Should Economists Think About What They Do?

by Mario Rizzo  

Believe it or not, this is a controversial question!

Brad DeLong has argued that the profession seems to know less today about macroeconomics than, say, Keynes did. Paul Krugman has expressed similar sentiments. They see a kind of collective or professional unlearning in the past thirty or forty years. They are right.  

While I am not a Keynesian, I would agree that the economics of Keynes (and Keynesian economics!) is more relevant to the present crisis than the graduate macroeconomics taught in most high-level departments today.  

I’d also suggest that the business cycle analysis of F.A. Hayek is also more relevant than today’s macro-theory.  

By “relevant” I mean, in both cases, that the issues addressed and emphasized are keys to either understanding what is going on or making progress in so understanding. Hayek asks us to consider the role of resource misallocation. Keynes asks us to consider the role of radical uncertainty. Mainstream macro is silent on these issues. In fact, much of it recognizes no connection between financial markets and the real economy. 

I am not saying that there is some grand synthesis of Hayek and Keynes that will yield truth. I am saying that these economists raised the fundamental issues. They are relevant.  

In my post below, I speculated that the unlearning that has taken place might not be an accident. It might be that in rigidifying their standards of what it means to “know” economists have actually thrown away knowledge. I may be wrong on the cause.

But then what is the cause?  

This process has been going on too long to be a minor problem subject to tweaking. No economist would say about an economic phenomenon of forty years duration that it was just a blip on the proverbial screen. 

I am asking that macroeconomists think sophisticatedly (philosophically) about their method. What is wrong with this? Aren’t we supposed to be intellectuals?

Now tremendous resistance is out there. The macroeconomic top-brass will not admit to so fundamental a mistake easily. And their students are afraid to challenge them in this way. Perhaps events will succeed in stirring up the pot.

7 thoughts on “Should Economists Think About What They Do?

  1. Truths are often dismissed by those who seek something more. Intellectuals hate being wrong, and they will not throw the dice until they have some assurance of the outcome, (or at least an excuse). Knowledge is lost when it is perceived as being too risky, when the prevailing methods do not justify its acceptance.

  2. The problem I see with the economics discipline is that it defines itself in terms of a methodology. The economics profession has for years studied rational decision making. This is why it makes sense to study “the economics of marriage.”

    Economists should instead define their discipline in terms of understanding how economies work. This would open up a much broader discussion of ideas.

  3. Stephen,

    This is true. And it is not recent. Gary Becker defined the economic approach in terms of method at least thirty years ago. Interestingly, economics has maintained its connection with reality in his hands. But others, less skilled than he, have let the reality part slip by. This whole topic would make an interesting article.

  4. The key error goes back to Lionel Robbins and Ludwig Mises.

    Hayek, Menger & Smith had it right — economics is “about” providing a causal mechanism to explain global economic order which displays a “design-like” pattern, but which lacks a designing mind (a problem similar to the parallel problem tackled by Darwin in biology).

    Robbins and Mises utterly changed the profession when they stipulated that economics was “about” explaining individual behavior — they mistook a building block used in the explanation of global economic order for the very topic of economics.

    The profession of economics has never recovered from this error.

  5. Greg,

    There is a subtle point here. Robbins thought that economics dealt with an *aspect* of all behavior — allocation of scarce means, etc. This is not quite defining economics in terms of its method since, for example, there is a big difference between the so-called logical method and the methematical method. Nevertheless, I will grant that it doesn’t take much to go from Robbins to Becker to Lucas to…

  6. I disagree with your view that “this is a controversial question!”.

    I think it would helpful in such discussions to make a distinction between the many very different types of methodological thought. I sometimes use the terms “applied methodology” and “philosopher methodology”, but there are better distinctions than that. Some types of methodological thought/debate are encouraged, common, and valued, others aren’t. I’d have to come up with the terminology needed, and adopt much more precise terms than “method” and “methodology” to get more detailed.

    An economist is supposed to include some form of their “a.m.” in their paper. When the paper is judged for quality, not quantity, judging the “a.m.” is part of that. Papers in the same journal can vary and disagree in their “a.m.”, and there is regular contemplation and debate of “a.m.”, which is hard to pick up on unless you’re involved in it or following it closely in the language in which it is being conducted. The type of methodological thought that is encouraged, always happening, is the sort that is more relevant to the process of making a contribution to economics (of a sort that is currently valued by professors and journal editors). There is some writing in philosophy of social sciences that could be called “methodology” that is not bad or wrong, and very interesting to some, but that should not be advertised as helpful for an economist, and won’t make a difference when we’re judging someone’s economics paper.

    I don’t think there’s any economist who takes the position, and behaves accordingly, that it does not matter what one does, and one should just do anything, as long as they are doing something. No economist, in my view, takes the position “methodology does not matter”, unless you restrict so severely what you mean by “methodology” so as to exclude the decisions made by all of the economists who’ve ever made good contributions. Certainly no such view is, or has ever been, my position, although I am not an economist.

  7. When I started my undergraduate degree 20 years ago, I learnt very little of practical value that I put to use now as a government economist. Grad classes taught us what national accounts were, but not how to use them, how to understand them. We never learnt about discount rates, net present values, net grant equivalents. We learnt about unemployment, but not about long term unemployment, job search, barriers to worklessness. And there was very little analysis of ‘an economy’ in terms of looking at structural weaknesses.

    I was saved by doing a masters in political economy in a politics department that showed me the links between policy and theory in economics. I learned what I learned through self teaching whilst completing a Ph.D and then on the job.

    I’ve heard that grad economics is little different these days, although reviewing Brad de Long’s lecture plans and notes, he actually does a lot of economic history and policy work.

    And really – not many lecturers had ever spent any time in a policy environment or working in a practical sense. Here in the UK, there is no integration between the academic and professional worlds. They are entirely seperate.

    What you need to be a good economist is to learn the context and to apply economics to the real world. Theories, methodology – might as well become a software programmer not an economist.

    What strikes me currently is the silence from the academic economists in the current recession. Journalists have taken over, but they are so poor in terms of their explanation, insight and polemnics.

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