Economists aren’t ‘superior’ just because

by Henry on December 2, 2014

Marion Fourcade, Etienne Ollion and Yann Algan’s forthcoming piece on the ‘superiority of economists’ is a lovely, albeit quietly snarky, take on the hidden structures of the economics profession. It provides good evidence that e.g. economics hiring practices, rather than being market driven are more like an intensely hierarchical kinship structure, that the profession is ridden with irrational rituals, and that key economic journals are apparently rather clubbier than one might have expected in a free and competitive market (the University of Chicago’s Quarterly Journal of Economics Journal of Political Economy gives nearly 10% of its pages to University of Chicago affiliated scholars; perhaps its editors believe that this situation of apparent collusion will be naturally corrected by market forces over time). What appears to economists as an intense meritocracy (as Paul Krugman acknowledges in a nice self-reflective piece) is plausibly also, or alternately, a social construct built on self-perpetuating power relations.

Unsurprisingly, a lot of economists are reading the piece (we’re all monkeys, fascinated with our reflections in the mirror). Equally unsurprisingly, many of them (including some very smart ones) don’t really get Fourcade et al’s argument, which is a Bourdieuian one about how a field, and relations of authority and power within and around that field get constructed. As Fourcade has noted in previous work, economists’ dominance has led other fields either to construct themselves in opposition to economics (economic sociology) or in supplication to it (some versions of rational choice political science). Economists have been able to ignore these rivals or to assimilate their tributes, as seems most convenient. As the new paper notes, the story of economists’ domination is told by citation patterns (the satisfaction that other social scientists can take from economists having done unto them as they have done unto others, is unfortunately of limited consolation). Yet if you’re an economist, this is invisible. Your dominance appears to be the product of natural superiority.

E.g., this post by Noah Smith (who I like lots, but who is being very, very, economisty here). This bit – “A lot of academic disciplines look down on other disciplines—that’s part of the fun of academia” misses the point spectacularly in a very Raj-official-in-India kind of way. And while it’s true that many sociologists have a complex about economics, the tacit imperialism is compounded by this claim:

As for economists’ “influence over the economy,” I am going to take a wild guess and say that it isn’t because of their arrogance or hierarchical insularity or “sense of authority and entitlement.” It’s probably because…drumroll…economics is the discipline that studies the economy. If politicians want to know how to reduce cancer rates, they should go to a biologist. If they want to know how to shoot missiles at Vladimir Putin, they should go to a physicist. If they want to know how to boost productivity at U.S. companies, or increase employment, or auction off broadcast spectrum rights, whom should they ask for advice? A sociologist?

Heaven forfend! After all, it’s not as if there’s a large grouping in sociology devoted specifically to the study of the economy or anything. And if there were such a peculiar tribe of sociologists, economists would surely know all about them!

More broadly, Noah argues that the reason that academic economists make more money is econ 101 – they have skills which are objectively more valuable in the outside marketplace, and hence exit options.

why do economists have the option to go work in consulting and finance? The answer is simple: They have the technical skills to do so. I’m not talking about fancy math. No one hires you to do real analysis—that’s just something economists learn as an IQ test, then never use. If financial companies need someone to do serious math, they will hire a mathematician or a physicist. As for the general equilibrium models that macroeconomists call “math,” well…no one uses those for anything except publishing macroeconomics papers. The technical skill I am talking about is statistics. Economists learn a lot of statistics—much more than anyone else except for applied mathematicians and statisticians. There is a whole branch of economics, known as econometrics, dedicated to statistics. Most of the empirical work that economists do is applied statistics. Statistics is hugely valuable in the real world.

But as Arindrajit Dube points out, statisticians get paid less than economists. Perhaps it’s different when you look at statistics professors versus economics professors, but I doubt it – this data at least indicates that mathematics and statistics professors, on average, earn less money than social scientists, on average. I would guess (and am open to contradiction if wrong) that statisticians’ salaries in the academy are indeed more like sociologists than like economists (and while I’m on the topic, I dunno whether Noah ever cracks open sociology journals, but if he does, he’ll find plenty of statistical work, including work from people whose mathematical chops are unquestionable)

While I’ve no doubt that that external markets do play a role, I don’t think that it’s nearly as much of a role as Noah suggests. Instead, I suspect that much of the assumed authority of economists (just like the authority, in certain policy roles, of international relations scholars like myself), is socially constructed. Expertise is not just a matter of raw talent, whether mathematical or otherwise. It’s a matter of legitimation – of being anointed with the proper sacraments associated with publicly acknowledged expertise in a particular topic. And that is, unquestionably the product of a certain kind of politics, a kind of politics that sociologists have a lot of experience in studying.

One especially unfortunate aspect of economics is that its penchant for just-so stories can reinforce its imperialist blindnesses. If you’ve been trained systematically to look for examples of market efficiency winning out, you’ll likely be inclined to treat your own, and your discipline’s success as examples of market efficiency in action. George Mason University law school’s Moneybollocks mythology provides one cautionary tale as to how this can lead one to systematically overlook the role of politics in determining who wins and who loses.

The underlying point of the Fourcade et al. article is that politics and power play a far larger role in determining both the success of economics and the success of economics than economists are prepared to admit in public. Or, more succinctly, sociology provides a much better account of economics’ success than economics itself does. Obviously, that’s a claim that’s going to be uncongenial to economists, as well as one that many economists will have difficulty in absorbing (they usually aren’t trained to think in that way). If they were better versed in sociology, and also somewhat paranoid, they might want to treat the piece as a meta-Bourdieuian Trojan horse, that inherently elevates sociology at the expense of economics (although these imaginary well-read paranoid economists would still somehow have to deal with Fourcade’s previous work, which has tacitly rebuked economic sociology for its obsession with disproving economics). But the point would still remain – that the internal structures of economics, as well as its external influence, are very far indeed from a free market.

Update: Cosma Shalizi sends links to salary figures for statisticians and economists in the academy. As he notes, “from a quick comparison, academic economists make substantially more, at every level of rank and every level of university, than do academic statisticians.”

{ 547 comments }

1

Donald A. Coffin 12.02.14 at 9:07 pm

Henry’s comments seem about right to me…and I am a member of the tribe economist.

2

Ben 12.02.14 at 9:24 pm

In other word, economics has done a better job of cozying up to power.

Which is not entirely the discipline’s own fault, given that the powerful have always seen it as an important tool for their legitimation. (e.g. see here)

3

Brad DeLong 12.02.14 at 9:30 pm

Perhaps Noah’s views are in some degree shaped by http://crookedtimber.org/2012/12/27/noah-smith-had-me-going-for-a-minute-there/ ?

4

phenomenal cat 12.02.14 at 9:56 pm

another minor data point in the gigantic mountain of evidence that economists are late modernity’s equivalent to the Grand Inquisitor…

5

Stefan 12.02.14 at 10:03 pm

The QJE isn’t published at the U of Chicago. I believe that’s the JPE.

6

js. 12.02.14 at 10:40 pm

It’s a great paper. And man, further confirmation—if any were needed—that business schools majorly suck!

7

Tabasco 12.02.14 at 10:56 pm

“a social construct built on self-perpetuating power relations.”

You only have to look at who runs the American Economic Association to see this is true. The President, two Vice Presidents and six Executive Committee members are, and have always, drawn from maybe 5 universities, 8 at most (the top Ivies, Chicago, Stanford and MIT). They in turn nominate their colleagues when their time is up, and the choice is between voting for X from Harvard or Y from Yale.

The idea that someone from, say, the University of Michigan or NYU could get one of these positions is unthinkable. The idea that someone from, say, North Carolina State could get one of these positions is like thinking about what lies beyond the edge of the universe.

The AEA is as close to a perfect self-perpetuating oligarchy as it possible to find.

8

Cahokia 12.02.14 at 11:05 pm

Henry, Noah and others have a lengthy discussion here:
https://twitter.com/Noahpinion/status/539883488082948096

9

Tabasco 12.02.14 at 11:10 pm

“economics is the discipline that studies the economy”

But that is just not true, at least of academic economics. You don’t need to know anything about the economy to be a highly successful economist, in the sense of the getting papers published in the best journals. And knowing a lot about the economy not only is no guarantee of career success, it invites condescension from economists who wear the ignorance about the economy as a badge of honor and sneer openly that economists who study the economy are just journalists.

Some thoughtful economists have begun to notice that their graduate students not only know nothing about the economy, they have no desire to learn anything about it, probably because they have no incentive to do so. Certainly, no graduate student needs to know about the economy to pass their preliminary or general exams, write a thesis and get hired as an assistant professor. But these thoughtful economists are a small minority.

10

RoyL 12.02.14 at 11:10 pm

I have to wonder if the reason statisticians are paid less than economists is that they study the wrong kind of statistics and they often lack the “critical thinking” apparatus that economists get in their training. By this I mean that economists are brought up in a world that could reasonably be called real, they are trained to be both courtiers and wizards, while statisticians are trained as technicians. While I have heard both statisticians and economist say insane things based on complete misunderstanding of the data, the econonists mostly make more socially acceptable ones. This is because their more general training in the Liberal Arts, makes them both more aware of how their conclusions look and also of how source data can be manipulated.

A similar thing happens in the natural sciences where a quant will come into a field where they know nothing about data collection and make an insane analysis that no one brought up in the discipline would, because those properly trained in the non maths part know the true nature of the biases in the data.

11

Sasha Clarkson 12.02.14 at 11:13 pm

“… It’s probably because…drumroll…economics is the discipline that studies the economy. “

Economics is not the discipline: it is a set of disciplines which share a name, some jargon and common ideas: not unlike, say, evolutionary biology and “intelligent” design creationism. Except that in economics there is more than one form of creationism: Marxism and Austrianism come to mind. Creationist economics studies the world(s) some people believe ought to exist. Austrianists even define “inflation” in their own unique way, but then try to coerce everyone else’s reality to match their theology.

The economics of the real world has evolved since Keynes, just as biology has changed since Darwin and cosmology since Kepler. But the key thing about non-creationist economics is that evidence matters and will lead to the model being modified accordingly. After Tycho Brahe died, in 1601, Johannes Kepler tried to develop a new cosmological theory based on circular orbits around an off-centre sun. After years of work, he rejected his beloved theory because it was incorrect about Mars’ position by 8 minutes of arc: 2/15 of a degree. Kepler wrote: “Because these 8′ could not be ignored, they alone have led to a total reformation of astronomy.”* He then spent several more years developing his theory of elliptical orbits which made predictions accurate enough to satisfy him.

Some “economists” have been predicting US hyperinflation for years: it’s failure to materialise is a vast error compared with Kepler’s 8 minutes of arc: but there has been no urge to modify the theory.

*Translated by Arthur Koestler in The Sleepwalkers.

12

door 12.02.14 at 11:21 pm

The root problem is that economists, and economics, frequently make policy prescriptions — normative judgments — even though they have very little knowledge of or training in normative ethics and moral philosophical argumentation. The real normative action is instead often concealed under technical phrases and axioms and simplifications that when scrutinized lack convincing justification and tend to be biased towards right-wing policies and the status quo distribution of power and wealth.

13

Commenter 12.02.14 at 11:22 pm

Disclaimer: I am an economist and hence biased.

Having read the paper, it seems to contain zero evidence that the structures it documents for the academic economics profession are in fact inefficient / suboptimal / bad.

All the evidence it contains is consistent with economics being a hierarchy-obsessed cargo cult. But all its evidence is also consistent with economists having better and more consistent quality criteria, better sorting, and larger grad programs at the top. But somehow, based on nothing really, the paper again and again draws the conclusion that is least flattering for economics. Which may be the correct conclusion, but as a social scientist one isn’t allowed to draw this conclusion without actual evidence. Null vs. alternative hypothesis, identification, and all that jazz.

14

Silly Wabbit 12.03.14 at 12:28 am

I’m a non economist but I’ve got a pretty good grip on “econometrics” (applied statistics by any other name). My PhD is in a different social science.
I think there is something of a “halo effect” around the term “economists” for some of the applied work that Noah Smith mentions. I’ve seen many job ads for an econ PhD in the private sector (or government) that require skills that any capable master’s student in most of the social sciences (including soc, poli sci or pysch) likely possess or could easily develop. Its like economists have convinced the private sector/ government that they are the only people who know how to do any data analysis or something.

My intuition is that the power politics or the “sociology” that Fourcade et. al. find in economics likely exists in all academic disciplines to varying degrees. My own discipline, which is often noted for its progressive politics, tends to be very hierarchical and elite-driven. My impression is that our elites often subscribe to very individualistic belief systems for how the discipline operates. So perhaps its a bit unfair to single out econ.

Also, it should be noted that econ is an incredibly wide and diverse discipline. A description of the upper echelon of the discipline might not be an apt description of the entire discipline.

15

Rakesh 12.03.14 at 12:34 am

The great thing about economics is that it allows you to talk about the quantity and price of things without having to worry too much about the conditions in which those things are made. You can’t have the same confidence of not coming into touch with all that in a sociology or anthropology department. They just don’t have the same pathos of distance. The other thing I love about economics is that you get to focus on every preference on the same footing without paying undue attention to needs. That allows a kind of distance from the frail, needy and frankly ugly human body.

16

Tom 12.03.14 at 12:37 am

Well, so much stuff here. Let’s make a couple of points:

a) “While I’ve no doubt that that external markets do play a role, I don’t think that it’s nearly as much of a role as Noah suggests. Instead, I suspect that much of the assumed authority of economists is socially constructed.” Uhm, yes, I guess, but pretty vague. How much of the economists-sociologists skill differential can this social construction explain? More like 20% or 80%? I would argue for a low number even though I may be wrong.

Economists have quant skills (as Smith says) and also their skills can be used in sectors where there is a lot of money. Finance, first of all. But also litigation. That is why they make more than statisticians and that is why actuaries make more than economists. And that is why math and engineering people who study finance end up making a fair amount of money.

Obviously expertise is a matter of legitimation but I am not sure why a central bank should tend to hire more economists than sociologists (I would argue they would need some sociologists and historians too but that is a separate topic).

b) Many sociologists have great quant skills too! And they also do great work! As an economist, I have read quite a few nice pieces from sociologists and I have heard many economists saying the same. So, I am sure that some economists look down on sociologists (as I am sure that some sociologists giggle at the idea of utility maximization) but the stereotypes are changing, and rightly so.

17

Rakesh 12.03.14 at 12:50 am

Without that pathos of distance you would be vulnerable to checking Steven Greenhouse’s twitter feed to find something like this
http://scroll.in/article/692477/Your-car-has-been-built-on-an-assembly-line-of-broken-fingers
And that is not what economics is about. Leave it the sociologists and anthropologists or even a stray political scientist concerned about regulation.

18

Andrew Smith 12.03.14 at 12:56 am

If politicians want to know how to reduce cancer rates, they should go to a biologist. If they want to know how to shoot missiles at Vladimir Putin, they should go to a physicist. If they want to know how to boost productivity at U.S. companies, or increase employment, or auction off broadcast spectrum rights, whom should they ask for advice?

It’s funny, the first two examples are pretty suspicious. I think epidemiologists study how toreduce cancer rates. And I’m pretty sure engineers build missiles and politics is very nearly 100% of the “how to shoot missiles at Vladimir Putin”.

19

Rakesh 12.03.14 at 12:59 am

Another great thing is the comfort economics gives me that amidst all the chaos of unemployment, bankruptcies, and cycles there is an equilibrium that markets are just about to achieve, perhaps with just a little expert guidance and the right human sacrifices at the right time.

20

mattski 12.03.14 at 1:19 am

Yet if you’re an economist, this is invisible. Your dominance appears to be the product of natural superiority.

This is peculiar to economists? Sounds like the human condition to me.

I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.

21

bianca steele 12.03.14 at 2:26 am

Instead, I suspect that much of the assumed authority of economists (just like the authority, in certain policy roles, of international relations scholars like myself), is socially constructed. Expertise is not just a matter of raw talent, whether mathematical or otherwise. It’s a matter of legitimation – of being anointed with the proper sacraments associated with publicly acknowledged expertise in a particular topic. And that is, unquestionably the product of a certain kind of politics, a kind of politics that sociologists have a lot of experience in studying.

Surely if it were just a matter of raw talent, it would/could still be socially constructed @?

(Somehow I managed to right-justify-munge this window on the screen, hope it looks okay when it posts.)

22

Navin Kumar 12.03.14 at 3:07 am

I’m willing to buy the idea that Econ’s “superiority” is about politics and power etc. But Henry does not shed light on this. Which politics? Whose power? Who anointed econs? Who socially constructed econ’s superiority? How? Why can’t Socio apply the research it supposedly has in this area and follow suit?

The mechanism that Henry talks about is unclear.

23

Navin Kumar 12.03.14 at 3:07 am

Forgot to subscribe to thread.

24

Tabasco 12.03.14 at 3:32 am

“job ads for an econ PhD in the private sector (or government) that require skills that any capable master’s student in most of the social sciences (including soc, poli sci or pysch) likely possess”

About 10 years ago a big government department in Britain decided that it needed someone who could evaluate whether its programs were working as intended. So they interviewed 30 people with master’s degrees in social sciences.

Not one of them could explain, in words, what a confidence interval is.

25

Val 12.03.14 at 4:10 am

Henry quotes Noah Smith saying:
“economics is the discipline that studies the economy. “

What on earth is “the economy”? You would never get sociologists saying sociology is the discipline that studies the society, even though ‘society’ as a concept is probably more meaningful than ‘economy’.

“The economy” has become like this mythical, but nonetheless terribly important and pitifully fragile, little flower, that we can’t ever actually see or touch, but all have to look after and think about and be terrifically careful of, otherwise it will just suddenly die and take us all with it. It’s nonsense. We should be thinking about how we, as human beings, look after each other and the earth that sustains us.

26

Val 12.03.14 at 4:15 am

I guess if Noah Smith hadn’t reified the economy as a unitary thing, he would have ended up saying ‘economics is the discipline that studies economics’ which really would have shown that the emperor had no clothes on!

27

Landru 12.03.14 at 4:29 am

My career-long, super-anecdotal impression is certainly that authority and hierarchical positioning follows more from politics than from competence/productivity in all academic fields; that economists are not an exception could come as a surprise only to economists, apparently. I once would have thought, that academic specialties more closely tied to immediate, quantitative checks against reality, ie physical sciences and engineering, would be less subject to politics in determining rewards and authority; alas, this appears to be another “just so story” with no evidence to support it (that I’m aware of).

As long as we’re thinking about economists and how they are judged to become respected and authoritative, what do we make of the parallel observation, (which I have seen in a number of places but have no link handy) that among academics in different fields, economists are on average the most politically right-wing? (a term I don’t use interchangeably with “conservative”, BTW, even though many seem to.) I’d be curious to hear from the sociologists out there, who are perhaps the best equipped to comment.

28

JanieM 12.03.14 at 4:38 am

“The economy” has become like this mythical, but nonetheless terribly important and pitifully fragile, little flower, that we can’t ever actually see or touch, but all have to look after and think about and be terrifically careful of, otherwise it will just suddenly die and take us all with it. It’s nonsense. We should be thinking about how we, as human beings, look after each other and the earth that sustains us.

Well said.

29

adam.smith 12.03.14 at 4:42 am

Yeah, Henry needs to fix this. QJE is notorious for being the Cambridge in-house journal. It’s edited at Harvard. According to FN 8 of the paper, it’s even more clubby than JPE, which, as Stefan above points out, is the U Chicago journal. (This isn’t exactly a shocker for anyone vaguely familiar with econ publishing).

30

Omega Centauri 12.03.14 at 4:43 am

Sasha:
“Some “economists” have been predicting US hyperinflation for years: it’s failure to materialise is a vast error compared with Kepler’s 8 minutes of arc: but there has been no urge to modify the theory.”
And yet the market for what these ‘economists’ have to offer is eternal. Its quite a gig actually.

