to make sure that what is being said is correctly transmitted from writer to reader. These are noble and reasonable goals, ones that should be embraced by sensible people of all viewpoints. Sometimes, to be sure, economists formalize more than is required and such excess formalism is rightly criticized. But formalism per se should be uncontroversial in any discipline that purports to advance knowledge.
A second implicit claim is that economics does not pay attention to behavior that would be "irrational" in the sense that economists use that term in a world of full information and zero information processing costs. In fact, entire sub-fields exist to study the economics of information and the economics of limited information processing costs. The latter goes by the (unfortunate and misleading) name of behavioral economics. The rapid rise of behavioral economics is testament to the ability of economics to creatively respond to weaknesses in existing models that have been highlighted by compelling empirical evidence obtained using econometric methods. Its existence as a popular sub-field, whose influence is felt throughout the discipline, contradicts the claims of intellectual rigidity made by the critics cited in the article.
Finally, there is this claim:
"The problem is that their view of how to think like an economist is extremely narrow to the point of being cut off from some of the major questions affecting society," Mr. Epstein said. "In the end it is a form of indoctrination."
This broader claim is easily dismissed by simply checking the table of contents of any field journal in a field not concerned with tool building, which is to say any field other than high theory or theoretical econometrics. For example, consider the table of contents of the Winter 2011 issue of the Journal of Human Resources
, one of the two leading journals in labor economics. The articles address topics such as racial differences (the first three papers!), the effects of conditional cash transfers for the poor, school quality and teacher qualifications, pollution, infectious diseases and pensions. Pretty irrelevant stuff there, yep. Sure sounds like a profession full of market fundamentalists bent on indoctrination, yep.
The article ends with a discussion of ethical misbehavior by a small number of economists. Their behavior is rightly condemned, but neither their behavior nor the ethical and organizational issues it raises has anything to do with the point of the article, which is about methodology. Karl Marx was by all accounts a jerk. Hayek, as we learned from David Warsh a couple of weeks ago, was not very nice to his first wife. From the standpoint of economics, so what? What matters from the point of view of a discussion of economic methodology
, is the ideas, not the imperfect humans who write about them.
Finally, it is worth noting that one of the leading heterodox views within the discipline (as measured by academic adherents or popular influence), namely Austrian economics, would hardly satisfy the lefty protesters at Harvard or U Mass Amherst. The Austrians drop the math, and much of the applied econometrics as well, from neo-classical economics, but they love markets, and hate government, in a way that would make most neo-classical economists blush, at best. A thoughtful article on heterodox economics would have done more to highlight the critiques of the Austrians and to note that their views and presence in the profession make clear that debates about the role of mathematics or of applied econometrics in economic research are largely orthogonal to concerns about political bias.
In sum, it is hard not to conclude that at least some of the critics cited in this piece (and perhaps its author as well) prefer to tear down economics by citing unrelated ethical lapses or by complaining about the math, or about mysterious asymmetries of power and influence, because they know they cannot win honest and straightforward debates about the substance. That's too bad, as serious intellectual discussion and reflection on these issues could be both illuminating and useful.[I should note that I excuse Folbre and Margolis from this criticism - my sense from what I know of their work beyond the sound bites in this article is that they are serious scholars, though obviously we disagree about many things empirical, political and methodological.]
Shame on the Chronicle
for publishing such a thoughtless and uninformed piece of rubbish on these important and interesting issues.