by From Peter Radford OK, let me get back to it: I have just read a set of short papers over at a journal aptly named Democracy. The papers are held together under the banner:Symposium: has Economics Failed Us? Naturally that question was sufficient to get my attention, but reading through the material was so depressing. Why? Because there was Jason Furman offering a defense that has all the hallmarks of an economics profession steadfastly denying its own reality. Dean Baker was brilliant in laying down the gauntlet: his analogy was perfect. He suggested that economics has become akin to an incompetent firefighting team. They sort of have useful ideas about how to put out fires, but fail spectacularly when called upon to do so because they are burdened by too much irrelevant or
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from Peter Radford
OK, let me get back to it:
I have just read a set of short papers over at a journal aptly named Democracy. The papers are held together under the banner:Symposium: has Economics Failed Us?
Naturally that question was sufficient to get my attention, but reading through the material was so depressing.
Why?
Because there was Jason Furman offering a defense that has all the hallmarks of an economics profession steadfastly denying its own reality.
Dean Baker was brilliant in laying down the gauntlet: his analogy was perfect. He suggested that economics has become akin to an incompetent firefighting team. They sort of have useful ideas about how to put out fires, but fail spectacularly when called upon to do so because they are burdened by too much irrelevant or wrongheaded other ideas.
Worse Baker cites an example of how convoluted and inward looking economics has become: he tells us about a paper that ended up being published by Brookings only after his collaborators [Brad DeLong and Paul Krugman] added sufficient, and irrelevant, complexity to it that editors could take it seriously.
Form, it seems, wins over function every time. Someone is not a serious economist without the right accoutrements no matter whether all that dazzling complexity is relevant. Professional advancement, prestige, and success have to be bought by ensuring that even the simplest insight is made inscrutable to outsiders. Ultimately this leads, and has led, to self-delusion. Economics deserves to be laughed at precisely because it has become laughable. The sad part is that its practitioners, most of whom are honestly toiling away at something they love, do not understand what there profession looks or sounds like from the outside. They are reduced, by their well-meant self-belief, to defend what is an increasingly indefensible exercise.
Which is what Furman does.
He is good. He really is. But he is wrong.
He deploys what I now call the Diane Coyle defense. This is simply to counter-attack critics by saying that economics is on the march across such a wide front with exciting new research popping up all over that any attack on it will surely miss. There is just so much good stuff that no one can possibly keep up. Furman admits he has a hard time himself. There is promise that new research will look into the connection between inequality and slowing growth. Others are just now penetrating into the thought that rent-seeking may be a problem. There’s even research into the possibility – yet unproven – that oligopolies can depress wage income. We are getting brand new research into how a “liquidity shock” might slow growth after a major recession. And so on.
The problem with all this is that none of these initiatives are especially new. To an untrained eye and expressed in simple language they are all rather ho-hum. After all isn’t it pretty obvious that one of the objectives of of establishing an oligopoly is to suck wealth out for the oligopolists? Or that a victim of that endeavor might be the wages of workers? Does this all really need “new” research no doubt steeped in extra-fancy math? Or does it simply require a conversation with someone in business who has worked on it?
If this is the “new and exciting” cutting edge frontier stuff of economics, then its blade is extraordinarily rusty and blunt.
Also: I am tired of reading about economists who have spent their entire adult lives researching on some “cutting edge” topic like the effectiveness of monetary policy at the zero-percent boundary. Great. More power to them. The problem is this: [a] that work apparently didn’t penetrate into policy thought very well; and [b] that lack of penetration is stark testament to a profession incapable of moving at the same pace as the very economies it purports to understand. Economics seems doomed to interpret the past rather than explore the current. Is it, then, simply history?
In any case: the Innovators Dilemma is alive and well within the very discipline that lauds innovation as a driver of wealth.
How apposite. Bureaucratic malaise has engulfed even those who scorn the dead hand of bureaucracy and its job-killing ways.
One last thing: defenders of economics like Furman and Coyle need to realize that their defense can be turned against them. Far from being a defense it is a weakness when they toss out long lists of great new exciting stuff going on. Especially when they then argue that this surfeit of stuff defeats their critic’s claim of the homogeneity of economics. That merely opens them to the return question: just how much are they up-to-date on all the even more exciting stuff going on in the heterodox world? Tit-for-tat. Are they even aware of the scope and endeavor of the effort out there beyond the hallowed bureaucracy of the mainstream? Have they read any of it? Any at all?
If they had then they would be less bullish on some of the stuff they proclaim as new and fresh. Much of it is established and old hat out here in the pluralist world.