31

John Emerson 12.03.14 at 5:11 am

Suppose a Pol Pot came to power and all economists were liquidated. How much would the economy suffer? Would the economics profession be revived in its present form, or would something strikingly different be developed which did all the jobs economics does, but without the arrogance and the ideological and methodological dead weight?

This is a THOUGHT EXPERIMENT, not a suggestion. Like a trolley car problem. There are no actual trolley cars with fat men being pushed in front of them, and there is no actual Pol Pot in the offing. Perhaps I should have hypothesized that The Rapture carried off every economist in the world, but no one else, but that’s even less realistic. Let’s just assume that all economists were pensioned off at twice their present salary on the condition that they quit doing economics. That would be both humane and practical.

32

John Emerson 12.03.14 at 5:13 am

You’d need a Manhattan Project. It’s not as though economists have no practical function. But under emergency conditions, what would be left out.

33

Bruce Wilder 12.03.14 at 6:02 am

Rakesh @ 19 — I admit it: I got that far before catching on.

Tom @ 16:

Economists have quant skills (as Smith says) and also their skills can be used in sectors where there is a lot of money. Finance, first of all. . . . That is why they make more than statisticians and that is why actuaries make more than economists. And that is why math and engineering people who study finance end up making a fair amount of money. . . . Obviously expertise is a matter of legitimation . . .

Economists have legitimated making a lot of money in finance, even though making a lot of money in finance is pretty obviously deleterious for society, aka the vast majority of people. It is kind of circular: bad economics opens opportunities for bad economists to make a lot of money doing bad economic things.

Commenter @ 13: All the evidence it contains is consistent with economics being a hierarchy-obsessed cargo cult. But all its evidence is also consistent with economists having better and more consistent quality criteria, better sorting, and larger grad programs at the top.

Two mints in one! Policy macroeconomics pretty much is a cargo cult, as far as its content is concerned. This is widely acknowledged in Naked Emperor remarks and so on, but it doesn’t seem to matter. Which, I suppose figures in the motivations for the research of Fourcade et alia. It is the contrast between outside political critiques and “derision” directed at economics and the arrogant confidence of its inside practitioners about which the authors are most curious.

Tabasco @ 9

You don’t need to know anything about the economy to be a highly successful economist, in the sense of the getting papers published in the best journals. And knowing a lot about the economy not only is no guarantee of career success, it invites condescension from economists who wear the ignorance about the economy as a badge of honor and sneer openly that economists who study the economy are just journalists.

Said as plainly and bluntly as that, it can seem like superficial sarcasm, but it is so accurate a description. The emphasis on “rigor” and the pride in irrelevant maths becomes a remarkable absence of curiosity and a doctrinal rigidity in a sizeable and highly influential minority of economists. And, all that is compounded by the rank corruption afforded by those fabled consulting opportunities.

34

js. 12.03.14 at 6:25 am

Henry quotes Noah Smith saying:
“economics is the discipline that studies the economy. “

What on earth is “the economy”? You would never get sociologists saying sociology is the discipline that studies the society, even though ‘society’ as a concept is probably more meaningful than ‘economy’.

For the win.

35

Ronan(rf) 12.03.14 at 6:53 am

I don’t think the fact that sociologists also train in stats negates noahs argument. An econ phd can still work as a signal in maths competence in the market, even if other social sciences also train to a high level, if (1) econ PhDs are generally perceived as more competent on quant skills or (2 ) they actually generally are(my understanding from a few people I’ve asked is that even in quant heavy pol sci/ sociology they don’t train to the same level as economists.) This is consistent with a very competent quant oriented sociologist being less in demand than a mediocre economist- and duncan watts can’t really be seen as representative of anything here,afaict.
What about Roy @10 claim that it’s the critical thinking + maths that explains noahs argument more plausibly ?

36

Ronan(rf) 12.03.14 at 7:00 am

I see others have made that point. I’d say Tom @16 is right as well , tbh( are the specific methods economists trained in more applicable to industry’s like finance ? Does an econ training better prepare u to work in/ understand those professions than even a stats training ?)

37

A H 12.03.14 at 7:05 am

The market is for private sector PhD economists is not that large, so I don’t think there is a direct outside demand pulling up econ wages. If anything, PhDs have a reputation for being awful at making money in finance.* Though it is pretty easy for a new PhD to jump into a consulting career.

I would guess is that where wages are getting driven up is in the demand for business school teachers. As inequality increases, MBAs become a path to the 1% and B schools become profit centers. They need lots of econ profs hence wages go up in Econ.

*Here is a fun recent example http://thereformedbroker.com/2014/05/28/brokers-liquid-alts-and-the-fund-that-never-goes-up/

38

gianni 12.03.14 at 7:19 am

@37 “where wages are getting driven up is in the demand for business school teachers”
this is supported quite clearly in the data linked in the OP, where business and law outpace everything but the highest rungs of engineering and comp sci.

39

dsquared 12.03.14 at 8:29 am

On the one hand, I’d rewrite Noah’s quote as “If politicians want to sit cross-legged and chant, they should go to a Buddhist. If they want to play volleyball with no clothes on, they should go to a nudist and if they want a load of boilerplate rhetoric in support of the status quo they go to an economist”. The “ist” in “economist” is akin to “Trotskyist”, not to ” physicist ” – it indicates ideology, not study.

On the other hand I’m going to push back on the “statistics” thing. In terms of applied work, which is what we’re talking about here, there’s no such thing as “Statistics”, in the abstract as a general purpose toolbox. There are a whole lot of specialised tools, specialised to different kinds of data, and econometricians are specialised in the statistics of economic data, which in turn is defined as ” the data which economists have found it useful to collect “. Even those demigods of physics that we are always hearing about end up having to take the equivalent of conversion courses.

40

John Emerson 12.03.14 at 8:41 am

So D2, after Pol Pot has done his evil work, how should economics be reconstructed? Replicated as it is based on surviving records, or would a quick and dirty working version of the most useful parts be a better idea?

41

Val 12.03.14 at 8:54 am

Thank you js and JanieM, much appreciated. One of things that often is discussed about mainstream economics is how much it’s a tool of privilege and oppression – which I totally agree with – but the thing that doesn’t get discussed often enough, in my opinion, is how much it dumbs down public debate, how boring and lifeless and depressing it makes our discourse.

Mainstream economists have their dogma about individuals and utility, and it seems they will fit anything into it, no matter what intellectual contortions are required. Being expected to take them seriously is like being forced to converse with Mormons.

42

Val 12.03.14 at 8:58 am

Quite possibly there may be some wonderfully interesting and thoughtful Mormons reading this thread, so if so I apologise for my previous comment – I don’t mean you, I mean the ones who used to come to the door and try to covert everybody.

43

gianni 12.03.14 at 9:07 am

@39 & @41
This predictable approach is probably a large part of the appeal of the discipline to those in traditional power structures (many of whom are trained in the lawyerly doctrine of not asking a question unless you already know what the answer will be).

44

peterv 12.03.14 at 9:37 am

Tabasco 12.03.14 at 3:32 am @24

“Not one of them could explain, in words, what a confidence interval is.”

Not surprising. Many statisticians (the non-frequentists) would also have difficulty.

45

J Thomas 12.03.14 at 9:56 am

#31 John Emerson

Let’s just assume that all economists were pensioned off at twice their present salary on the condition that they quit doing economics.

I expect it would have no, zero, zilch effect on politics. Politicians and pundits would keep on making the same stupid economic arguments they do now. They would keep on making up numbers to predict the results of proposed policies. They would keep on claiming that science proved them right.

There are various government jobs that are currently done by economists. These jobs would continue to be done the same way they are now, perhaps at first by secretaries and then by people with some other job description. We would still collect unemployment figures, inflation estimates, etc. The way they are done is mostly fixed by tradition and it doesn’t much matter whether trained economists are present when they are done. It might possibly matter about new data collection etc. Somebody competent should devise new economic activities by government. Assigning economists to that task doesn’t guarantee competence but it might improve the odds. Perhaps it could be done by operations research guys.

The biggest result I would expect is a lot of jobs for brand-new economist while it was getting started. A brand-new graduate with an MS in economics goes to JP Morgan and says “Hire me for a year at $1 million, and then when I retire for $2 million/year I will give you $1 million/year for the rest of my life.”

Or is that something we should expect more from MBAs?

46

dsquared 12.03.14 at 10:44 am

Many statisticians (the non-frequentists) would also have difficulty.

A calumny and very definitely untrue. Bayesian statistics isn’t an excuse to be ignorant and nobody uses it as one.

47

David Steinsaltz 12.03.14 at 11:28 am

Speaking as a professor of statistics, I admit that I’ve always assumed that economists — and even more, business school professors — were paid more because 1) their professional concern with monetary incentives makes people (i.e., university administrators) assume that they can’t be bluffed with other amenities; and 2) their profession brings them into close contact with the people who control the flow of money. But fundamentally, I assumed that economists were probably strategising collectively about this sort of thing far more than my colleagues and I. This post suggests that I perhaps attributed too much objective optimisation to them.

48

Zamfir 12.03.14 at 11:38 am

In her book comparing economists in various countries, she mentioned Krugman as a strong example of an American academic who patrolled the boundaries of the discipline: only seriously engagement towarss people from a small set of elite institutions (even if to point out their errors), and sharp put-downs of people from outside of academia or even from outside the small, American elite academic circle.

I have no way of verifying that view, but it seemed believable. I am always amazed how much Americans seem to listen to (a small set of) professors of economy. Especially as those professors seem to do very abstracted work, compared to their publicly active peers in my country.

49

mattski 12.03.14 at 12:36 pm

Suppose a Pol Pot came to power and all economists were liquidated. How much would the economy suffer?

Well, how about a re-do of the Great Depression only without Keynes?

Or put it this way: what reason do you have to believe that in the absence of the profession the pro-stimulus position, which Krugman and others are struggling to advance, would be ascendant? I see no reason whatever to believe that.

People fight over gelt. Is it necessary for the left to be gobsmacked about it?

50

Walt 12.03.14 at 12:40 pm

It’s Journal of Political Economy, not Quarterly Journal of Economics.

51

bob mcmanus 12.03.14 at 1:01 pm

Or put it this way: what reason do you have to believe that in the absence of the profession the pro-stimulus position, which Krugman and others are struggling to advance, would be ascendant? I see no reason whatever to believe that.

The pyramids. Joseph and the lean years. Stimulus from public works, gov’t spending, currency devaluation was not discovered by Keynes.

Mainstream Economics is absolutely nothing more than a priesthood used to justify inequality of wealth and income, the distributional privileges of the ruling class.

52

Agog 12.03.14 at 1:19 pm

ejh:

The task of economics
Is to propagate a bluff:
That the poor have too much money
And the rich have not enough.

53

J Thomas 12.03.14 at 1:25 pm

#49 Mattski

Well, how about a re-do of the Great Depression only without Keynes?

Or put it this way: what reason do you have to believe that in the absence of the profession the pro-stimulus position, which Krugman and others are struggling to advance, would be ascendant? I see no reason whatever to believe that.

There were economists arguing that we needed the depression to cut out the dead wood, to free up resources for newer expansion. It appears that nobody understood Keynes at the time, they just used him as the economist-prophet who said it was OK to do what they wanted to do anyway.

Toss out both sets of economists, and you get politicians who see the government can get low-interest loans and spend the money for jobs building infrastructure etc. You get a bunch of voters who want that, and a bunch who are afraid it will give the government unsupportable debt. The unemployed and the socialists etc win, and it turns out just like it did in real life except there aren’t economists on both sides arguing their abstruse positions which the voters don’t understand.

But without economists could we measure unemployment, GNP, national debt, number of starved citizens, etc? Probably. We might have a measure of something that didn’t fit our needs as well as GNP, because it wouldn’t have as good a theoretical backing. Or maybe we’d accidentally get a better measure. These days people usually say GDP doesn’t really fit our needs but it’s what gets measured so they use it.

I don’t see any way to prove how things would have gone if they were different. We can have different opinions with no way to tell who’s wronger. But it seems quite plausible to me that the Depression could have gone about the same without economists, and it seems quite plausible that it could have been very different. I don’t feel a lot of certainty about this one.

54

Francis Spufford 12.03.14 at 2:34 pm

Can anybody suggest a good thing to read for someone only slightly numerate (me) who would like to self-educate a bit in statistics?

55

William Timberman 12.03.14 at 2:48 pm

I imagine the Cosmic Apothecary…. The ists are offered in sealed bubble packs, but require no prescription, and may be purchased by any customer. The isms, are kept in locked cabinets behind the counter, and sold only to adults with the proper ideological qualifications. What is thought to be the Ding an sich is sometimes glimpsed scampering from one dark corner to the other in the back of the shop. Pest control has been called.

56

LFC 12.03.14 at 2:49 pm

Val @25

Henry quotes Noah Smith saying:
“economics is the discipline that studies the economy. “

What on earth is “the economy”? You would never get sociologists saying sociology is the discipline that studies the society, even though ‘society’ as a concept is probably more meaningful than ‘economy’.

Though my impression is that sociologists don’t generally talk about the society (with the definite article), “society” as a word is hardly unused in sociology; or, at least, certainly one will find it in e.g. textbook subtitles (“an intro to the study of society”) or bks written by sociologists for a wide audience (e.g. Dennis Wrong, The Problem of Order: What Unites and Divides Society.)

Not to mention that the title one of Max Weber’s major works is usually translated into English as Economy and Society (Wirtschaft und Gesellschaft, or however the **** the German words are spelled, I can’t be bothered to look it up).

57

Zamfir 12.03.14 at 2:50 pm

Do you have one experience with computer programming? If so, you might consider voing through an introduction rto the R language, a specialised language used for statistics. In the process, you’ll encounter a lot of the widely-used concepts.

58

Zamfir 12.03.14 at 2:51 pm

That was intended for Francis Spufford

59

Ronan(rf) 12.03.14 at 2:52 pm

I’d second Francis spuffords request, but just add(from someone completely innumerate) that on the main concepts naked statistics and the cartoon book of statistics(I know, I know) are the best explanations I’ve read. They might be at too low a level, so I’m working my way through the Freedman/pisani/purves book “statistics”, which is handy.
My impression is that experts give out about it for not being mathy enough, but for a layman it’s pretty approachable.

60

LFC 12.03.14 at 2:56 pm

Wm Timberman:
What is thought to be the Ding an sich is sometimes glimpsed scampering from one dark corner to the other in the back of the shop. Pest control has been called.

A special division of Pest Control known as the Noumena Patrol. Or something like that. Whatever.

61

Ronan(rf) 12.03.14 at 3:00 pm

And to really throw the cat among the pigeons, the “magna book on linear algebra” is amazing (as far as these things go)
Don’t be afraid of cartoon guides, is what I say.

62

Rich Puchalsky 12.03.14 at 3:12 pm

Mainstream economics in the U.S. is inalterably opposed to the moral values of the left. As such, mainstream economists have to be right-wing moralists, although they never can admit this. The not admitting it part is what a lot of this ideological superstructure is about.

Here’s an example. For there to not be too much inflation, we’re told, a certain number of people have to be kept unemployed. There’s no way around it: if all of the people currently unemployed resolved to look for work harder, or train themselves or what have you and as a result more of them got jobs, then the interest rate would have to be adjusted to make the same percentage of the workforce unemployed again.

At the same time, we exist in a society in which unemployed people are stigmatized as lazy sods who need to get to work, and as a result social support for them is always under threat. I can’t remember when I’ve seen a mainstream economist explain that no, this isn’t true, that a certain number of people have to not work for the good of the rest of us, and as a result we might as well pay them not to work in the same way that farmers in the U.S. are paid not to grow crops. Why can’t they say this? It’s because implicitly the magical power of them being unemployed only works if they are frightened and desperately seeking jobs. If they are satisfied with being unemployed, they join the long-term non-job-seekers and drop out of this statistic, the labor pool effectively shrinks, workers can demand higher wages, inflation goes up etc. So they not only have to be kept unemployed, they have to be stigmatized and desperate: if the dole exists, it must be low-level and precarious.

Not that mainstream economists ever seem to really have much trouble speaking for only elite interests. With mainstream trade theory, people have to be put out of work, but retraining them into working in whatever industries we’re supposed to be nationally good at would be interfering with the market. With environmental analysis I’ve never seen a mainstream economic account that isn’t wrong because economists generally don’t understand science, then papered over.

So when people are engaged in institutionally doing evil in this way, of course they need a system in which they listen only to themselves for their opinions of who is good and doing well.

63

Sean Matthews 12.03.14 at 3:20 pm

@46

> Many statisticians (the non-frequentists) would also have difficulty.

> A calumny and very definitely untrue. Bayesian statistics isn’t an excuse to be
> ignorant and nobody uses it as one.

Other way round, in fact, I would have thought. Given how staggeringly unintuitive the definition of a confidence interval is, it is a useful stick for Bayesians in the Bayesian/Frequentist wars.

I would never ask for the definition of a confidence interval in an interview, unless I was actively on the lookout for reasons to reject the candidate – I would assume that _only_ a proper statistician would be able to give a correct definition.

64

bianca steele 12.03.14 at 3:25 pm

This blog has the most enlightened comments section I’ve ever seen (thinking of @24, @27, @33): most people, in my experience, however cynical they may be about their own profession (while, at the same time, they tend to believe most of their colleagues are in broad agreement about who has real expertise, whether or not it’s socially recognized in a “legitimated” way), tend more or less to believe that they can tell who has expertise in other people’s fields by who’s a bestseller, who has awards, who has tenure at the most prestigious universities, and so on.

65

bianca steele 12.03.14 at 3:35 pm

Okay, that’s a little snarky.

John Emerson: I always think of the shadow Rocket project in Gravity’s Rainbow when I think about that question.

66

Trader Joe 12.03.14 at 4:23 pm

@64 Bianca
I agree entirely.

I read an interview once with the comedian John Cleese who commented that he makes it a point of asking people in different fields ‘What portion of the people in your field do you think are really good at what they do’ – he said he normally gets an answer of around 10% and has never gotten an answer higher than 20%. I’ve been replicating this myself since I read it and have had similar results. Apropos of your comment, it suggests most people don’t think too highly of most people in their own profession, but somehow think they can spot ‘experts’ in all manner of other fields.

The the OP – the economists get the attention because they deal with jobs and money – the two things virtually everyone has at least some interest in and most everyone has at least some opinion about. Most other humanities, even when I enjoy reading about them, I don’t have much of a preformed opinion about the topic at hand.

67

Rakesh 12.03.14 at 4:31 pm

re 54: intro to stats Charles Wheelan Naked Statistics, Gary Smith Standard Deviations, Lorenzo Fioramonti How Numbers Rule the World, Robert Abelson Statistics as Principled Argument

68

Rakesh 12.03.14 at 4:33 pm

69

adam.smith 12.03.14 at 4:38 pm

For those looking for an intro to stats, the best book far and wide is the Statistics textbook by Freedman, Pisani, and Purves. You should be able to find old editions for cheap, they haven’t changed much. It isn’t very technical and is very low on difficult math, but it’s very rigorous about statistical concepts and should enable you to become a decent reader of statistical evidence. I’ve seen this used over and over again in intro to stats classes for social scientists and it’s written and structured well enough for self study.

For more advanced stuff, good books quickly become specialized depending on what you’re interested in and I’m not aware of anything that’d be relatively accessible.

70

Jim Harrison 12.03.14 at 4:38 pm

Look at the bloodlines. Economics grew out of cameralism, i.e., the self reflection of professional administrators. As an instrument of the application of power from the beginning, it has always been prescriptive; and the norm of disinterest that belongs to scientific disciplines is foreign to it. Individual sociologists, who actually are scientists, have plenty of biases and ulterior motives, of course; but what’s a failing in them, is foundational for the economists. Economics is about power, not truth.

