Saturday, August 29, 2015

Economics really needs better critics

Per Byland recently complained that economists had killed economics

What we have seen over the course of the last eighty years is a systematic dismantling of the contribution of economics to our understanding of the social world. Whatever the cause, modern economics is now not much more than formal modeling using mathematics dressed up in economics-sounding lingo."
I’m not sure that Bylund and Michael Lind would agree on much, but Lind also has seen the destruction of economics

 Before World War II, economics — the field which had replaced the older “political economy” — was contested between neoclassical economics, which sought to model the economy with the methods of physics, and the much more sensible and empirically-oriented school of institutional economics. Another name for institutional economics was the Historical School. After 1945, the institutional economics associated in the U.S. with John Kenneth Galbraith was purged from American economics faculties, in favor of the “freshwater” (Chicago) and “saltwater” (MIT) versions of mathematical economics, which focused on trying to model the economy using equations as though it were a fluid or a gas.

Either Bylund and Lind are completely out of touch with what economists are doing now or I am. Their critique of economics is an old one. I’m not sure it ever really applied, but it does not now. The American Economic Review and other top journals are full of empirical research, not lots of new papers about General Equilibrium.   

What sort of work do economists admire? Here are the John Bates Clark medalists since 1990. How many are known as pure theorists and how many are known for the empirical research?

Bylund and Lind seem to think that economists all aspire to be Samuelson, Arrow or Debreu. Yes formal models with lots of imposing math are still to be found, but more often than not they lead in to empirical research.

Are there things that economist can do better? Yes. I, for instance wish that economists would give as much attention to the evidence that they use as they do to the formal model and the choice of econometric techniques. On the topic, Mary and I have a paper on “The Historian’s Craft and Economics” that I am happy to say was just accepted by Journal of Institutional Economics. I also wish they would give more attention to history generally, but I’m not really an unbiased source on that topic. 

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