by From Peter Radford Is it a cult? Is it a guild? Both perhaps? I remember reading sometime not long ago that Steve Levitt was leaving Chicago. Two things stood out in the article bringing that news: first, Levitt said he was concerned that economics was becoming irrelevant; second, someone had told him he was not doing ‘proper economics’. Here’s a clue who that someone was: Heckman. Then, more recently, the Financial Times editorial page accused the economics discipline of becoming a closed shop. And like most closed shops it was stifling creative thinking, it was resistant to change, and was generally becoming … irrelevant. What a shock. Mario Rizzo then had a letter published in the FT hammering the point home. Economics is, indeed, a closed shop. He teaches at NYU and has an
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from Peter Radford
Is it a cult?
Is it a guild?
Both perhaps?
I remember reading sometime not long ago that Steve Levitt was leaving Chicago. Two things stood out in the article bringing that news: first, Levitt said he was concerned that economics was becoming irrelevant; second, someone had told him he was not doing ‘proper economics’.
Here’s a clue who that someone was: Heckman.
Then, more recently, the Financial Times editorial page accused the economics discipline of becoming a closed shop. And like most closed shops it was stifling creative thinking, it was resistant to change, and was generally becoming … irrelevant.
What a shock.
Mario Rizzo then had a letter published in the FT hammering the point home. Economics is, indeed, a closed shop. He teaches at NYU and has an inside look at things.
These sorts of rumblings suggest that things are not well within the fortress of mainstream economics.
Good. Because, from the outside, it’s all looking a bit worn, tired, and generally … irrelevant.
Let’s deal with the obvious first.
Economics acts akin to a guild. Its great and good patrol its boundaries and set the rules. They decide what is and what is not ‘proper economics’. They create an intellectual hierarchy to protect their thinking from attack by upstarts. And they are the conduit through which the public receives what the discipline has to offer — suitably sanitized of heresies of course.
Outsiders might find it highly ironic that the discipline that advocates the virtues of free markets, competition, and the inevitability of the consequent slide towards maximal welfare, protects itself from all those things by erecting barriers to entry, peer review, tenure, and the closure that the FT was berating. Economists advocate one thing, but act a totally different thing in their own lives.
The hypocrisy has an odious stench.
This ambivalent ethical stance is multiplied in its social impact because economics and its theories pop up all over the place and is presumed by those acting upon its advice to be the best available thinking. From central banking to industry to policy making, economic advice forms a key part of our social discussion. It alters people’s lives. It can have profound impact on the welfare of the nation’s citizenry. There is an implicit social contract between the opinion generators and the consumers of those opinions. Society relies on their value or veracity.
That they emanate from within a tightly managed and deeply entrenched academic guild hell-bent on protecting its member’s reputations and intellectual investment in their lifetime of study, suggests an occasional refresh is in order. There is no inevitability in society’s tolerance for listening to advice that appears, occasionally at least, to be ideologically unbalanced.
This is especially true when we take into account the discipline’s lamentable performance.
The entire arc of economic history in the modern era has posed two essential and socially imperative questions: why does growth occur? And how is the wealth, thus created, distributed? There was a time when those questions were uppermost on the discipline’s agenda, but repeated failures to come up with generally accepted answers forced it to take a different tack: it narrowed itself steadily down to focus only on the logic of choice. It even abandoned distribution — in its inner sanctum — as being a subject worthy of consideration.
It is from this diminished perspective that economists occasionally launch their famous socially offensive statements. Dynamic pricing is great for economists. Those famous charts prove it so. Outsiders who favor fairness over ‘efficiency’ disagree, but , as if to taunt the public, the economist John Cochrane wrote an article headed ‘In Favor of Price-Gouging’. Likewise we are told that the great laws of supply and demand are responsible for the allocation of resources across the globe — so executives are not responsible for shifting jobs overseas. Indeed, according to Arnold Kling, anyone who advocates that executives are so responsible is merely displaying their ignorance.
Notice the haughty provocation. Notice the casual dismissal of anything falling outside the logic of choice. Fairness? Don’t be silly, that’s a soft and unscientific concept. Economists are scientists, they theorize about sharp and clear concepts like efficiency and scarcity. Just don’t ask too much about those assumptions needed to make the math work. Oh, and definitely don’t ask what ‘capital’ or ‘labor’ consist of. Just know that they are rigorously and battle tested quantities. Just like total factor productivity. Honestly.
This from a discipline that argues there is no involuntary unemployment.
This from a guild that refuses to act according its own theoretical advocacy.
Strange things happen when a guild gets closed for so long and thus so comfortable with itself.
Take, for instance, Brian Albrecht’s provocative article arguing that there is no such thing as ‘supply’. This might astonish the millions of students who have been taught otherwise … but, logic. Ad absurdum. Albrecht dazzles us with is wit and knowledge by following the trail of his logic to its inevitable conclusion. The real tension that produces prices is not that between supply and demand, but between competing elements of demand. The consumer with the more urgent demand and thus willingness to pay a higher price, wins. So, we have to assume, Ford Motor Company manufactures cars because it demands them and only sells them when it encounters someone willing to pay a price above Ford’s valuation of the car. Really?
Guilds can get wobbly at times.
When you are willing to go to the most extreme end of the logic you believe in — just to show off your willingness to flaunt its logical powers — you become extreme yourself. You become a cult member.
The question this raises for the rest of us is: do we bother listening to all this? Is there value in it as we tackle our social problems?
Or was Galbraith right when he said that the true value of economics is that it keeps economists employed and off the streets.
What else is it good for?
Other than a good laugh occasionally?