71

Ivy 12.03.14 at 4:39 pm

The field of economics suffers from the same affliction as the Boston-NYC-Washington pundit/media world. The latter was shown to read each other a lot more than outside sources. That gave rise to the justifiable critique of living in an echo chamber. Economists would do themselves and the world at large a lot of good if they got out of their offices, seminars, conferences and colloquia to see how people live. Try a road trip across country, stopping in small towns to see how people, businesses, farms, schools, local governments and assorted others are coping, and how they live their lives. Try practice before theorizing! Without that, economics will continue to be a dry, unrealistic field that will devolve further from reality. At least Krugman sometimes makes an effort to try to reach the public, even if it is via a biased, discredited organization like the NYT

72

fledermaus 12.03.14 at 4:41 pm

You know astrologers also gained power and influence by telling wealthy people what they want to hear.

73

AcademicLurker 12.03.14 at 4:46 pm

71: I suspect that, on balance, astrologers have done less damage than economists.

74

J Thomas 12.03.14 at 4:51 pm

#66 Trader Joe

… he makes it a point of asking people in different fields ‘What portion of the people in your field do you think are really good at what they do’ – he said he normally gets an answer of around 10% and has never gotten an answer higher than 20%.

He is asking people their definition of “really good”.

I think.

You could test it. Ask people what percentage of professional baseball players are “really good”. What percentage of MBAs. What percentage of construction workers.

Who could we ask that about where the question just doesn’t make sense? Maybe gourmands? What percentage of gourmands are really good at appreciating a fine meal? What percentage of people are really good at operating a microwave to cook a frozen dinner? What percentage of people are really good at taking showers? What percentage are really good at ordering at the drive-through line at McDonalds? What percentage are really good at eating M&Ms?

Somehow I can imagine dojos in Japan where the sensei teaches people the fine points of the right way to eat M&Ms. But until this moment I never thought about what it would take to be good at it.

75

LFC 12.03.14 at 4:53 pm

the Statistics textbook by Freedman, Pisani, and Purves

Wish that had been used in the (fairly worthless) quant class I had to take in first yr of grad school instead of the (mediocre, imo) books that were actually used (that i won’t name out of pity for the authors, basically).

76

Trader Joe 12.03.14 at 5:10 pm

@73 J Thomas,

I paraphrased the quote a bit differently than it was originally delivered (which I’ve copied below), but reached a rather similar conclusion. The exercise was meant to show that most people’s opinions aren’t worth getting too wraped up about since only 10-20% of people in any profession really have opinions that matter.

Q: What’s the best advice you’ve ever received?
A (Clesese): I asked a psychiatrist named Robin Skynner, with whom I wrote a couple of books, how many people in his profession he thought really knew what they were doing. He said about 10 percent. So for the next few years, every time I met somebody I thought was particularly sharp, I asked them the same question. The highest estimate I got was 20 percent. That explained so much. I spent so many years worrying about executives and critics, but once you realize that very few of them know what they’re talking about, everything is simplified.

P.S. I believe I’m rather excellent at microwaving, ordering at drive thrus and eating M&Ms and if you bring a bag of the later to my office I’d be prepared to prove it.

77

Zamfir 12.03.14 at 5:35 pm

Individual sociologists, who actually are scientists, have plenty of biases and ulterior motives, of course; but what’s a failing in them, is foundational for the economists. Economics is about power, not truth</I
Someone I knew used to remind us time and again, "Don't trust sociologist, they are obsessed with power"

It was a half-snark. Woud sociologists be as imperialistic as economists, given the opportunity?

78

TM 12.03.14 at 5:36 pm

Since the argument has come up that economists prove their worth by mastering statistics, may I offer a data point. (Economists are free to dismiss it as anecdotal but I’m betting they are more likely to deny anything wrong with it.)

The very reputable American Economic Review (AER) published a now infamous paper by Chetty et al. in which the authors claim to provide evidence that teacher quality is measurable and can statistically be correlated with observables such as adult earnings and even the teen pregnancy rate of their students. Based on this evidence, a California judge (employing some convoluted logic) ruled that protecting teachers against arbitrary firing causes irreparable harm to students. The charts by Chetty et al. can be viewed at http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/10/a-california-judge-just-ruled-that-teacher-tenure-is-bad-for-students/. What should immediately catch your eye is that the charts’ y-axes are hugely stretched and no error bars or confidence intervals are shown (each point you see in the diagram represent the means of thousands of binned data points; if the error bars were shown, they would most likely far exceed the purported statistical effect). When I saw this first, I was sure that no self-respecting academic publication would publish such figures. I was wrong, AER did publish them unchanged. What is more, the paper they published doesn’t include R-square values for the regressions and has a host of other defects, the most serious of which is the fact that an earlier version of the same paper reported a non-significant result for earnings at age 30, whereas the AER version not only fails to report the non-significant result but provides calculations as if there were a proven effect after age 28 (details at http://nepc.colorado.edu/thinktank/review-measuring-impact-of-teachers). Moshe Adler, who wrote extensive critiques of the papers, contacted the AER editors with these concerns before publication, to no avail.

I’d be curious if people from the social sciences could have a look at the charts and judge whether respected journals in their field would publish such. Until recently I would have thought no way, not in 2014, but maybe I’m deluding myself.

Back to the economics question. Alan Blinder, in the current NYRB, writes in defense of economics that academic economics doesn’t really have that much policy influence (“Politicians use “research findings the way a drunk uses a lamppost: for support, not for illumination.””), and that “mainstream economic” shouldn’t be held responsible for right-wing Voodoo (Blinder doesn’t use the word) economics (just like “mainstream biology” isn’t responsible for creationism). Of course, Chetty, 2013 winner of the John Bates Clark Medal, is not the economics equivalent of a creationist. It is obviously true that politicians, and sometimes judges, pick the kind of evidence they like. The Chetty paper is influential only because it confirms what many policy-makers already believe. But there is no denying that academic economists can have immense political influence. It is also true that the Chetty paper was published in a reputable mainstream economic journal despite violating fundamental principles of scientific data presentation and other grave flaws.

79

Ronan(rf) 12.03.14 at 5:44 pm

Well look, 95per cent of what people are saying at any given moment is bullshit, there just happens to be 10-20 per cent we give any credence to, but averages still hold. Duncan watts elaborates this arguement in the link in the op.
For my part, anyone curious who arsenal should buy come January transfer deadline, then feel free to ask.

80

Ronan(rf) 12.03.14 at 5:45 pm

That was in the context of trader Joe’s Subthread

81

Nonym 12.03.14 at 5:48 pm

I’m letting my cynicism show through, but it would seem to me rather likely that the difference in compensation between economists and statisticians is due to the value to the financial industry and other big players in the economy of co-opting economists — and in general using very large carrots to make sure that the discourse in economics is dominated by theories that will increase the profitability of the industry in question.

82

Francis Spufford 12.03.14 at 6:20 pm

Ronan, Zamfir, Rakesh: thank you.

83

Rakesh 12.03.14 at 6:25 pm

TM @78
thank you for giving the links to the debate about Chetty’s findings. Look forward to reading them. Quick question: I would guess that disengaged teachers don’t want the stronger students, given that their parents are more likely to be involved and more likely to complain (this being one of the reasons that they are stronger students in the first place). And principals can’t want to put up with tiger parents scheduling endless appointments. Is the assignment of kids to classes random? How does Chetty control for this?

84

TM 12.03.14 at 6:37 pm

Tabasco 24: “Not one of them could explain, in words, what a confidence interval is.”

As a teacher of statistics (albeit not of grad students), I have no difficulty believing this. I just graded an assignment which required students to explicitly explain the confidence interval and other concepts – pretty much nobody got it right. Most students get to the point where they can follow a cookbook recipe (even involving such terrifying algebraic operations as dividing by a square root) but very few can explain what they are actually doing and why. Which creates the dangerous situation that masses of people now have access to powerful statistical tools that they don’t even remotely understand. As of confidence intervals, I suspect that many instructors teach it wrong because it’s too much hassle to try to explain right and the students don’t care anyway (or maybe the instructors themselves believe that the CI contains the true mean with probability 95%).

As to whether economists have a better than average grip of statistics, I don’t know of any systematic evidence in favor or against but nothing beats a good anecdote. Chetty in response to criticism that they failed to report a non-significant result (links at 78):
“this does not mean there is no effect at age 30; rather, it means that one has insufficient data to measure earnings impacts accurately at age 30.” And proceeds to assert that there is an effect.

85

TM 12.03.14 at 6:42 pm

Rakesh 82: assignment of kids to classes? Difficult question. I don’t know and I’m not sure you will find an answer at the links. For the record I’m not claiming expertise in the field of education science but I do have some expertise in data analysis and logical reasoning.

86

Rakesh 12.03.14 at 6:45 pm

Doesn’t Chetty have to assume that the already stronger students weren’t more likely to be assigned to the better teachers? I may not understand the research design.

87

Rakesh 12.03.14 at 6:50 pm

OK it seems like Chetty has controlled for this:
“In interpreting these results, it is important to note that children of higher-income parents
do get higher VA teachers on average. However, such sorting does not lead to
biased estimates of teacher VA for two reasons. First, and most importantly, the correlation
between VA estimates and parent characteristics vanishes once we control for
test scores in the prior school year. Second, even the unconditional correlation between
parent income and VA estimates is small: we estimate that a $10,000 increase in parent
income is associated with less than a 0:0001 SD improvement in teacher VA (measured
in student test-score SD’s).3 One explanation for why sorting is so limited is that 85%
of the variation in teacher VA is within rather than between schools. Since most sorting
occurs through the choice of schools, parents may have little scope to steer their children
toward higher VA teachers.”

88

Enzo Rossi 12.03.14 at 7:08 pm

Economists’ self-serving delusions about the role of efficient markets in allocating their fancy jobs is comparable to liberal political philosophers’ self-serving delusions about the meritocratic character of the discipline. Both groups know that the real world is messier than their model, both groups wisely nod when they’re reminded of this, and both groups largely carry on as if they lived in their model.

89

Bruce Wilder 12.03.14 at 7:21 pm

Rakesh @ 87

Analysis of variance with a weak model of mysterious treatments and with noisy, error-prone data about instrumental variables drawn from uncontrolled samples — what could go wrong?

90

john c. halasz 12.03.14 at 7:52 pm

Val @25:

The domain or field which economics studies, derives from and applies to would be functional analysis of emergent systems of production and exchange with respect to the generation, distribution and optimalization or increase of more-or-less material surpluses. That definition should be fairly neutral with respect to any methodological or normative/ethical commitments.

For that matter defining what “society” is, is a notoriously difficult problem for sociologists, (as is “religion” for anthropologists). But it’s not as if the various social “sciences” or studies are referring to completely different “things”. Rather they are studying different aspects and modes of the same “thing”.

91

armando 12.03.14 at 7:55 pm

10% are really good does not mean 90% are talking rubbish. Thats a really weird point to make.

92

John Emerson 12.03.14 at 8:07 pm

Well, how well is economics doing in promoting the Keynesian position today, for example in Europe? Just asking. What proportion of economists are Keynesians.

What about finance, which is where most economists work? There are those who believe that something bad happened economically in 2008 or so. What was the role of economists in that? Was the profession working heroically to keep it from happening.

My main question actually was, how would economics be reconstructed if all the big economists and most of the little ones were sent off to the place in the country where they could play happily all day long. Is there anything that would be jettisoned? Is there any chance of getting it jettisoned in some other way? Or is economics as we have it just about right (except for the non-Keynesians, of course).

93

John Emerson 12.03.14 at 8:33 pm

45: You garble the point. All economists, including economists in training, would be pensioned off. Anyone gaming the system as you suggested would be handed over to Pol Pots’s secular arm.

94

Rakesh 12.03.14 at 8:42 pm

In response to problem that teachers’ estimated VA may reflect unobserved differences in type of students they get rather than causal impact of teacher, Chetty rely on a natural experiment of switched classrooms. But it seems that Jesse Rothstein has challenged whether this really gets at the problem, e.g. there may be reasons to expect that scores were set to rise before the new teacher was appointed and may in fact be part of the reason a new teacher was appointed.
Just my own guessing: it could be that the principal made a teaching switch to prevent involved/tiger parents from continuing to send their kids to private school; and that once parents saw that the principal was willing to act, those parents decided not to exit from the school as their voice was now effective. The rising test scores could be as much the result of changing demographics at the school as the effectiveness of the new teacher.
I do agree with Bruce that this is messy but I think scholars have no option but to get messy.
In terms of this thread, there is certainly need for interdisciplinary scholarship to think through the total consequences of what new forms of teacher assessment would be, e.g. new forms of cheating, consequences of teaching to tests in terms of which teachers will be assessed, prematurely firing teachers who would turn out to be ver effective. This is not simply an econometric problem.

95

bob mcmanus 12.03.14 at 9:06 pm

92:Just a toss, but I might posit that the ascendancy of economics and economists can be correlated with the amount of credit, or for David Graeber, debt. It takes a culture and a technology to induce a stranger to loan a large sum for a house or a factory.

This is not simply understanding markets and the effects of innovations and other shocks, but a more general sense and confidence in the predictability of social, political, and macroeconomic conditions.

It is the ambition of economists to a) create a stable and long-lasting understanding of material interactions, a science that will, if served b) create a stable and long-lasting dynamic distribution of resources, an economy (which is created by the science), and c) train and discipline states, nations, peoples, institutions and bodies to relinquish sovereignty and obey the laws of economics.

And this is all to serve banksters and rentiers, to guarantee a decent return on investment. It is no small thing to part the rentier from her money.

The dangerous part of 2008 was the capitalist strike, the TED spread.

Mirowski is probably better than this paper in that reading him should make you madder (2 senses), and there are people, actually it is done all the time, historicizing and contextualising the organization and social system of economics. I have read two histories of Chicago economics, and a book on neoliberalism probably comes out every week.

96

wd40 12.03.14 at 9:10 pm

The post and most of the comments show why economists are in greater demand than sociologists. In their beginning, intermediate and graduate courses, economists learn models of competition: (1) the perfectly competitive model, where no individual has an effect on price; (2) the monopoly model, where one firm has control over output and price; and (3) a variety of models in between where several firms are dominant and the aim is to show how their interaction affects price. Similar models can be used to explain wages, etc. Depending on the situation, economists apply one of these models.

Sociology employs almost exclusively the monopoly model (hierarchy, hegemonic, and power are sociological terms for monopoly or near monopoly). Sociologists do not ask whether the same data might be better explained by perfect competition (they do not have the tools to do so). So as pointed out by the economist letter, they never ask whether the same data might be explained better by a different model of competition. As pointed out, economists have a much larger toolkit and therefore have to justify their choices.

There is no doubt that some sociologists have as strong a background in statistics as economists (and I suspect that they get paid as much as economists), but the vast majority of sociologists have by far weaker training in statistics. And clear theorizing that comes with mathematics is also nearly absent in sociology.

Statisticians know their statistics, but typically are not trained in social theory. So they are less likely to ask the right questions and look for the right data. Think of it this way. Statisticians rarely replace people in the hard sciences because statisticians do not typically have a strong background in these sciences.

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Metatone 12.03.14 at 9:15 pm

I’ve said it before, but it bears repeating – given the inability of most economists to find anything wrong with their field, it’s really hard to trust them. Just about every other field is aware of the difficulties of maintaining the academic enterprise in the 21st century and talks about it. The silence of economists looks an awful lot like a lack of self-reflection.

And as someone with a serious engineering background, I laugh at economists and their claims of mathematical superiority. Economists are mostly second-rate with the math, even statistics.

This allows me to notice how they’ve built up well-paid territories in business schools that involve teach undergraduates and MBAs badly. It’s well known how ill-served the business students are by much work by economists – but because MBAs and BBAs are effectively captive customers, it is unlikely to change…

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Val 12.03.14 at 9:20 pm

LFC @56and john c. halasz @90
I don’t know if you are both economists, but you do seem to be proving my point. I’m not trying to be personally rude here, but you do seem to be dumbing the conversation down.
I was making a point specifically about the use of the definite article – the idea that there is one economy, which is a thing (the fragile little flower).

Sociologists study society or societies. They generate diverse, and often interesting (though I have to say I also find quite a lot of sociologists boring, or frustrating, especially the great white fathers, with their unexamined patriarchal assumptions) theories about how societies work, and then generally try to test them using evidence. That process, which we generally call scientific method, although it’s also what everyone does if their natural intelligence hadn’t been stultified, is interesting – it’s fun, even though occasionally tedious when you are trying to be rigorous.

My complaint about mainstream or classical or neoclassical (whatever they are called) economists, is that they don’t do that, and therefore they take the fun and interest out of public debate (as well as propping up structures of inequality and privilege which I deeply oppose). They don’t have theories, they have a dogma about individuals and utility and markets, which they try to force everyone to believe. It’s boring and I’m sick of it.

This is maybe stretching it a bit far, but I am even now thinking about the geo thread, and depression, in this context. Is it possible that the flattening and dumbing down of everyday discourse by economism (if I can call it that) is contributing to depression? I know that I find it not just boring, but depressing, in the everyday sense of that word. We could be having creative and intelligent conversations about how we face contemporary challenges, but we are largely not (I don’t mean on CT, I mean in the general public sphere) and I think economism is at least partly to blame for that.

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Paul 12.03.14 at 9:25 pm

OK. So economists have constructed a reputation for themselves. True enough. For example, if you search for a ranking of economics blogs you’ll get maybe 200 of them. What happens if you search for sociology blogs? Not so much. Whether it’s Putin and oil or robots and the labor market or or immigration or why traditional journalism is doomed at least economists always have something to say. “Everything is a social construct” gets kind of boring.

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bob mcmanus 12.03.14 at 9:33 pm

92: In other words, without economists in 2008, we would have probably had a total financial crash, depression, and social disorder possibly revolution and war. I’m with Chris Rock, social disorder sounds like a plan.

As a Marxist, I don’t believe the stability is achievable under capitalism, that the goal is a religious supernatural delusion, but the delusion of predictability is probably necessary for modern free societies of our present preference. It is also failing in plain sight.

The motivation, the number one law of economics is avoiding or minimizing social disorder. Yeah, economics is massively and inherently conservative, even at its most liberal.

And this is John Maynard Keynes greatest and most original contribution, the urgency and importance of avoiding the horrors of 1914-1945 and the confidence that confidence could be manufactured.

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bob mcmanus 12.03.14 at 9:40 pm

Is it possible that the flattening and dumbing down of everyday discourse by economism (if I can call it that) is contributing to depression?

(Anomie, Durkheim, never mind)

Cheer up! Soma, hypnopaedia, and lots of recreational sex is in your future. You’ll feel great. After the big die-off, of course. “More stitches, less riches!”

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js. 12.03.14 at 9:52 pm

@Val/LFC/JCH:

It’s also that it’s impossible to imagine a contemporary sociologist saying something like—well, of course!, sociologists should be the most important counsellors to the prince; we’re the ones that study society after all! (Notwithstanding textbook subtitles.) And compare the totally unwarranted smugness on display here:

It’s probably because…drumroll…economics is the discipline that studies the economy.

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Bruce Wilder 12.03.14 at 9:54 pm

jch @ 90, Val @ 97

It seems to me that it isn’t hard to come up with a workable concept for denoting “the economy”: the political system of production and trade.

Val’s concern seems to be that the concept of the economy synthesized by academic economics and consumed by us as politically-aware citizens is mythically detached and unreal. Instead of helping people think productively and insightfully about the political economy in which they live and work in ways that enhance their ability to make the system work better in satisfying their material needs without compromising important values, economics produces something more akin to astrology or theology, obscuring and legitimating by loading false meanings on to ritualistic or dramatic enactments without identifying latent or kinetic functional relationships, thus insulating from effective critique, functional political systems that perform poorly for some or most people.

A narrow peak in the discipline’s political pyramid of status and power engages in highly abstract theorizing, with few if any conceptual referents to the observable economy. Within the narrow confines of that theorizing elite, social consensus plays a large part in permitting practitioners to simply ignore valid criticism. Then, the larger middle part of the professional pyramid uses abstruse statistical methods, which are often extremely weak in the chosen applications, to carry on “empirical” inquiries. Between the theoretical methods that contradict or ignore all observable phenomena and weak empirical methods that filter out almost all contact with facts, the economics profession has enveloped itself in Dunning-Kruger effect, where they continually congratulate themselves on their rigor and mastery, with little apparent awareness of their ineffectualness and irrelevance. And, finally, millions of students are indoctrinated in the dogmas of economics in colleges and business schools, and one of the principal, demonstrated effects of economics education is to make students less ethical!

The sensible thing, I think, would be for the outside world, to simply acknowledge that lots of other people do economics as a practical matter, and do it better. As for business schools, let the humanities and liberal arts evict the social sciences altogether. If business schools graduated people, with “skills” in moral reasoning, rhetoric, history, and, yes, mathematics and probability, without the economics indoctrination, we’d probably all be better off within a generation.

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Noah Smith 12.03.14 at 9:59 pm

105

Noah Smith 12.03.14 at 10:10 pm

Oh, and many of the criticisms of econ I’m reading above also strike me as true. Econ has tons of flaws and faults, but they know how to get the $$. And they also have been effective at colonizing areas of sociology, and sociologists will need to be quantitative if they are going to fight back effectively!

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david 12.03.14 at 10:18 pm

That response from Noah Smith deserves a post all it’s own – IQ up you losers with your nerd guns full of trendy jargon! There’s numbers out there, with facts attached.

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Jerry Vinokurov 12.03.14 at 10:27 pm

That’s an incredibly smug response that fails to engage any of the actual points in Henry’s post.

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bob mcmanus 12.03.14 at 10:32 pm

sociologists will need to be quantitative if they are going to fight back effectively!

Just finished Appadurai on the British census in India 1830-1930. Modernity at Large is essential reading. Numerical and statistical analysis is necessarily preceded by categorization and classification, and the quantitative work then disguises the categories (caste) as “natural and inevitable.” Econ roolz because a prior ontology, a methodology has been embedded. The numbers are not real, and do not depict reality, and are a method of control.

That it is the sociology of Marx that will defeat his economics has always been understood.

I wouldn’t expect Smith to read and accept Foucault. I find Smith in his youth and naive neoliberalism kinda interesting as an example, but don’t much like the guy or his work

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js. 12.03.14 at 10:32 pm

What’s weird about all this is that a lot of the evidence that Fourcade et al. provide is quantitative! Has Noah Smith actually read the paper?

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Abbe Faria 12.03.14 at 10:37 pm

Is the economics salary disparity recent? I suspect it existed before Haavelmo, Koopmans, microcomputers and big data, so I’m not sure being able to run a regression is the reason behind it. The fact accountants are paid more is also rather damning, given accounting though quantitative is rather anti-statistical.

There is a problem with quantitative social science. I appreciate people want to stick up for their disciplines, but #24 is quite correct and the ESRC in the UK has been trying to address problems across sociology, psychology, geography, anthropology, etc. There are social scientists doing good quantitative work, but equally a lot (most?) research is qualitative and you can be successful without a mathematical background in a way that I don’t think is possible in economics. Also, if I remember correctly Watts is a physics PhD, so probably not the best example.

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Main Street Muse 12.03.14 at 10:49 pm

“If they want to know how to boost productivity at U.S. companies, or increase employment, or auction off broadcast spectrum rights, whom should they ask for advice? A sociologist?”

Politicians going to economists for help in boosting productivity at US companies – because the business people (who earn quite a lot of $$ for their expertise) need politicians advised by economists to get their job done… No wonder the US economy is screwed up.

Sounds like the ego of the economist is beautifully stroked by the politicians in need of such great advice. (Not seeing the value of this advice, particularly since the great crash of 2008. But who am I? Just a resident of Main Street, not an “economist.”)

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LFC 12.03.14 at 11:04 pm

Val @98

LFC @56and john c. halasz @90: I don’t know if you are both economists, but you do seem to be proving my point. I’m not trying to be personally rude here, but you do seem to be dumbing the conversation down. I was making a point specifically about the use of the definite article – the idea that there is one economy, which is a thing (the fragile little flower).

I’m not an economist, don’t read the economics journals or (except on fairly rare occasion) the economics press, and I have no particular interest in defending mainstream economics. I think some of your criticisms of mainstream economics are no doubt well taken.

I do not think, however, that the ‘reification’ aspect of your criticism is an especially strong point: in other words, of the various legitimate criticisms that can be leveled against mainstream economics, the charge that it treats “the economy” as singular (and allegedly fragile) ‘thing’ should go pretty far down the list, I’d say. On the other hand, the charges of professional insularity and tendency toward dogmatism and/or arrogance are closer to the mark, I imagine (although those failings are not unique to economics, they seem to be somewhat more pronounced there, from the little I gather as an outsider).

I would also say for the record that the history of economic thought is quite an interesting subject and even a pretty cursory acquaintance with it shows that the range of interests of modern ‘mainstream’ economists has narrowed fairly drastically from that of their predecessors. Smith, Marx, Veblen, Mill, to name a few, were social/political theorists (sociologists, if you like) and economists. The balkanization/specialization/hyperprofessionalization of the social sciences, largely a product of the late 19th and 20th centuries, is a trend to be regretted on the whole, it seems to me. It does have some achievements, but has also hardened often artificial and harmful disciplinary divides. A minority of scholars and a few academic programs have resisted this trend, but not that many.

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Lee A. Arnold 12.03.14 at 11:05 pm

The MOST important social scientists, at this moment, are the political scientists studying the social cognitive bias of right-wing tribalism. It appears to be a kind of mental disease that fully infects about half the population, including, we must assume, the same or greater proportion of economists. Consider the quantitative, statistically-correlated symptoms among the general population:

1. On the group/grid axes, it is hierarchical (vs. egalitarian), and individualist (vs. communitarian).
2. It is an in-group phenomenon (i.e. it is reinforced by the values of the group you belong to).
3. It is a “system one” strategy in risk assessment, and in dealing with complexity. (And often, system two.)
4. It is partly about justifying the status quo (i.e. conservatism).
5. It correlates with lower need for cognitive activity and higher need for cognitive closure.
6. Additions of factual knowledge do not counteract it.
7. It correlates with greater existential fear, with fear of a dangerous world, with fear of the Other, etc.
8. The attitude toward science is more positivistic and technologically optimistic, and devalues “impact” (i.e. regulatory) science and environmentalism.
9. In the US, there is a strong “white male” correlation.
9. It is even more pronounced among the elites and political actors, than in the general population.

What are the real world effects? Presently, the economists who preached against more fiscal stimulus are the ones who are most responsible for the extenuation of the output gap. As are the rest of the economists who didn’t have the cojones to stand up to the likes of Robert Lucas and the Chicago Rationaloids. These people are supposed to be studying “the economy”? You can argue all you want about the roots of growth, or lack thereof, but the fact is that short-term mitigation might have alleviated some longer-term consequences simply by creating greater access to food and education — right now, at this moment, in the present.

Instead, we have kids who aren’t getting proper nutrition after birth, and lots more teenagers who cannot afford college, nor even find a job. These numbers have grown over the last six years. Maybe it is turning around now, MAYBE. But much damage is already done. We (the “society”) are going to be saddled with MORE welfare spending in the future, to take care of MORE social problems in the future, –why? because many economists, who are supposed to be studying “the economy”, cannot think clearly (they have lower cognitive needs), nor take responsibility for their discipline (because it’s an in-group hierarchy), nor speak up for what is right (because facts really don’t matter).

Instead it’s a ridiculous argument about “Keynesianism” or whatever.

Economists should be ashamed of themselves. They aren’t superior, by a long long shot. This will be the judgment of science.

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hix 12.03.14 at 11:09 pm

“that will almost certainly mean raising the IQ bar for entering sociology at the undergrad and grad level”

Really? Oh the American iq fetish -_-.

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Peter T 12.03.14 at 11:10 pm

My experience in public policy is that really advanced statistics are rarely useful, except for torturing the data until it gives the “right” answer. The data are usually patchy, unevenly collected, difficult to join across domains and so on, and the effects sought are fairly large. Attention to what is being talked about, how that is reflected in the data, quality of data and similar issues are much more valuable than statistical expertise. The Chetty case (and the judge’s use of it) above illustrates most of the point.

This is not to argue against better training in statistics, but if it takes a lot of maths to find a one per cent difference with a large error bar, then the support it offers to policy will be rhetorical.

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LFC 12.03.14 at 11:12 pm

p.s. And speaking of things, as Val did, that are boring and depressing, what I tend to find somewhat boring and depressing is another of these my-discipline-is-better-than-yours-no-it-isn’t-mine-is-better-than-yours debates.

I’m not going to spend time reading the Fourcade et al paper b/c what it says, according to the OP, about contemp. mainstream economics is just not that startling. So the profession is clubby, insular, hierarchical, patriarchal, dominated by narrow networks? As the guy said in Casablanca: “I’m shocked, shocked to find gambling going on here.”

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LFC 12.03.14 at 11:14 pm

[Have a comment in mod.]

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js. 12.03.14 at 11:14 pm

Smith, Marx, Veblen, Mill, to name a few, were social/political theorists (sociologists, if you like) and economists.

Agreed. But one way of stating the problem would be to note that while social and political theorists would recognize these thinkers as part of their intellectual heritage, the overwhelming majority of economists almost certainly wouldn’t (with the exception of Smith I suppose, tho even there, one wonders if any of them actually read him).

I don’t think you’re disagreeing with this necessarily, but it seems worth making explicit because it shows that the “balkanization” has had asymmetric trajectories and effects, which is part of the point Fourcade et al. are making.

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LFC 12.03.14 at 11:26 pm

js.:
But one way of stating the problem would be to note that while social and political theorists would recognize these thinkers as part of their intellectual heritage, the overwhelming majority of economists almost certainly wouldn’t (with the exception of [Adam] Smith I suppose, tho even there, one wonders if any of them actually read him).

Fair enough, and the same w/r/t your next paragraph.

(For the record, I’d note that it was an economist albeit a somewhat heterodox one, R. Heilbroner, whose The Worldly Philosophers introduced a few generations of U.S. high school and college students to the hist. of economic thought in this broader sense. It was one of his earliest books (maybe the first, I forget), the most famous, and prob. the best.)

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Jerry Vinokurov 12.03.14 at 11:30 pm

As an ex-physicist, I really enjoy following these econ wranglings every time they happen because economists are often said to have “physics envy.” But from where I sit, the envy seems not to be so much for the actual process by which physicists do what they do as for the legitimacy they have. Because much of what goes on in economics (or perhaps I should say, what goes on in the public debate around economics) appears to me to be basically cargo cult science that replicates the form but not the substance of actual scientific achievements.

Fundamentally, the problem of any science is to make a connection between the theory and the reality. The flip side of the coin inscribed with “All models are wrong but some models are useful” needs to be a method for actually figuring out which models are, you know, useful. This problem has been mentioned by multiple commenters (Bruce Wilder comes to mind first) in this thread and elsewhere, but it’s worth expounding on in detail. At some level, if you’re trying to figure out what people are going to do, you need a veridical model of how people actually behave. Microfoundations are a lovely idea, but reducing the actions of individual agents to some nicely-behaving utility functions isn’t actually microfounding anything; it’s just voodoo. You may or may not get something that succeeds on out-of-sample predictions, but you’ll have no way of knowing why it did or did not succeed. Contrary to what Friedmann wrote in The Methodology of Positive Economics, assumptions do matter. False assumptions, even on the off chance that they lead to a “correct” theory, will only do so as a matter of accident; if you want your theory to reflect the structure of the underlying world, your assumptions had better do so as well.

And of course this means that the theories themselves need to be empirically validated. As far as I can tell, there is absolutely no professional penalty for coming up with theories that don’t work out in practice. So as long as you can be reasonably mathematically clever (and especially if you can produce a “counterintuitive” result), people are going to take you seriously regardless of whether your model matches any sort of real-world results or not. And of course there’s zero accountability to the public; if you were on record saying circa 2006 that there’s no housing bubble, no one is holding your abject wrongness against you in 2009 when it’s time to make public policy. Convenient, that.

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mattski 12.03.14 at 11:33 pm

15 The great thing about economics is that it allows you to talk about the quantity and price of things without having to worry too much about the conditions in which those things are made.

I think this is a very succinct statement that cuts to the heart of why economics annoys a lot of people on the left, justifiably. Unfortunately most lefty critiques of the profession aren’t nearly so lucid.

24 Not one of them could explain, in words, what a confidence interval is.

Try asking a physicist for a clear explanation of the 2nd law of thermodynamics. (I’m mostly persuaded that it can’t be done.)

76 The exercise was meant to show that most people’s opinions aren’t worth getting too wraped up about since only 10-20% of people in any profession really have opinions that matter.

Ha! The beauty part is there is hardly any field of human endeavor where it doesn’t apply. It’s too bad ‘hierarchy’ is such a radioactive word here, if you see what I mean.

:^]

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mattski 12.03.14 at 11:37 pm

LFC,

I really loved ‘The Worldly Philosophers.’ Some of it was downright hilarious. (Esp chapters on Smith & Marx.)

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Val 12.03.14 at 11:38 pm

LFC@112
I guess there are actually two points I’m making:

One is the dogma: there is one true economy and this is how it works

The other is the reification: it’s a fragile plant and if you don’t treat it the way we tell you to, it will die and we’ll all be doomed.

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LFC 12.03.14 at 11:42 pm

mattski @122
It’s been decades since I read it. I remember it as witty in places. Hilarity may be in eye of beholder, but I’ll take yr word for it. ;)

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Ragweed 12.03.14 at 11:51 pm

Tabasco @24
About 10 years ago a big government department in Britain decided that it needed someone who could evaluate whether its programs were working as intended. So they interviewed 30 people with master’s degrees in social sciences.

Not one of them could explain, in words, what a confidence interval is.

That is just terrible. I wonder if they understood representative samples, sample size, or anecdotal evidence?

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Val 12.04.14 at 12:09 am

Also – as Bruce suggests above – I’m not in any sense trying to deny that there are complex sets of actions and transactions that can be called an economy, or even the economy in the relevant circumstances, nor that studying economies is in itself misguided.

For example I would be interested in an economist who could explain what happened to the economy of post World War One Germany, and why they had galloping inflation, in clear and evidence based terms, because I’ve never really understood that.

But the dogmatic prescriptions about how we should live – they particularly get to me because I work in public health in Australia, and every time we get a conservative government (as we currently have) they try to privatise our public health system using econo-speak justifications, which are just clearly and utterly misapplied and wrong. It gets you down.

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john c. halasz 12.04.14 at 4:20 am

Val @ 98:

Mine was a simple “clarifying” comment. And, sorry, I’m afraid that you’re the one who is being condescending and “dumbing down”. (The definite article is linguistically relative, and has nothing to do with the diversity of phenomena and their means of explanation).

There are all sorts of human purposes and ends, (or, in a diminished sense, natural ones), that have nothing to do with economic calculations, of whatever sort. But there are few human activities that aren’t subject to some sort of budget constraint, and thereby subject to economic considerations.

The diversity of phenomena doesn’t obviate the questions about the boundaries, conditions and constraints under which they occur and the basic principles by which they can be explained and “justified”. Nor about how individual agents or agencies generate and are subject to those constraints and conditions, thus leading to systemic pressures and implications, which operate beyond the cognizance and intentions of participant agents or agencies. That would be the point of various social “sciences” or studies, which themselves, (in contrast to the natural sciences), are embedded in the very social practices and activities that they study. So your apparent account of “scientific method” and its simply “empirical” basis is itself naive.

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Val 12.04.14 at 5:05 am

@ 127
Sorry I wasn’t meaning to be personally rude or patronizing (although obviously that’s hard to avoid when you’re saying that someone is dumbing down a conversation obviously!), but I think you didn’t (and still don’t) understand what I meant.

Natural sciences are no less embedded in social practices and activities than social sciences – and by the same token the social is equally part of the natural as the natural is part of the social (the distinction is useful, but not essentially grounded in anything much, if that makes sense) – and I’m sorry if you thought I was advocating some kind of naïve empiricism. I don’t think I am. Put it this way – do you agree that there is a difference between dogma and theory? and if so what is it? If you can answer that without any recourse to empiricism I will be interested.

129

In the sky 12.04.14 at 6:15 am

Some quick comments:

@Rich Puchalsky

Mainstream economics in the U.S. is inalterably opposed to the moral values of the left. As such, mainstream economists have to be right-wing moralists, although they never can admit this. The not admitting it part is what a lot of this ideological superstructure is about.

Here’s an example. For there to not be too much inflation, we’re told, a certain number of people have to be kept unemployed.

You’re not told that. Or at least you shouldn’t be, for the past thirty years or so. Antiquated and refuted theory.

As for the condition that “mainstream economists have to be right-wing moralists”, come off it.

@TM

[Binscatters don’t have confidence intervals; no R^2’s reported; etc]

I’d be curious if people from the social sciences could have a look at the charts and judge whether respected journals in their field would publish such. Until recently I would have thought no way, not in 2014, but maybe I’m deluding myself.

1. You’re right that binscatters don’t include confidence intervals. It’s all part of the recent emphasis on the benefits of taking a nonparametric approach and “stretching the axes”, as you say, in a data-driven way. Much of what you ask about is explained http://michaelstepner.com/binscatter/binscatter-StataConference2014.pdf. Excessive use of binscatters is undesirable. But they are a good, robust way of expressing conditional density functions. (They’re also quite a new tool – the same Chetty paper was the first, I think, to use them – so there’s no agreed convention on how useful they are, and I’m speculating/giving my opinion on this.)
2. R^2 is not particularly relevant for policy evaluation. If you’re trying to explain overall variation, then R^2 is a intuitive but gameable and often silly criterion. By “silly” I mean if you include obviously endogenous variables you can explain as much variation as you want, but your estimated coefficients are meaningless. If you’re estimating the treatment effect of a policy intervention, the residual variance is not your focus and it’s all about the estimated coefficient. (That said, I imagine Raj would tell you the R^2 if asked him.)
3. I can’t comment on the significance/lack thereof of that particular variable, I just haven’t looked into it.

@Metatone

I’ve said it before, but it bears repeating – given the inability of most economists to find anything wrong with their field, it’s really hard to trust them.

Way off track here, Metatone. Pop along to an economics research seminar. Economists rip each other to shreds and see (others’) entire reseach agendas as ludicrous. Structural versus reduced form types, for example, have been at each other’s throats. See if Guido Imbens and Jim Heckman are best friends or not.

More generally, I’ve always seen the difference between statistics and econometrics as the focus on causality. To paint a vulgar picture, statisticians are great with developing methods for experimental data. Econometricians are great at finding causality from observational data. As a social scientist I am of course biased, but the latter skill-set seems more useful to the world.

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A H 12.04.14 at 6:37 am

“You’re not told that. Or at least you shouldn’t be, for the past thirty years or so. Antiquated and refuted theory.”

By who?

131

Rich Puchalsky 12.04.14 at 6:41 am

Any economic theory that is criticized instantly becomes antiquated and refuted. Tell the central banks, somebody.

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John Emerson 12.04.14 at 7:38 am

Metatone: “I’ve said it before, but it bears repeating – given the inability of most economists to find anything wrong with their field, it’s really hard to trust them.”

In the sky: “Way off track here, Metatone. [i. e. There’s nothing wrong with the field].”

I’ve seen this ploy used by half a dozen disciplines. The fact that a discipline has vigorous internal debates does not address the question of whether the discipline acknowledges problems with their field. Vigorous internal debates are normally carried on within the limits of the discipline. What Metatone is saying that economists do not acknowledge that the field as a whole has any limits. And he didn’t mention it specifically, but another question is whether economists band together to defend their brother economists from external criticism, even if they disagree with them on internal questions. My perception is that they do.

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dsquared 12.04.14 at 7:45 am

#54 Francis – given the work you’ve already done on linear programming for the first chapter of “Red Plenty” there’s really not much more to do if you just want to achieve educated layman status. Nearly all of statistical modeling is simply about defining some function of the vector of “residuals” (ie, the difference between the actual data and the model) and using constrained optimisation techniques to minimise that function. Unless you want to get into the weeds of exactly how that optimisation is done, that’s it. Then the rest of statistics is about making assumptions about the distribution of the residuals from the optimised model to make deductions about the probability of some quantity of interest.

It’s not really a guide to statistics as she is generally done by statisticians, but Charles Manski’s “Identification for Prediction and Decision” is a beautiful book.

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dsquared 12.04.14 at 7:58 am

For there to not be too much inflation, we’re told, a certain number of people have to be kept unemployed.

Although Karl Marx was an economist, it seems a bit perverse to be blaming the modern profession for his theory of the reserve army of labour.

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bob mcmanus 12.04.14 at 8:40 am

134: Apparently CT won’t take the three links I got from googling “Phillips Curve 2014”

Papers or posts from the Minneapolis Federal Reserve (Fitzgerald and Nicolini November 2013); CEPR (Laszlo Andor, Oct 2014); and a long post by Simon Wren-Lewis (Mainly Macro) October 14 2014 are all about the trade-off between inflation and unemployment

“The final chart goes from 2000 to 2013. Note that the inflation axis has changed – it now peaks at 4.5% rather than 16%. The interesting point, which Paul Krugman and others have noted, is that this looks much more like Phillips’s original observation: a simple negative relationship between inflation and unemployment. ” …S W-L

Don’t let them lie to you.

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bob mcmanus 12.04.14 at 9:52 am

Having said that economist still correlate inflation and unemployment, and skipping over Friedman and Lucas:

a) Phillips, as I remember, simply discovered a useful correlation but

b) Central Banks, for instance, I think follow real wages more closely than unemployment. The theory is that unemployment creates downward wage pressure.

c) Capital has gotten very good at decreasing real wages while keeping workers officially on the books, cutting hours, benefits, social wage, differentially increasing the costs of consumer essentials (education, healthcare) while making “toys” cheaper, in other words, neoliberalism is in part a science of pre-emptive social pacification. Germany is famous for this.

That the employment-population ration has been fairly steadily horrible after its precipitous fall in 2008-2009 while U-3 headline unemployment has been decreasing is no accident.

137

Barry 12.04.14 at 10:02 am

TM: ” and that “mainstream economic” shouldn’t be held responsible for right-wing Voodoo (Blinder doesn’t use the word) economics (just like “mainstream biology” isn’t responsible for creationism). “

The difference is, of course, that creationists don’t become biology professors, who are also willing to publicly and severely criticize creationists.

When the austerian professors are no long published in economics journals, and economists in general treat them as Krugman does, then and only then will mainstream economics be innocent.

138

Val 12.04.14 at 10:36 am

Barry @ 137
Absolutely! Well said.

Possibly those economists who are being referenced by conservative parties are the ‘creationists’ of economics, and the actual ‘mainstream’ frowns upon them. But if that is the case, then ‘mainstream’ economics needs to say so, because it’s certainly not evident at present.

139

Anon Sociologist 12.04.14 at 12:03 pm

The pattern of this debate seems to be that Noah Smith says false or clueless things that we then respond to. So in response to his recent post:

It is false to say economics is such a popular major and that undergraduate demand is high. I do not have recent data, and would love to see it is someone can locate it. But, sociology did a report on the 1990s:
http://www.asanet.org/footnotes/mayjune00/ba.html
This shows a) economics declined dramatically in the 1990s, and b) sociology overtook economics in the 1990s. See for example:
http://www.asanet.org/footnotes/mayjune00/batable1.pdf

Following Noah’s argument, did sociology salaries gain on economics during this period? Did economics salaries decline in the 1990s? I doubt both. For a post claiming economics’ superiority in quantitative analysis and data, there is a rather striking absence of either in support of his claims.

The other major problem with his post is that he doesn’t at all know what he is talking about when he discusses concepts like power and legitimation. There are huge and rich literatures on both. Power, for example, is studied by political scientists, sociologists, philosophers and psychologists. Noah seems myopically clueless about all of this. Instead, he links to a paper by Acemoglu to say a literature on power exists(!?!). Sorry, Noah, Acemoglu is NOT part of that literature and you’re linking to him signals a lack of awareness of the literature.

This leads to a claim I cannot support with data, so I’ll pose it as a hypothesis. Noah and perhaps other economists do not read enough, and certainly do not read enough outside their discipline.

140

J Thomas 12.04.14 at 12:08 pm

#138 Val

Possibly those economists who are being referenced by conservative parties are the ‘creationists’ of economics, and the actual ‘mainstream’ frowns upon them. But if that is the case, then ‘mainstream’ economics needs to say so, because it’s certainly not evident at present.

Wouldn’t it be interesting if the chairman of the Harvard economics department announced to the media that the Chicago school of economics was a travesty, an unscientific imitation of real economics?

I think that would lead to a lot of fun.

141

Jim Quin 12.04.14 at 1:17 pm

Economists do have more options and more influence outside of academia.

And it’s because of the things they know and study rather than some vague, poorly defined “legitimation” or conferment of “sacraments”.

What exactly would you contribute to a discussion at, say, a major bank when the managing director says that a major client needs a forecast of interest rates to determine what combination of derivatives to use to hedge an investment?

I doubt your knowledge of social hierarchies and power relations will impress anyone when you’re sitting around the conference table at midnight and the client needs answers in the morning.

None of this is about “legitimation” or sacraments.

It’s about the fact that economists can deliver an answer to a question that someone is willing to pay good money for.

You can’t.

And so when a bank is trying to hire someone to deliver those answers, they’ll recruit at the econ department, not at the sociology department. Hence, more outside options.

Likewise with policy-making.

An economist that has done 20 years of research on financial markets is going to be relevant at a Federal Reserve meeting about the proper structure of the Fed’s asset purchases or on the staff of a CBO team forecasting the effects of reducing a certain tax deduction.

What would you contribute to such a meeting or project exactly?

I don’t think anyone would have the time to listen to you lecture them on power hierarchies when there is work like that to be done, with very high stakes and tight deadlines.

So no- people aren’t just deifying economists and listening to them instead of you because they have some kind of unfair socially constructed advantage.

It’s because they study specific things that matter in specific situations to decision-makers outside of academia, when there is money at stake.

142

John Quiggin 12.04.14 at 1:57 pm

The impossibility of explaining confidence intervals reflects the fact that they really don’t make much sense. People (including those with statistical training) intuitively reach for the idea that “there is a 95 per cent probability that the true value is x”, which makes perfect sense for anyone with a subjective theory of probability, but is ruled out by the assumptions about probability that were in force when classical hypothesis testing theory (including confidence intervals) was developed.

In this classical world, probability statements about unique events (like the parameters of the distribution of a given variable) aren’t permitted. So, we get something like “if the true parameter x is within this interval, the probability of the observed sample is at least 5 per cent”, which is just about incomprehensible.

143

G. Antongiovanni 12.04.14 at 2:24 pm

#120 Jerry:

“And of course there’s zero accountability to the public; if you were on record saying circa 2006 that there’s no housing bubble, no one is holding your abject wrongness against you in 2009 when it’s time to make public policy. Convenient, that.”

http://economics-files.pomona.edu/GarySmith/BrookingsHousingBubble.pdf

Incidentally this professor is the highest paid faculty member at his college (total comp over 300K).

144

dsquared 12.04.14 at 2:32 pm

So, we get something like “if the true parameter x is within this interval, the probability of the observed sample is at least 5 per cent”, which is just about incomprehensible.

Contrary data point – maybe I just have a strangely wired brain but I find this totally comprehensible and intuitive (although this does admittedly result in me making other mistakes about likelihood functions) while the statements of subjective probability – ie those involving making probability statements about something which is definitely either true or false – must seem totally incoherent, unless translated into rather weak just-so stories about imaginary bookmakers.

145

AB 12.04.14 at 2:56 pm

It’s a shame so much of this thread has wbeen given over to bashing economists. Jim Quin has finally stated the obvious.
– How should I design the auction for mobile phone bandwidth?
– How would a reduction in sales tax effect the labour market?
– Is it sensible to build an oil rig here?
– Should I buy the company that makes my company’s inputs?
These are billion dollar questions. Economists can sometimes offer answers, or at least attempts at answers or pretences to answers. That’s why they command higher salaries.
The point about how prestige works within the profession is more interesting. Krugman suggests that local/faculty networking, being in with the department head etc, really does not matter much. It is national/global reputation in your specific subfield that matters.
Is that true? More/less so than other social sciences?

146

A H 12.04.14 at 3:37 pm

@AB “– How should I design the auction for mobile phone bandwidth?
– How would a reduction in sales tax effect the labour market?
– Is it sensible to build an oil rig here?
– Should I buy the company that makes my company’s inputs?”

Designing auctions is the only place where academic econ has had something like an engineering success. That it involves the detailed planning and maintence of a market by a central planner is rarely remarked upon.

And Econ PhD would not provide any particular advantage in answering the other questions, and Mainstream economic theory doesn’t have much to offer either. So in the real world you see that these problems are not solved by economists, or when an economist tries, they do poorly.

147

LFC 12.04.14 at 4:00 pm

Jim Quin 141

What exactly would you contribute to a discussion at, say, a major bank when the managing director says that a major client needs a forecast of interest rates to determine what combination of derivatives to use to hedge an investment?

What is the track record of economists like when it comes to forecasting interest rates? (Not sure, that’s why I’m asking.)

148

bianca steele 12.04.14 at 4:12 pm

It’s normally the case that fields with practical applications split into theoretical and practical halves. It seems this hasn’t happened w/r/t economics. Rather, a Ph.D. in the most theoretical possible version of the field is considered the best possible qualification for the most practical possible job in the same field. Why and how this happens–and whether it’s a good thing–is an interesting question and certainly within sociology’s realm of study.

149

Rakesh 12.04.14 at 4:24 pm

If you want to deregulate labor markets, fend off living wage advocates, deny to emergent countries the protection the wealthy ones historically used, eliminate tenure for California elementary school teachers, deregulate the derivatives market, create a panic about govt debt/GDP ratios, prove that stock options should not be expensed, have dependent employees (mis)classified as independent contractors or temporary workers without protections and of course dull young people’s social sensibilities so that they can enjoy equanimity in face of extreme inequality and permanent high, albeit disguised, unemployment,
you simply cannot rely on Anthro, Ethnic Studies, History and Sociology Depts.
There is only one reliable place to go.

150

Rakesh 12.04.14 at 4:28 pm

Do economists read non-economists who write about economics?
Gilliant Tett
Justin Fox
Jonathan Schlefer
Eve Chiapello
Donald MacKenzie
Thorstein Veblen
It’s not clear to me that people who are officially economists were trained in what we would now recognize as economic departments–John Hicks, Maurice Dobb, Robert A. Brady, Richard R. Nelson.

151

Nine 12.04.14 at 4:37 pm

A H@145 – “Designing auctions is the only place where academic econ has had something like an engineering success.”

A lot of this work – on Networks, Algorithmic Game Theory, Auction Theory, Computational Anything-at-all theory etc – is , in fact, done in Engineering departments. You could conceive of shutting down every Econ Dept in the solar system without any reduction in the quality of research in certain application areas like Auction theory, mechanism design and so on.

152

AB 12.04.14 at 4:38 pm

And what about when you want to toughen regulations in the derivatives market Rakesh? Or increase debt for the purposes of stimulus? Or design a stronger social security system?

Do you think that the Scandinavian welfare states were designed by armies of anthropologists?

Remember Hayek shared his nobel prize with Myrdal.

153

LFC 12.04.14 at 4:44 pm

Rakesh @150:
“Do economists read non-economists who write about economics?
Gilliant Tett
Justin Fox
Jonathan Schlefer
Eve Chiapello
Donald MacKenzie
Thorstein Veblen”

Me @112:
“Smith, Marx, Veblen, Mill, to name a few, were social/political theorists (sociologists, if you like) and economists.”

154

hix 12.04.14 at 4:46 pm

@141
“What exactly would you contribute to a discussion at, say, a major bank when the managing director says that a major client needs a forecast of interest rates to determine what combination of derivatives to use to hedge an investment?”

I think i would contribute exactly the same thing Gene Fama would. All without college degree at all. Oh wait, no, i would just make shit up so i can keep my job, just like the bank econ Ph.Ds.

155

Trader Joe 12.04.14 at 4:57 pm

@147 LFC

“What is the track record of economists like when it comes to forecasting interest rates? (Not sure, that’s why I’m asking.)”

Its a mix, but some of them are pretty good. Time frame is definitely an issue – out 6 months to a year, the accuracy is investibly good, beyond that its going to come down to whether all things being equal are really equal.

The guys who are consulted for these type of projects/reports are not the academics and comparatively high profile writers most people are familliar with – its usually a house economist, they usually have a PhD from somewhere (but not 100%) and while their writings might be well known within the financial community and among the banks customers, they almost never have blogs, write for newspapers or do articles – said differently, the writing is for paying customers only, its not given for free.

They are not trying to solve macro problems like how inflation interacts with unemployment – they are aiming to forecast particular economic data and then suggest how investors might make choices based on their view. If one expects 10 year treasuries to move from 2.3% to 3.3% over 12 months, its not really important if it turns out to be 2.8% or 3.5% – it is important that its not 1.8%….as some have mentioned, its an applied part of the field and has different goals and methods than the theorists that get so much attention.

156

Jerry Vinokurov 12.04.14 at 5:13 pm

Of course technical expertise is useful; no one denies this. It’s just that, somehow, every time unearned privilege needs to be defended, or the proles told that the welfare state must be dismantled (for your own good, of course!) or that free markets (whatever those are) know best and that if you’re poor it’s your own damn fault, there’s never any shortage of economists swinging their big economist… credentials in public, preaching that right wing gospel. They’re not the only economists that comment on public policy, and there are plenty of liberal economists too, but yet, somehow, all the worst right wing policies invariably have economist defenders with impeccable credentials. Never mind whether those policies actually do anything good for people; Greg Mankiw can be counted on to write columns about how put-upon the 1% is regardless of whether that’s actually true or not.

The problem is not with economics the technical subject. The problem is with Economics the discipline and its collective refusal to publicly disavow its right wing elements. Perhaps somewhere out there lots of technical articles are being written about how cutting taxes is not the ultimate solution to all of life’s problems; that doesn’t affect the fact that conservative economists show up on TV like clockwork to defend just that sort of thing, again, regardless of whether it’s actually true (because it’s not like we’ve had any real experiments testing that proposition or anything).

It’s really, really simple: there are elements of the profession that have chosen, either for reasons of ideological agreement or just for the money (or, most likely, for both these reasons combined), to sell their professional opinion to the highest bidder. Unsurprisingly, business is the highest bidder, and mouthing the business line on TV, which can be more or less decoupled from any actual technical expertise, is a great way of getting paid. All you need to do is establish your bona fides as a clever person who is good with math, and then you can shill for industry all day every day if you like, since there are zero ethical or professional standards getting in your way. Until economists actually address this issue, it should be thoroughly unsurprising that the public treats all economic pronouncements with a profound skepticism.

157

Rakesh 12.04.14 at 5:16 pm

@152 Toughen regulations in the derivatives market? I guess that I would turn to Lynn Stout before any economist I can think of. As for the Scandinavian welfare state, it may also have been the work of anthropologists–eugenic anthropologists? There is a dark side here, I think. So there are problems across disciplines of course. I think Myrdal’s Political Elements book should disqualify him from being an economist–does any economist trained in the last thirty years actually read him? He would seem much more likely to be read in a political science department and of course ethnic studies department.

158

Rakesh 12.04.14 at 5:19 pm

Jerry at 156 and elsewhere is quite insightful, in my non-economic opinion.

159

Ronan(rf) 12.04.14 at 5:30 pm

My impression of interdisciplinary academic politics from the outside is something like this. Anthropologists, sociologists and political scientists all stick together, at a general level, though political scientists see themselves as more empirically minded than the other two, while the other two think that at base political scientists are racist/sexist/homophobes who havent properly accounted for their privilege biases. All three *hate* economists, as economists don’t understand the importance of ‘power’, but economists dont even realise this hatred exists as, due to the ability to add and subtract at a reasonably high level, they see themselves closer to physicists than social scientists. Physicist’s find economists tiresome, their assumptions juvenile, their models useless. If only a team of physicists were given the opportunity, the argument goes, all economic and social life could be reduced to a handful of models. Mathematicians appear embittered for reasons I can’t understand, and spend their time complaining that none of the aforementioned even partly understand the methods they use. (Philosophers something similar) Engineers and computer scientists argue among themselves over who is ‘the more practical’ , deals with ‘the most difficult questions’, and gets ‘the best results.’ Quantam biologists are the only ones speaking any sense in the whole matter, afaict.

160

JW Mason 12.04.14 at 5:30 pm

John Cochrane makes a useful point: The “economics” taught in grad school and published in most journals has zero connection with the “economics” used in macroeconomic policy settings.

161

Rakesh 12.04.14 at 5:35 pm

Perhaps we should read Big Ideas in Macroeconomics: A Nontechnical View Hardcover –
by Kartik B. Athreya. I began last night. And then we can figure out whether the DSGE/ADM/Solow/Harrod-Domar models represent progress over Marx’s reproduction schema and the way that were developed by Otto Bauer, Henryk Grossman and Duncan Foley.

162

LFC 12.04.14 at 5:54 pm

TraderJoe 155: thanks for the response. (I had the impression the in-house forecasting of the sort you describe was mixed-to-bad, but I didn’t really know, hence the question.)

163

LFC 12.04.14 at 5:58 pm

Ronan @159
I assume this comment is intended mostly to be amusing, i.e. tongue-in-cheek. ‘Cause it’s hard to generalize this way even w/in disciplines, as you presumably know.

164

JW Mason 12.04.14 at 6:10 pm

John Quiggin’s post on Athreya from earlier this year makes the same point as Cochrane: There is almost zero intersection between Big Ideas in Macroeconomics and what I would think of as macroeconomics.

165

Rich Puchalsky 12.04.14 at 6:35 pm

This is generally how I’ve found public interaction with mainstream economists goes. I say something like “Economists say that we can’t have full employment because we’d get too much inflation” and someone hastens to inform me that I’m misinformed and that economists no longer believe any such thing. Instead there are apparently much different reasons why we can’t have full employment because we’d get too much inflation, an entirely different theoretical basis that I’m not familiar with for why the same observable behavior by economists continues.

166

Ivy 12.04.14 at 6:37 pm

Ivy’s Premise: Economists and others in finance make more than sociologists and statisticians because there is more to be made in cash flow-rich econ/fin jobs.

Willie Sutton’s Premise: Why do I rob banks? Because that’s where the money is.

Think of salaries/compensation plans as the post-Jensen manifestation of the present value of all the future cash flow, so clipping off a little here and there to support the mandarins that enable clipping is part of the game.

167

Barry 12.04.14 at 6:39 pm

Daniel Davies: ‘Nearly all of statistical modeling is simply about defining some function of the vector of “residuals” (ie, the difference between the actual data and the model) and using constrained optimisation techniques to minimise that function. ‘

This is a really good statement; I never thought of it like that.

I would just rephrase it as ‘statistical model-fitting’.

168

In the sky 12.04.14 at 6:42 pm

@John Emerson

What Metatone is saying that economists do not acknowledge that the field as a whole has any limits… and another question is whether economists band together to defend their brother economists from external criticism

I agree that’s probably what Metatone meant, but they’re incorrect widely off the mark. Some economists think, to repeat an example I gave earlier, that structural estimation techniques have become ludicrous. That’s an admission that there is a limit to the field. Others think Steve Levitt-type cuteonomics adds no worth. That’s an admission that there is a limit to the field. Everyone accepts that behavioral economics has important insights. That’s an admission that the neoclassical framework is at best a first estimate.

Economists are a strange old bunch, but blindly supportive of each other we certainly are not.

@bob mcmanus

[Three good references] are all about the trade-off between inflation and unemployment

1. Central Banks can target the money supply and interest rates
2. Monetary policy can alter real things like output and employment, at least in the short run, as well as nominal measures like inflation
3. There is an accepted wisdom that these intervemtions will tend to increase inflation and lower unemployment, many caveats omitted
4. This is ten million miles from “For there to not be too much inflation, we’re told, a certain number of people have to be kept unemployed.”

@A H

Designing auctions is the only place where academic econ has had something like an engineering success.

This isn’t true. See RCTs from development over the past decade; successful implementation of Pigouvian carbon taxes in many countries; the consumer benefits from interventionist antitrust policy in the EU; the relative efficiency (both economic and administrative) of VATs over other taxes, etc etc etc.

169

Barry 12.04.14 at 6:46 pm

JW Mason 12.04.14 at 5:30 pm
“John Cochrane makes a useful point: The “economics” taught in grad school and published in most journals has zero connection with the “economics” used in macroeconomic policy settings.”

What’s interesting is that the school macro is not being used outside of school, even when there are a large number of sophisticated companies who make/lose lots of money by not being right about macro stuff, and who hire lots of economists.

In fact, a blogger named ‘Noah Smith’ had an post on this.

170

Barry 12.04.14 at 6:48 pm

Another: “For there to not be too much inflation, we’re told, a certain number of people have to be kept unemployed.”

dsquared: “Although Karl Marx was an economist, it seems a bit perverse to be blaming the modern profession for his theory of the reserve army of labour.”

It’s a core tenant of economics; they probably believe in that theory at least as much as Marx did.

171

In the sky 12.04.14 at 6:48 pm

This is generally how I’ve found public interaction with mainstream economists goes. I say something like “Economists say that we can’t have full employment because we’d get too much inflation” and someone hastens to inform me that I’m misinformed and that economists no longer believe any such thing.

If this is really happening repeatedly, Rich, you may want to brush up on what economists are doing before you criticize them. Yes, economics has changed an awful lot in the past 25 years. If old theories have flaws that you outline, but that these theories have already been sent to the graveyard, that’s not something to moan about.

172

TM 12.04.14 at 7:04 pm

AB 145: your example about oil rigs (really, you think it makes sense to ask economists about the siting of oil rigs?) brought to mind the stunt, years ago, by what’s-his-name, the “Skeptical environmentalists”, who invited economic prize winners to confer about what to do about Global Warming. Their predictable answer: nothing, it’s a waste of money. If I remember right, JQ wrote about that at the time. The episode is actually very relevant to this discussion because the mere fact that the stunt worked, was widely commented on, and had a certain propagandistic effect is remarkable. It is very unlikely that a similar stunt with political scientists or sociologists would even raise even eyebrow. Of course, economists claim to have expert knowledge on the “allocation of scarce resources”. And of course, the allocation of scarce resources is the essence of politics. So the relationship between economics and power is really not a big mystery.

173

AB 12.04.14 at 7:23 pm

“really, you think it makes sense to ask economists about the siting of oil rigs?”
Some people think it makes sense to consult them about say, commodities markes, or the best ways to value capital investments. Perhaps they are fools. Or perhaps Shell keep all those economists on the books so they can write memoranda in favour of low taxes and union-busting. That seems to be the consensus in this thread.

174

TM 12.04.14 at 7:29 pm

In the Sky 129: “It’s all part of the recent emphasis on the benefits of taking a nonparametric approach and “stretching the axes”, as you say, in a data-driven way.”

Basically you are saying, let’s just throw the whole that whole nonsense of statistical good practices over board. We don’t need no stinkin’ error bars, say no to Rsquares, and stretching the axis just shows how “data-driven” we are. Astonishing.

Stretching the axes is neither non-parametric nor “data-driven”. It’s a transparent trick to mislead viewers into seeing a big effect where there is little or none, warned against in any beginner’s statistics textbook.

Chetty et al’s statistical methods are not non-parametric (in fact Chetty stated in response to Adler that he’s using “least squares” methods, as if that justified anything – it reinforced the impression that he doesn’t understand his methods too well). And the lack of error bars, come on. They are condensing tens of thousands of observations in a single point. There is no circumstance under which such grossly misleading data presentation is justifiable. I’m aware of one other publication where this was done systematically – Murray and Herrnstein’s The Bell Curve. They also, incidentally, omitted to report the Rsquare values in their diagrams. Almost certainly, Chetty et al have very low Rsquares. Why not report them.

“If you’re estimating the treatment effect of a policy intervention, the residual variance is not your focus and it’s all about the estimated coefficient.” Nonsense. You can have a high coefficient that is not, or barely significant. It is impermissible to just report the coefficient without Rsquare and confidence interval.

175

TM 12.04.14 at 7:35 pm

Ab 173, you have piqued my curiosity. Why would Shell ask economists about the siting of oil rigs?

“Or perhaps Shell keep all those economists on the books so they can write memoranda in favour of low taxes and union-busting.”
You write this as if it were implausible. Seems a whole lot more plausible to me than your explanation. Or am I overlooking some higher level irony here?

176

Rakesh 12.04.14 at 7:42 pm

@164,
OK so academic or macroeconomics does not include IS-LM models and the theory of liquidity traps? First question. Second ?: are the IS-LM models and theory of liquidity traps (as presented by Krugman, DeLong and Blanchard?) the basic foundations for understanding the recent downturn and proposing the right policy mix?

177

J Thomas 12.04.14 at 7:48 pm

#155 Trader Joe

Its a mix, but some of them are pretty good. Time frame is definitely an issue – out 6 months to a year, the accuracy is investibly good, beyond that its going to come down to whether all things being equal are really equal.

The guys who are consulted for these type of projects/reports are not the academics and comparatively high profile writers most people are familliar with – its usually a house economist, they usually have a PhD from somewhere (but not 100%) and while their writings might be well known within the financial community and among the banks customers, they almost never have blogs, write for newspapers or do articles – said differently, the writing is for paying customers only, its not given for free.

OK! So here’s an important topic, and in general economists can’t give good answers 6 months or a year ahead. The experts who use secret knowledge to do that sell their predictions to people who will keep them secret. These experts are not all PHD economists, and presumably they are valued according to their results. If your track record goes down, presumably your remuneration will too.

These guys are good at predicting the direction that interest rates go, nobody much cares if they get the magnitude right.

It occurs to me that this probably has nothing to do with the economics people learn in school. More like something you might do with neural nets or something. Provide the known time series, weighted in favor of the most recent, and whatever other data might help predict, and choose the nets that predict best.

It might be a game that anybody could break into. Make your guesses public for long enough to show how good you are, and then take it private. Sell your predictions to every subscriber, or if one of them pays enough then sell only to him. How long do you have to get great results before somebody will pay for them?

You could prove how good you are without making your results public. Six months and a year ahead, publish digital signatures of the documents that contain your predictions. Then after the fact you can publish the actual documents which show what your predictions were.

It looks to me like this sort of prediction probably has no connection to academic economics whatsoever, except that people with econ degrees have a head start at the recognition and trust they need to get the work.

Hmm. Predicting interest rates. Does that have something to do with predicting what the Fed will do within the next 6 months? How could academic economics possibly help with that?

178

hix 12.04.14 at 8:26 pm

There might be great interest rate short term predictors or not. Im not really sold to the notion that such people exist, but that does not even matter. Theres just far too much observable banks cheat customers with interest rates derivatives behaviour going on to think this a situation where an economists skilled or not is usefull for society as a whole. The notion that one needs an opinion about interest rate movements to _hedge_ is weird in the first place.

179

Ronan(rf) 12.04.14 at 8:36 pm

Dani Rodrik’s critique of economics as a profession.

https://www.ias.edu/ias-letter/rodrik-economics

180

john c. halasz 12.04.14 at 8:54 pm

Val @128:

Maybe this is drifting off topic, but… Natural sciences are themselves socio-cultural institutions and they are partly implicated in and relative to human practices, capacities and projects. But there is a categorical distinction between them and social “sciences” or studies. (I prefer the term studies for social matters, because in English “science” tends to imply the natural scientific model of empirical-analytic nomological research, though already in biology the formation of “covering law” generalizations into a unified theory begins to break down. The German “Wissenschaft” is a much baggier word, covering any methodically rational discipline, such as, say, philology). SImply put, the “elements” of social “sciences” or studies are human agents, which have the properties of cognizant sentience and intentionality, and their respective domains or fields concern the structuration of systems of social (inter-)action. IOW human agents are, however notionally, “free”, and it is the structural constraints operating more-or-less sytematically upon them, rather than strictly material causality, that forms the “objects” of study. (Animals exist largely as a function of adaption to their given environments, whereas humans have a capacity for reflexive self-control, which means not only can they adaption their environment to themselves, rather than adapting themselves to it, but they can alter their responses to environmental events). The domains or fields of natural sciences are “mind-independent”, whereas those of social studies depend precisely on the understandings of constituent agents, (since to be an agent is to act on the basis of some sort of understanding.) That is a basic boundary and a difference in kind and not merely in degree. And it also means that social studies are more radically and reflexively implicated in underlying social practices and projects than natural sciences. (That is something that economists especially tend to miss or ignore, believing themselves to be producing some sort of “pure” and therefor disinterested theory, on a par with physics, because math).

All human experience, knowledge and activity or action is mediated by our meanings and concepts. There is no such thing as self-evident evidence in itself, as if the external world were immediately and directly transmitted into our minds, without any interpretation. Empirical evidence is gathered and selected within constructed conceptual frameworks, whether formally theories or not, and only count as evidence in terms of such relevance, as confirming and supporting some conceptual claim or not. But such conceptual frameworks are not simply derived from experience or evidence itself, which rather depend for their possibility on those very frameworks. (In philosophy of science terms, this is the problem of abduction, the most crucial and difficult issue to account for: how and why are such conceptual frameworks formed or derived, such that they should be considered worthy candidates for empirical testing. Popper’s falsificationism, aside from just being an unoriginal criticism of induction and equally unoriginal account of science as a hypothetico-deductive method, claimed to provide a demarcation criterion between science and non-science. But his account was far to simplistic to provide such an account). Different competing theories are to be evaluated not just by the evidence or “data”, but with respect to how well they organize the available evidence to support their theoretical or conceptual claims, which has the difficulty that “the evidence”, being already “theory-laden” is never quite the same. It’s not that one can’t decide between theories, but rather evidence alone doesn’t provide the sure-fire criterion, but rather the matter entails reflection on what the theory is for, its underlying project, which is implicated in social practices and ineluctably normative considerations. A doctrine or theory is not to be distinguished from “dogmatism” on empirical grounds alone. Rather it is much more a matter of how a doctrine or theory is held to, an attitude of openness to conflicting contrary evidences and alternative explanations or interpretations and a willingness to reflect on the aims and norms that the theory or doctrine seeks to advance. That, at least according to me, is what is naive and dogmatic about “empiricism”.

Now to get back on topic. So economists are needed to design auctions, (because at bottom then have an auction-like theory of nominal price formation)? It was on the advice of economists no doubt that electricity markets were deregulated. So now we need some other economists to explain how the electricity auction system can be readily gamed. And in the meantime, no doubt it was economists at the Fed who approved, if not encouraged, mega-banks to buy or form subsidiaries so that they could speculate on and game the electricity market. Nice work if you can get it, I suppose.

And just how many certified economists forewarned or quasi-predicted the GFC? (Something like it was readily foreseen by many non-economists, rank amateurs, based on rising debt loads, current account imbalances and the open-air Ponzi market in structured securitizations and derivatives). One such established figure who did foresee was Paul Volcker, (though not a phd.), who declared in 2003 that there was a 75% chance of a global crisis in finance within 5 years. In 2007, Larry Summers called out what he called “the prophets of doom”, naming names, Volcker among them, and asking what had become of there predictions. Great timing as always, Larry!

You’d think the failure to predict even remotely the possibility of such a massive catastrophe would be a cause for shame and consternation amongst economist, and result in an admission of professional and scientific failure. No such luck. Maybe it has something to do with honor amongst thieves. My favorite example is Prince Myshkin, former Fed governor, who was paid to extol the wonders of Iceland’s economy, shortly before it collapsed.

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Zamfir 12.04.14 at 8:58 pm

@TM, Shell has loads of people who weigh the numbers on businessy questions. Comb through the cash flows and expected future cash flows of projects, build arguments on which possible investments make sense under which conditions. Including, yes, whether they should fund a certain platform.

As far as I know, this has not much relation to cutting-edge economic Theory. But people educated as economists have an affinity for such work, they already know part of the jargon, and they tend to be theoretically stronger than people who went to straight to business/management school out of high school. Economics is the go-to education for people who want to do money-work and have an academic bent of thinking.

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Jerry Vinokurov 12.04.14 at 9:06 pm

You’d think the failure to predict even remotely the possibility of such a massive catastrophe would be a cause for shame and consternation amongst economist, and result in an admission of professional and scientific failure. No such luck. Maybe it has something to do with honor amongst thieves. My favorite example is Prince Myshkin, former Fed governor, who was paid to extol the wonders of Iceland’s economy, shortly before it collapsed.

Right, that’s kind of the whole sticking point, isn’t it? When you fail this badly, all the internecine debates about whether this or that particular model is 5% better or worse seem a lot less relevant.

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Trader Joe 12.04.14 at 9:08 pm

@177 J thomsas

It is an important topic since it hopefully helps illuminate the difference between academic economics (which is what the OP is mostly about) and the non-academic alternatives which as many have mentioned have a lot of money behind them and is why there is so much ‘care’ are about economics relative to the social sciences.

There isn’t one set answer as to how people get jobs as bank economists. Most investment banks have a person who is named as ‘chief economist’ and whose name goes on the top of the estimates/forecasts. Under that person is a team of people who are doing the data work, analytics, model building etc. and as you say, that’s where the credentialing comes in to get a spot on the team in the first place.

Often there are different specialists below the chief economist – perhaps ‘rates strategist’ or “currency strategist’ These guys tend to be deep, but narrow in their specialty whereas the chief economist is going to be a bit more broad.

I’m sure it’s happened, but I’m not aware of many cases where some academic PhD has been helicoptered out of academia and anointed a chief economist – the skill set doesn’t immediately translate. They don’t talk the talk. They can’t convert the concepts to investment ideas. Most often guys work their way up the ranks from analyst to sector specialist to chief maybe moving between firms to get the promotions.

The guy who gets the top job ultimately has to have two key attributes – first some ability to consistently reach the right conclusions from the data he is working with and two the ability to communicate how he reached his conclusion and therefore what should happen if he’s right and just as importantly what could make him wrong and how to respond to that.

The combination of the communication skills and the analytics are what make that person valuable to their customers. The customer isn’t only paying for being “right” (although they won’t pay indefinitely for wrong). Part of what they want is insight into the numbers, what can change and just as importantly what other investors are thinking about and the questions others are asking. Part of their insight is listening to what market participants are thinking about and that’s not something directly captured in an econometric model.

Investors will ultimately make their own decision about how to invest their portfolio they aren’t being “sold” something. They are paying for insights and someone that helps them make better decisions over time is well worth what they are paid (an extra 5 basis points on a $10 billion bond portfolio pays for a lot of economists).

The proof is in the pudding so to speak, these guys do get compensated and unless all of their customers are making uneconomic decisions, they must be adding value in some way or else, as you say, they’d get rid of that guy and send in the next.

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tom 12.04.14 at 9:10 pm

@TM

Why does Chetty needs error bars? The relevant standard error is the one on the slope of the line which he reports in the published figure (which differs from the one in the article). The figure is just a summary of the results. Plus he posts the statistical code on his website.

On the R-squared issue, economists usually don’t care about it. Human behavior is messy and we are happy if we can explain only a small portion of it. Still, teacher VA added is a politically charged issue and I would have reported the R-squared, which I guess are pretty low. Student’s success is a function of many things, we spend a lot of time arguing about teacher VA added while maybe the focus should be somewhere else (poverty? The family environment?).

Many comments here miss the point of the OP about the high wages of economists. WD40 has valid points above and s/he has been completely ignored.

Still, I agree that there are important issues in economics that need to be addressed and some have been raised here. We needed a disclosure policy since a long time, glad we have it now for AEA journals. Quite a few economists are by default skeptical of the government and this is just ideology for me. But, alas for many here, you need economists to counter the claim of some other economists that more stimulus would not have been effective. Rodrik’s link above is also a good one.

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bdbd 12.04.14 at 9:19 pm

Economics is to the economy as physics is to baseball.

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Jerry Vinokurov 12.04.14 at 9:24 pm

Who is the Alan Nathan of economics?

187

bob mcmanus 12.04.14 at 9:29 pm

168: 4. This is ten million miles from “For there to not be too much inflation, we’re told, a certain number of people have to be kept unemployed.”

Dean Baker, today:”It is central banking 101 that you raise interest rates to slow the economy and throw millions of people out of work in order to head off inflation. Paul Volcker is a hero in elite Washington circles precisely because he raised interest rates and threw millions of people out of work in order to bring an end to the inflation of the 1970s. To his admirers (which do not include me), the longer term benefits to the economy were worth the pain suffered by the millions of unemployed and their families.”

You are going to have to parse that for me a little. Was the “ten million mile away” problem with the phrase “certain number?” As in the number (s, disputed) that is NAIRU?

I kinda assumed the commenter was not totally informed and so did not demand a perfectly phrased question. I tried to respond in the spirit rather than the letter.

Hell yes, most economists, liberal or conservative, fresh or salt, believe in the inverse relation between inflation and unemployment.

Back to OP, though probably repeating myself, in an age where everybody wants to learn statistics and some check the box office everyday and some watch sports with a calculator to catch WaR or twitter followings, our society have the disinterested, scientific, objective, empirical dismal economists we deserve. We are being consumed by our numbers, no longer a Panopticon, we are watching each other counting whose watching. And timing it. And placing our bets.

Since I believe the problems with economics are pretty much constructed, like everything else, at the ground level in everyday social interaction Foucault of Birth of the Clinic and Order of Things (and biopolitics) is more useful than the Bourdieu of Homo Academicus and Reproduction in Education

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AB 12.04.14 at 9:38 pm

@Tm 175
Zamfir rather beat me to it. In case you don’t believe me, Shell are currently advertising for a new Senior Economist, with expertise in macro-economics.

Tasks include: “Enhance the quality and analytical rigor of the macroeconomic, oil price and capital cost outlooks for business planning and project appraisal.”

So: help us work out when it is worth building a new oil rig…

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bdbd 12.04.14 at 9:57 pm

@Jerry V 186: I guess Deirdre McCloskey could be one candidate. Another, very different candidate might be Philip Mirowski

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TM 12.04.14 at 10:17 pm

184: “Why does Chetty needs error bars? The relevant standard error is the one on the slope of the line which he reports in the published figure (which differs from the one in the article). The figure is just a summary of the results. Plus he posts the statistical code on his website. On the R-squared issue, economists usually don’t care about it.”

Why do we need error bars? Why should we care about R-square? Questions of a statistically trained economist…

Seriously, these diagrams, without error bars or anything of the sort, were shown to a judge as “scientific evidence”. No indication of the actual messiness of the data behind that diagram. Do you think the judge might have been less impressed if the axes were scaled correctly and error bars were shown? You bet! Likewise, do you think readers of the published article get an honest summary of the work from those sanitized diagrams? For that matter, what about the editors and reviewers (who rarely dig into the details of data in papers under review)? It doesn’t matter whether I can theoretically get the code. There are standards for scientific data presentation for a reason, and this article violates those standards.

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Val 12.04.14 at 10:18 pm

@ 180
Well that was a rather lengthy post, telling me a lot of things I already know, making some claims I don’t agree with but which are probably a bit too off topic here to debate, and not really answering my question.

I think you actually acknowledged my point that when we attempt to distinguish between dogma and theory, we usually have some recourse to empiricism, but had to say it in a way that showed your empiricism was a better kind of empiricism than my kind of empiricism.

I guess if you (me) tell someone that what they are saying is dumbing the conversation down, then there is some likelihood of an antagonistic response. I wouldn’t normally start a conversation with someone that way, but you know it was relevant because you were illustrating my previous point about economics (or econo-speak) dumbing conversations down. Oh well lost cause I guess, but I’ve spent years studying social theory, so I think you are accusing the wrong person of being a naive empiricist here.

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Val 12.04.14 at 10:28 pm

@180
I know this is a terribly bad habit – two posts is a row, just have to make another point – but anyway

When I said that forming theories and testing them is a normal part of what humans do, if their intelligence hasn’t been stultified, I wasn’t glorifying ‘scientific method’, I was doing the opposite. I was saying that there is nothing special about ‘science’. Not quite sure you got that?

Many students I’ve taught have a habit of saying things are ‘scientifically proven [no citation]’ because in our society, science is a magic thing (like religion used to be) that means you are right. Economics is being ‘sciency’ is trying to also have magic rightness.

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T 12.04.14 at 10:37 pm

Why do economists get paid more? Over 40% find work in the private sector, int’l organizations, gov’t, nonprofits, etc and most of these jobs pay a premium over academia. Not so much for the other social sciences. By the way, something like 64% of new US econ PhDs are not US citizens.
See, “15 Years of Research on Graduate Education in Economics: What Have We Learned?” by Wendy A. Stock and John J. Siegfried Charts and tables are at at the end of the paper.

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Thornton Hall 12.04.14 at 11:12 pm

@129 In the sky
You are the living and breathing embodiment of the problem.

How do we stop it? 

How do we end up in these backwaters, with jargon filled debates about the right way to arrange false ideas? It’s Brad DeLong with his lists of all the areas where market analysis breaks down, failing to notice that what remains is the null set. It’s Nick Rowe answering objections with “well, there is a branch of Econ that acknowledges that truth” as if science is done with truth scattered among 100 different theories, each of which is quite wrong. It’s Krugman failing to understand the difference between more right and less wrong. Einstein is more right than Newton, but Newton is simpler. That doesn’t mean you can use wrong models to simplify analysis. And yet there he goes, talking about things that are somehow both wrong and interesting.

How do we make it stop?

Tony Lawson wrote in 1997:

Having come to economics by way of first studying mathematics I was immediately impressed by, as I saw it, the widespread and rather uncritical application of formalistic methods and systems to conditions for which they were obviously quite unsuited. 

It’s not just still true. It’s still obvious. Make it stop.

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J Thomas 12.04.14 at 11:59 pm

#183 Trader Joe

The guy who gets the top job ultimately has to have two key attributes – first some ability to consistently reach the right conclusions from the data he is working with and two the ability to communicate how he reached his conclusion and therefore what should happen if he’s right and just as importantly what could make him wrong and how to respond to that.

The combination of the communication skills and the analytics are what make that person valuable to their customers. The customer isn’t only paying for being “right” (although they won’t pay indefinitely for wrong). Part of what they want is insight into the numbers, what can change and just as importantly what other investors are thinking about and the questions others are asking. Part of their insight is listening to what market participants are thinking about and that’s not something directly captured in an econometric model.

OK. Too bad. If all you needed was a way to fit the data without fitting too much of the noise, and you didn’t have to say how you did it, there might be room for fresh competitors to enter the field. But when you also have to come up with a convincing story, if you find a particularly believable story then your competitors can copy you. It isn’t enough to be right, you have to impress people by your credentials, your personal appearance and office decor, your job title and history, etc etc, whatever you can use to be believable that can’t easily be copied. So it looks much harder to enter that competition. It was a beautiful pipe dream for a few minutes.

Thank you for the explanations.

The proof is in the pudding so to speak, these guys do get compensated and unless all of their customers are making uneconomic decisions, they must be adding value in some way or else, as you say, they’d get rid of that guy and send in the next.

Not to be too cynical about something which is not really economics, when the topic is about being cynical about economists, but since uncertainty is unsettling and unpleasant, anybody who can reduce customer uncertainty will be perceived as adding value. Supply something they believe in, and they will like that unless they find out the predictions are too often in the wrong direction. Even then they may prefer stories that make sense of the situation in general — even though they fail in specific predictions — to being uncertain in general.

Or maybe when there are billions of dollars at stake people behave more rationally than usual. ;-)

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In the sky 12.05.14 at 12:26 am

Thornton,

I am surprised to have been called the embodiment of a “problem” by you. In future, I will do my best to not point out that people are criticizing dead theories, or reply to people who think variable bandwidth scatterplots (*cough* http://www.jstor.org/stable/2345968 *cough*) are not data driven nor non-parametric.

Do me a favor. Watch this – https://www.youtube.com/watch?v=-39znKX8kC8. Do you think Jim Mirrlees is also a problem?

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Thornton Hall 12.05.14 at 12:53 am

@195 Well it doesn’t look wrong from deep inside. That’s why they call it a paradigm.

But this confirms it:
If this is really happening repeatedly, Rich, you may want to brush up on what economists are doing before you criticize them. Yes, economics has changed an awful lot in the past 25 years. If old theories have flaws that you outline, but that these theories have already been sent to the graveyard, that’s not something to moan about.

This is the dance that’s been going on since the first push back against the Freshwater boys. It involves lots and lots of jargon filled lectures on YouTube. And it’s all eithe Sudoku or moral philosophy… And a lot of lipstick.

Oh yeah. It kills poor people.

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gianni 12.05.14 at 1:14 am

“because in our society, science is a magic thing”

Yup. And ‘technology’, sophisticated mathematics, and ‘big data’ are ways of invoking its power.

Economics is a weird discipline. I agree with Val upthread on ‘the economy’ being a funky construct. The least we can do is to make that plural.

I also think that geopolitics got a bit in the way of the development of a pluralist – ie healthy – American approach to economics. I can’t say for sure outside the American context. But here, the development, and narrowing, of economics occurred with direct state involvement and parallel with some of the broader Cold War dynamics. I would imagine something similar happened on the Soviet side of things as well.

But is it really a surprise that it is economics – the discipline most focused on money and financial incentives and rational self-interest – that exhibits some of the strangest contortions?

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Chris Mealy 12.05.14 at 1:21 am

How much stat does a person need to know to be able to do statistics without having better informed people call bullshit on them? I get the impression that everybody thinks everybody else is doing it wrong (especially in medicine).

200

Thornton Hall 12.05.14 at 1:25 am

I think it’s helpful to look at what happens when real social scientists are wrong. James Q. Wilson was huge in political science and criminology. He coined “broken windows” and argued incarceration as the solution to drug abuse.

It is not the case that the entire political science department at Harvard still spouts this wrongness. People won’t write books in 40 years called “Zombie Criminology” listing his theories and pointing out how wrong they are. Neither will political scientists be saying, “You criticize ‘broken windows’ but that’s a dead theory. Today it’s all about ‘broken doors’. Silly.”

What’s the difference between the disciplines? That’s the only interesting question. Or you can talk about scatter plots.

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LFC 12.05.14 at 1:58 am

Though not by any means an uncritical fan of academic political science (which can be just as scholastic, narrow, and insular as anything else), it does strike me that at least a few political scientists have done important work recently on inequality and its ramifications, e.g. Gilens & Page, Hacker & Pierson etc.

The November issue of Am. Pol. Sci. Rev. arrived in my mailbox the other day. It has two (and possibly three) articles that I probably will actually read (as opposed to just reading the abstract), which in itself is noteworthy and somewhat unusual from my standpoint.

Don’t think any broad conclusion shd be drawn from this, and I wdn’t be as praiseworthy as T Hall about pol sci. But thought i wd mention, fwiw. (Btw I think “broken windows” and pro-incarceration are two different matters. But that’s OT.)

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john c. halasz 12.05.14 at 2:04 am

Val @191:

(Not to engage in thread derailment…)

Well, I did answer your question, though perhaps in terms that you might be prepared to accept. So…

1) I am not an empiricist, in the sense of “logical empiricism”, so it is not a matter of my thang being better than yours. ( I have the generalized impression, perhaps completely unwarranted, that some combination of logical empiricism and utilitarianism are the default positions in Aussie culture and academics. At any rate, let John Quiggin stand as exhibit A).

2) I am acutely aware that “empiricism” is the the key criterion for many here, which is why I labored to make my objections explicit. But, in any case, making one’s presuppositions explicit, even if apparently obvious, is a way of conducting arguments. (The failure to do so, or the unrealistic and even uninterpretable presuppositions of economists’ arguments,- and still worse, the attempt to smuggle normative assumptions into “positive” arguments,- are key failings of economic discourse).

3) You originally objected to the use of the definite article, “the” economy, which is actually a quite relative linguistic convention. But there is an economy, because different economic sectors are cross-implicated with each other and impose their constraints on each other, such that there is a systemic dimension, not just a various diversity of phenomena. Informing people about the constraints they face, beyond their ken and through the interaction of various intersecting structural constraints, is very much the “essence” of social “science”. Otherwise there is no point to the exercize. (One can analyze the material basis of tribal “gift” economies, just as much as one can analyze the institutional requirements and bases of “market economies”, without prejudice, so long as one maintains the limits of any such exercize).

4) The topic of the OP was the “superiority of economics”. But there is no such thing. And, yes, economists can be narrow-minded, philistine, crudely and gleefully reductive and instrumentalistic, “imperialistic”, corrupted by unwarranted proximity to power and privilege, etc. But that doesn’t obviate that there is a real domain or field to be addressed, which was the point of my first “clarifying” comment here. Claiming superiority for one’s “higher” purposes, while denigrating such “low” considerations, is no answer to the call. Quite frankly, if it didn’t effect the fates and livelihoods of millions of people, I would take no interest in such matters, as boring-to-tears. I would rather talk about music, literature, philosophy and other such more august and more enjoyable matters. (I do have a secondary interest in economics, in terms of making out the notion of “economies of explanation”, which the actual discipline fails to oblige, as well as an interest in environmental matters, in which the “mainstream” is thoroughly retrograde, but beggars can’t be choosers). But… but… time will not relent.

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J Thomas 12.05.14 at 3:00 am

#198 Chris Mealy

How much stat does a person need to know to be able to do statistics without having better informed people call bullshit on them? I get the impression that everybody thinks everybody else is doing it wrong (especially in medicine).

If you learn the statistical methods from 80 or so years ago, and learn them well enough to do them correctly, people will not call bullshit on you.

There are more modern approaches which will get better results. They might find out whether your results are significant at a given level with less data. This is useful when more data is expensive or slow. But the old methods will give you correct results, if they’re correctly used.

The most common errors all boil down to common sense, but when things get complicated it’s easy for common sense to fail except in hindsight. If you throw away part of your data, try to make sure that the part you throw away is just like the part you don’t. If you throw some away because some of your measurements didn’t come out, try to make sure that the times your measurements don’t work are just like the times when they do work. If you make a botch of some data points, it’s OK to throw them out provided you’re sure that the times it happens come at random, independent of what’s going on with the data.

Traditional parametric methods usually must assume finite mean and finite variance. If those assumptions are not true you will have problems. You can test for those problems and use advanced methods to deal with them. Or you can throw out outliers and get much more normal results. If you throw out the outliers, you lose data about rare events which might be important.

Usually you can’t measure the variables you are most interested in. Instead you must measure something which is easier to measure, which you hope correlates with the important variable. Ideally you will have evidence about that correlation, and you can show that in the conditions that you are measuring the two variables correlate well, and that it is not true that in those particular conditions the two variables are independent or correlate in reverse etc.

There are lots of ways to get into trouble, and most of them involve saying that your results show things that they do not in fact show. In general, the more interesting your claims, the more likely somebody will look carefully at your methods and find flaws in them. Also, people are more likely to look for flaws when they have something to lose if you are correct. If you get a result that looks like it’s good for everybody, people are far less likely to criticize your statistics.

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In the sky 12.05.14 at 3:34 am

@Thornton Hall

@195 Well it doesn’t look wrong from deep inside. That’s why they call it a paradigm.

Ah yes, accusing the other person of lacking intellectual breadth through de facto brainwashing. An approach known to work best when you have absolutely no idea of that accused’s background, or speciality, or their knowledge of philosophy/theology/political science/medicine/whatever. Best to top it off with a bizarre reference to poor people dying. Because that’s a reasonable way to continue dialogue on Crooked Timber, it seems. Cheerio, Thornton, you mad bastard.

@Chris Mealy

How much stat does a person need to know to be able to do statistics without having better informed people call bullshit on them?

That’s a very good question Chris, and J Thomas has given you a very good answer. Let me be rude and alter your question to “How much stat does a person need to know to be reasonably able to smell bullshit?” I think that’s a better question.

I think the answer is “not much”. A 3 hour crash course would get many people well on the way there in terms of explaining correlation vs causation, and the few rules of thumb as to when you can reasonably interpret correlations as causal.

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William Timberman 12.05.14 at 3:50 am

I keep hearing echoes, especially in jch’s contributions, of Polanyi’s Great Transformation. If, as we all in one way or another suppose, Capitalism and the Necromancy of Finance have now permanently upended human society, it seems odd to me that the priests of the new order, the economists, should be as unconcerned as they seem to be about the remnants of the defeated human institutions of the past still entangled in their mechanisms, and of those parts of the human psyche which still pledge allegiance, as it were, to the old gods.

At the moment, economists seem concerned mostly to shave off the parts which don’t fit their predictions, and if, as Thornton Hall suggests, this kills poor people, presumably that’s only because the poor haven’t heard the Good News. On the off chance that Bishop Tutu or Arundhati Roy get snippy about the body count, it can be waved away as the unfortunate consequence of non-overlapping magisteria. If that doesn’t do the trick someone in the outer office will surely call security, and tell them to make doubly sure that everyone admitted to the conference has the proper credentials.

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Thornton Hall 12.05.14 at 4:26 am

I wasn’t saying that political science is some sort of perfect discipline. I just thought “who’s as wrong about everything as “conservative” economists (see Blinder in NYReview of Books) but in another discipline?” Charles Murray came to mind, and that led down the path to James Q. Wilson.

207

Tabasco 12.05.14 at 4:42 am

In case it wasn’t obvious @24, the inability of the job candidates to describe a confidence interval had nothing to do with frequentists versus Bayesians. What they couldn’t do was explain in words what generations of Statistics 101 students have been taught to do in a cook book fashion.

The first part of that anecdote, by the way, which I left out, was that these people with masters degrees in social science could talk at length about deconstruction but could not explain in words …

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TM 12.05.14 at 5:06 am

195 – I love it how you keep putting irrelevant jargon out.

I do recommend your link at 129 – it shows exactly how messy data gets sanitized to give a totally misleading impression of a clean relationship that is not supported by the actual data. I wasn’t aware that Chetty uses a software module called binscatter developed by an MIT economics student named Michael Stepner. I don’t see anything novel about the technique of subdividing the x-axis and collapsing each interval into a single average. What is decidedly novel about this particular approach is that it actively hides the original variance. It wouldn’t be hard to make these diagrams honest by including error bars or box plots or similar around each point, as scientists have been doing for a long time. I guess your qualification as economist is indicated by the fact that you don’t even understand why scientists would be doing that. Economists don’t need no stinkin’ error bars yo!

209

Peter T 12.05.14 at 5:45 am

Some people have pointed out that economists are paid lots to help BP site oil rigs, or forecast to businesses the likely direction of interest rates. And tell government about Pigovian taxes.

Hmm. It’s as if no-one sited oil rigs, took punts on interest rates or thought to tax naughty things before economists came along. Or even – poor things – thought to measure the results and check. I tell you, before economists we hunted mammoths with rocks.

While john halasz has a good intellectual point, we really do make better progress when we check against whatever bits of reality are available. The natural sciences do this, albeit in a less than perfect fashion. So, too, does academic history (popular history often prefers the old stories). Anthropology tries to document social reality. Many of the other social sciences are much less attached to this kind of empiricism. Even when they try, they usually lack the inclination, resources and methodology to collect enough “facts” to test against (see IR Theory for a good case in point). The kudos that ensues to the climate researcher who assembles a better coral core sequence or measures glacier flow does not apply in these fields. Bold speculation wins the day. In the case of economics, the field is often hostile to the kinds of detailed historical research that would really test the models – especially research on periods before good stats were available. And also hostile to drawing on other fields for context (see Acemoglu et al for egregious examples).

Yet economics takes the money. Why? For the same reasons theology students took the money in renaissance and early modern Europe, and military types in C19/early C20 Europe. Because in those periods the salvation of souls and the preservation of the nation were felt to be the highest goals. We now worship money, but that is changing. I predict that by 2200 ecologists will rule, and economist will be a tragic remnant persisting in odd corners of the academy. Either ecologists or rats.

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Zamfir 12.05.14 at 7:00 am

Hmm. It’s as if no-one sited oil rigs, took punts on interest rates or thought to tax naughty things before economists came along. Or even – poor things – thought to measure the results and check. I tell you, before economists we hunted mammoths with rocks.
Trust me, I share your suspicion that economists often fulfill a similar role as priests or diviners used to do. Cast confidence on how to deal with the uncertain, even if that confidence does not actually have that much of a basis. I think we would be better off if in most situations, we listened less to economists than we do.

But I don’t think that makes each and every economist a useless fraud. Just that the field is overrated. In the analogy: most renaissance priests probably had a valuable role in their community, even if religion had an outsized stature and power.

The finances of government and of large corporations have grown very complex and more subtle since the days of the first oil rigs. Economy as a discipline grew together with that process, just as engineering grew as a discipline when machines grew more complex and more subtle. People made machines before there were engineers.

A lot of the work done by bread and butter economists is not that controversial or uncertain. It could be done by people with another training. Engineers, accountants, sociologists, you name it. At a guess, those fields would then develop subfields that resemble quite some of the basics of economics, even they might avoid the ambitious claims and grand theorizing of that field.

Then again, perhaps they wouldn’t. Economics attracts people with ambitions in management, in higher government. If sociology would ever achieve its coup against economics, those types would flock to sociology. And they would bring their relative conservatism with them. You might soon see great theories how power in hierarchies usually flows to the right people, with some technical exceptions mostly of academic interest only.

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Peter T 12.05.14 at 8:49 am

Zamfir

I agree. Most of the jobs economists do (apart from economic theory and prognostication) can be, often are, and were, done by others just as well. Economics is where it is because people, by and large, think the economy is the most important public thing. This belief is, in itself, justification for the prestige and rewards accruing to economists. My feeling is, however, that this is changing.

BTW, the parallel with theology is quite exact. there were any number of qualified high theologians prepared to explain, yet again, that indulgences or simony or immediate translation to the afterlife were not orthodox doctrine but vulgar errors – nothing to do with the real religion. yet their fellows persisted in selling benefices and pardons and masses for the soul.

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John Emerson 12.05.14 at 8:57 am

“In the sky”‘s confidence i his profession seems impervious to human words.Emperor Shōwa, 1945: “the war situation has developed not necessarily to Japan’s advantage”.

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John Emerson 12.05.14 at 9:06 am

Besides bankers, the main product of the econ biz is udergrad econ students who don’t go to grad school. And very few indeed of these students. and I don’t know how many of the bankers, are aware od the True Scotsman Economics that In the Sky proclaims as the only real economics. That’s all late-graduate school, back of the book stuff. All of the obsolete stuff is still around in force, even though the top new economists scorn it.

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Zamfir 12.05.14 at 9:46 am

@Peter T, here is my gut feeling: a lot of the problems we perceive with the field of economics are, in the end, not too intrinsic too the field itself. It’s just that economics happens to be the current lingua franca of bossy people, people who like to be Responsibly In Charge of stuff.

And as result, we see an annoying overconfidence, shirking of accountability, a willingness to justify the status quo, a distaste to consider outside viewpoints. Which I think we would see in any philosophy that is popular among bossy people. There might be a whack-a-mole aspect to it. If economics loses stature, another field or fields will attract our deserved annoyance.

Let’s assume (as a thought experiment) that there is a law of conservation of annoying bossiness. Would other fields do better, as philosophy for bosses?

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Val 12.05.14 at 9:51 am

@210
Many economies, many societies, and many intellectual sub-cultures – even in faraway Australia. I talk to the people on Prof Q’s blog – we are all pretty amiable now – but there were times was my name was mud, with all my talk of framing and assumptions and what have you.

Just to restate my original point – there are societies and there are economies. Mainstream or positivist or neoclassical – whatever you want to call it – economics tries to reduce this to one model, in which there are individuals and there is utility: ‘the’ economy. It’s just a way of seeing the world, but it’s a particularly boring and depressing one, which was my other point.

Of course I talk about ‘ the economy’, like everyone else – probably partly because it’s a convenient shorthand, partly because I’ve been brainwashed, like everyone else, I suppose. But “economists study the economy” is clearly a form of words suggesting there is only one economy.

Because I studied the way that ‘economy’ was understood in twentieth century Australia, I could talk a lot about this, and how even terms like production and consumption are basically pretty woolly and ideological, but I feel I’ve said enough. I just think something has to be done about the way that economics has colonized our polity.

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Val 12.05.14 at 9:58 am

Sorry my post was meant to be reply to john c halasz @ 201, not 210. I like 210, although I don’t totally agree with the first para (not harsh enough on economics:) ), the second one’s great though.

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Ronan(rf) 12.05.14 at 10:05 am

WD40’s argument above is quite interesting, but this :

“Sociology employs almost exclusively the monopoly model (hierarchy, hegemonic, and power are sociological terms for monopoly or near monopoly)”

surely is wrong ? What about a Social Network or institutional analysis (to name the only two i know) ? These could, at some level, be termed ‘hierarchial’ I guess, but that really doesnt tell us much. Afaict sociologists can utilise numerous models or methods (perhaps not as many as economists, but still plenty) not all of which adopt a ‘monopoly’ perspective.
I think in the sky is making a number of fair points. At this stage it seems people just want to beat up some caricature of economics(an explain all for the problems of the world.) It’s pretty tiresome and not very convincing (imo)

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Ronan(rf) 12.05.14 at 10:19 am

As an anecdote, Ive generally found economists (particularly those trained in ‘neo classical’ economics) far more approachable to a layman than any other discipline, and also far more willing to accept there are limits to their knowledge. Obviously there’s selection bias with my experiences involved here, but I do think that it trains you (perhaps) to be less pompous and view the world in less Manichean terms, which makes for less hyperbolic company.
To be quite frank, a lot of people are critiquing a highly technical,sophisticated subject with apparently little to no knowledge of it and no desire to learn more. This is the height of intellectual arrogance. The economists I see are answering very specific, technical questions, not trying to figure out the mysteries of the world. Most of the ‘left’ I see these days are doing the opposite, trying to develop a simple, monocausal explanation for everything with the good guys on one side and the bad on the other. It’s all very neo-con.

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J Thomas 12.05.14 at 10:43 am

#217 Ronan

Ive generally found economists (particularly those trained in ‘neo classical’ economics) far more approachable to a layman than any other discipline, and also far more willing to accept there are limits to their knowledge.

I’ve found that Austrian school economists are the most approachable.

In their explanations that government deficit spending is always inflationary, that Keynes was dead wrong about everything, that we would do better with a gold standard, that fractional-reserve banking is a form of theft, that free markets are always efficient and always the best possible way to allocate resources in the face of uncertainty, they explain economics in a way that is easy for laymen to follow.

Of course In The Sky says that this isn’t the real economics, but a lot of laymen don’t get that this is old discredited economics but instead think that the new economics from Keynes on is all wrong, and that Austrian school will emerge as the truth.

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Ronan(rf) 12.05.14 at 10:48 am

Yeah Austrian schoolers are very approachable, in a ‘me against the world wont somebody please listen to me ‘ kind of way. I dont mean that dismissively. Theyre good dudes. Barmy though.

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Val 12.05.14 at 11:58 am

@217
Well Ronan(rf), I may be one of those people who are “critiquing a highly technical, sophisticated subject with apparently little to no knowledge of it”, since I’ve never studied economics (though I have read several texts, including a large undergraduate introductory text, in an attempt to learn more), but on the other hand, I do have direct relevant experience since I work in the reasonably good Australian public health system, which is continually – as now – being threatened with privatisation, price signals, market discipline, etc.

There is no evidence that any of these measures will make the system any better, and considerable evidence that they could make it significantly worse. So given that real example, how do you defend those economists who prescribe all this? This is not about whether economists are nice people, and I am asking you a genuine question.

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J Thomas 12.05.14 at 12:02 pm

#219 Ronan

Yeah Austrian schoolers are very approachable, in a ‘me against the world wont somebody please listen to me ‘ kind of way. I dont mean that dismissively. Theyre good dudes. Barmy though.

It’s easier to explain economics to people if you tell them what they already believe, and a lot of laymen have been teaching each other key Austrian ideas for well over a hundred years.

People instinctively grasp Just-So stories, and Austrians are good at providing Just-So stories since after all that is their primary methodology, having rejected science.

Traditionally they cut other economists a lot less slack than most economists cut each other, basically saying that everything done in mainstream economics since around 1930 was wrong. So other economists sometimes return the favor and say they are wrong too. But George Mason U is basicly Austrian, and real economists are mostly polite to them.

So for example Austrians have championed the idea that free markets are efficient. As I understand the argument against, you can’t decide whether a market is efficient at using all the public information available unless you can collate all the public information yourself and decide what the right answer should have been. Since we have no adequate method to find the right answer, we have no way to test how efficient any real market is. With no way to test the hypothesis, assuming that markets are efficient is unscientific. And of course no reputable modern economist would argue that markets are efficient, except for all the economists who do, including Austrians, Chicago school, etc. But I guess the more nuanced approach is to say “According to EMH…” and go on from there. Kind of like assuming Axiom of Choice in mathematics. If you say that it’s an assumption then you can work out the implications of the assumption and then claim your results are correct.

I think economics might get more respect if the mainstream economists announced that traditional Austrian economics is not in fact economics at all but pseudo-scientific nonsense. We have astronomy and astrology, maybe we could have the name econology for things like Austrian-school.

On the other hand, that might not in fact get economics any more respect, maybe the reverse. Maybe economists should ask sociologists or somebody who knows about that sort of thing what result to expect….

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Ronan(rf) 12.05.14 at 12:05 pm

Val – Im not defending the economists who want to privatise the Australian health service. Take it up with them. Economists come in all shapes and sizes, a lot of the ones where I come from (Ireland) have taken very progressive stances on numerous causes, such as paying back bank debt (against). Afaict most also arent in favour of a privatised health service, so Im not sure that your generalisation is fair.

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Ronan(rf) 12.05.14 at 12:07 pm

My impression of the causal relationship here would be – Australian politican/party X wants to privatise the health service, finds economist to agree with them.
It’s a policy issue more than an academic one.

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Ronan(rf) 12.05.14 at 12:36 pm

Here’s a decent first touch polling off mainstream economists on policy issues. Certainly seem to skew to ‘market based solutions’, but noy uniformly and with qualifications

http://www.igmchicago.org/igm-economic-experts-panel

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Robert 12.05.14 at 12:58 pm

Some of those who think mainstream economics is mostly pseudo-scientific nonsense can follow economics.

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Val 12.05.14 at 1:03 pm

@222 and 223
Ronan(rf) I’m not disputing that you know some nice economists, but you seem to be missing the point. The fact that you can get these very highly credential led economists to give this nonsense advice to conservative governments is one of the very things people here are critiquing them for. It’s not just because we are ignorant and don’t know anything about economics, as you suggested.

Look at the biography of one of the guys on our conservative government’s latest “Commission of Audit”, which recommended a $15 co-payment fee, not just for doctor’s visits, but for every test or procedure associated with it (in addition to what we pay through our taxes). This guy is blue ribbon economist. And it’s no good saying ‘oh well he’s one of the old bad school economists, nice modern economists don’t think like that’, because these guys have been running this stuff out since the 1980s, and it has had seriously bad effects – and, as I’m telling you right now, they’re still doing it.

http://en.m.wikipedia.org/wiki/Peter_Boxall

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Jim Quin 12.05.14 at 1:26 pm

@ LFC 141

Better than the track record of sociologists forecasting interest rates.

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Ronan(rf) 12.05.14 at 1:32 pm

No Val, people are not criticising specific economists who are offering policy advice, they are offering generalisations about a discipline they (and I) do not understand.

This is not about me knowing ‘nice economists’ (I know none, personally) It’s about the intellectual bankruptcy of the left.
People seem to be combining three things – the manifestation of ideas and rhetoric in policy and public debate, economists who do the bidding of corporate interests, and economics as a discipline, into one whole which they can critique with meaningless generalisations and displays of moral superiority.
Here’s the Rodrik critique (from inside economics) again

https://www.ias.edu/ias-letter/rodrik-economics

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LFC 12.05.14 at 1:35 pm

Ronan @216

WD40’s argument above is quite interesting, but this: “Sociology employs almost exclusively the monopoly model (hierarchy, hegemonic, and power are sociological terms for monopoly or near monopoly)” surely is wrong ? What about a Social Network or institutional analysis (to name the only two i know) ? These could, at some level, be termed ‘hierarchial’ I guess, but that really doesnt tell us much. Afaict sociologists can utilise numerous models or methods (perhaps not as many as economists, but still plenty) not all of which adopt a ‘monopoly’ perspective.

This is correct, imo. What WD40 says about sociology is complete bullshit. And if Henry Farrell were reading the comments thread to his OP here — which he apparently isn’t, and I don’t blame him, if I had his time commitments I wouldn’t either — he would agree with Ronan and me on this, I’m quite sure.

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LFC 12.05.14 at 1:36 pm

Jim Quin
Better than the track record of sociologists forecasting interest rates

Funny. Have you considered a sideline as a stand-up comedian?

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Ronan(rf) 12.05.14 at 1:50 pm

“It’s about the intellectual bankruptcy of the left” was too much and quite a bit pompous on my part, so Ill retract that and offer my apologees.

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mattski 12.05.14 at 1:51 pm

John Emerson,

What do you think of the work that people like Krugman, Joe Stiglitz and Dean Baker do, for example? Is it economics?

Ronan @ 228

Well said.

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mattski 12.05.14 at 2:32 pm

Ronan,

Whoops! Just saw that.

‘Bankruptcy’ might be too strong. But not necessarily far off, at least where a certain contingent of the Left seems to dwell. IYAM….if you ask me that is. :)

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J Thomas 12.05.14 at 2:33 pm

#228 Ronan

It’s about the intellectual bankruptcy of the left.

I thought it was about the intellectual bankruptcy of the economics community.

People seem to be combining three things – the manifestation of ideas and rhetoric in policy and public debate, economists who do the bidding of corporate interests, and economics as a discipline, into one whole which they can critique with meaningless generalisations and displays of moral superiority.

Imagine that a whole lot of climate scientists did the bidding of corporate interests, and publicly announced that it is completely proven that there is no human-caused climate change and there can never be such a thing. And then when people claimed that a lot of climate scientists are unscientific corporate shills, somebody responded that *real* modern climate scientists disagree with that.

Imagine that a whole lot of biologists and MDs did the bidding of the nuclear industry and publicly announced repeatedly and over decades that ionizing radiation is good for you.

Imagine that influential epidemiologists announced publicly that if people lived right there would be no epidemic diseases, and so there is no need to spend money to prevent epidemics and no need even to spend money to find out whether epidemics are happening or study how they happen when they do.

And imagine that there was not enough agreement about the disciplines of climate science, biology, or epidemiology that these views could be regarded as kooky.

And then people made defenses like “Well, no good, modern epidemiologist holds those views” as if the bad, old-style epidemiologists were not effective at getting funding cuts.

It sure looks to me like those three things you describe are linked together into an unhealthy whole. It would be a good thing if a way could be found to break that linkage so they don’t work together to kill people.

Let me give a hypothetical example to show what I want. Suppose that I said “We don’t need police or bank guards to stop bank robbers, because the bank robbers will police themselves to protect the long-run interests of their profession.”. Crazy, right? If I tried to make economic justifications for that crazy idea, people could say “J Thomas is not a professional economist and he does not understand economics. His idea is crazy.”

But suppose that somebody who did have a PhD in economics announced the same crazy idea. They couldn’t refute it so easily. Other economists could present their contrary opinions, and the result would be that economists disagree.

If a physicist announced that he believed in phlogiston, other physicists could say that he is not doing physics. Physics has no room for phlogiston.

If a molecular biologist announced that he believes in copy-choice, that has been disproven. Molecular biology has no room for copy-choice.

If a professional economist announces publicly that he believes the economy is inevitably doomed unless we switch back to a gold standard, there’s nobody who can say it is not economics. In general, voodoo economics is economics. Economics is whatever economists do.

So if we actually had a discipline of economics that was robust enough to announce that (for example) Austrian economics is not in fact economics, that would be one good thing.

And if we actually admitted out loud to everybody that there is no discipline of economics, that the most fundamental assumptions are in dispute, that the Austrian school is not in fact discredited nor are economists who believe almost the opposite about almost everything, that would be a different good thing.

If we agreed that economics as a discipline deserves no credibility yet. That would be good for the world.

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dsquared 12.05.14 at 2:42 pm

Imagine that a whole lot of climate scientists did the bidding of corporate interests, and publicly announced that it is completely proven that there is no human-caused climate change and there can never be such a thing. And then when people claimed that a lot of climate scientists are unscientific corporate shills, somebody responded that *real* modern climate scientists disagree with that.

So you’re basically saying “imagine the actual genetically modified foods industry”?

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LFC 12.05.14 at 2:46 pm

J Thomas

And if we actually admitted out loud to everybody that there is no discipline of economics, that the most fundamental assumptions are in dispute, that the Austrian school is not in fact discredited nor are economists who believe almost the opposite about almost everything, that would be a different good thing.

A better way of saying this, imo, is that economics, despite whatever pretensions it might have to the contrary, is still in many ways like the other social sciences, where some things are widely agreed on, but many other basic issues and assumptions are in dispute. Which puts the burden on policymakers and voters to decide which economists make sense and which don’t. Which I personally prefer as an approach to the more broad-brush “economics as a whole is bogus and should be abolished and all economists sent to Siberia” approach. Which is one reason I have tried to refrain here from making clever anti-economist jokes/snark, tho i cd retail one or two pretty recondite ones (albeit not original w me).

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MPAVictoria 12.05.14 at 2:47 pm

“If we agreed that economics as a discipline deserves no credibility yet. That would be good for the world.”

Well if you believe Krugman and Delong Keynesian economics has been pretty accurate over the last 7 years…

/It seems to me that we know what works best for the majority of the population, and that is Scandinavian style democratic socialism. I only hope that one day we can reach that goal.

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Ronan(rf) 12.05.14 at 2:57 pm

“If we agreed that economics as a discipline deserves no credibility yet. That would be good for the world.”

My impression is that ‘mainstream economics’ as a selection of models, assumptions and perspectives explains less than the average economist would like to believe. This is probably the nature of professional socialisation, you overstate the relevance and usefulness of your resarch and mode of thining. I dont think it has *no* credibility nor do I really expect someone trained in it to say so, but a certain level of scepticism would be fine by me. I understand you adopt an extreme sceptical take on things JT, and that’s fine. I like you as a commenter, even if you do (imo) overdo it at times. ; )

Obviously mainstream economists generally think the Austrian School is nonsense (or at least parts of it), and vice versa. Again, Ive no problem with that, it’s the nature of academia (I would guess) to try to develop ‘good’ ideas, which also means discarding nonsense ones. I’ll leave them argue it out as it doesnt interest me.
My only issue is with statements like your one above. It doesnt state anything explicitly. I dont know who *we* is, I’m not sure what you mean by *no* credibility and Ive no idea what your definition of *good* is.
Is all mainstream ecnomics useless ? I doubt it. Are economists given too much credence in policy debates ? I’d assume so. Is rhetoric to ‘free markets’ banal and useless ? Sure. My guess would be economists can explain some questions well, sociologists/political scientists/anthropologists can explain others better, so on and so forth. This is a trivial point, by me, ut I think it more accurately frames what’s at stake here.
Finally, look, Im not an expert on nought so I have to take a lot on the assumption that all these people doing X have some degree of professional competence and integrity and that there’s some sort of professional oversight and system of correction in place. That might be naive, but it’s where I stand at the min. So i dont buy your unerscepticism neccesarily, but Im also not sure where I draw the line specifically. If you get me.

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LFC 12.05.14 at 3:11 pm

J Thomas

If a physicist announced that he believed in phlogiston, other physicists could say that he is not doing physics. Physics has no room for phlogiston.

If a molecular biologist announced that he believes in copy-choice, that has been disproven. Molecular biology has no room for copy-choice.

If a professional economist announces publicly that he believes the economy is inevitably doomed unless we switch back to a gold standard, there’s nobody who can say it is not economics. In general, voodoo economics is economics. Economics is whatever economists do.

This is just a long-winded way of saying that economics is still one of the social sciences. It’s not physics or biology. (I know what Halasz says, but there’s a still a difference btw natural and social sciences, imo.) So: yes, this is right. It’s also obvious. It doesn’t mean economics has no credibility whatsoever. It simply means it’s not physics.

The burden, as I said above, is on the consumers of economists’ pronouncements — i.e. citizens, voters, policymakers, etc. — to exercise some judgment about what they’re being told and to realize that economists’ politics and ideology will influence their statements and prescriptions, at least to an extent, and to understand the limits of economics and what economists, regardless of their ‘school’, shd and shdn’t be pronouncing on.

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Trader Joe 12.05.14 at 3:42 pm

“It seems to me that we know what works best for the majority of the population, and that is Scandinavian style democratic socialism. I only hope that one day we can reach that goal.”

See this is just the type of stuff that too many economists are inclined to trot out. I agree there is much to recommend Scandinavian democratic socialism, and no doubt models and data could be produced to display its greatness.

That said, its a model which has been applied to about 1% of the world and a piece of it that is particularly homegenous, industrialized and well blessed with natural resources. Presuming from this small working model that it would also work in Inida, Haiti and Greece is about the equivalent of inferring from one thriving albino squirrel that all ruminants should be white.

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Jerry Vinokurov 12.05.14 at 3:43 pm

So you’re basically saying “imagine the actual genetically modified foods industry”?

Well, no, because the last ingredient of the analogy is missing, namely, the “real biologists” that don’t believe GMOs are harmless.

The burden, as I said above, is on the consumers of economists’ pronouncements — i.e. citizens, voters, policymakers, etc. — to exercise some judgment about what they’re being told and to realize that economists’ politics and ideology will influence their statements and prescriptions, at least to an extent, and to understand the limits of economics and what economists, regardless of their ‘school’, shd and shdn’t be pronouncing on.

That doesn’t seem terribly reasonable to me. You’re asking laypeople to gain competence in a complicated technical subject, because without that competence they’re just not going to have the background to make those kinds of judgements. I don’t believe that’s going to go terribly well, given that, in fields that have legitimately right and wrong answers (evolutionary biology, immunology, physics) you repeatedly see all kinds of people that claim to have the necessary competence but are actually just cranks. In a field like economics this gets about as far as “hurr durr supply demand you dirty hippie rah rah capitalism,” or, in other words, as far as the learner’s pre-existing ideology requires it to go before finding confirmatory evidence of things they already “know” to be true.

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AB 12.05.14 at 4:02 pm

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J Thomas 12.05.14 at 4:20 pm

#235 Dsquared

“Imagine that a whole lot of climate scientists did the bidding of corporate interests, and publicly announced that it is completely proven that there is no human-caused climate change and there can never be such a thing. And then when people claimed that a lot of climate scientists are unscientific corporate shills, somebody responded that *real* modern climate scientists disagree with that.”

So you’re basically saying “imagine the actual genetically modified foods industry”?

Yes. And the economics profession.

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A H 12.05.14 at 4:23 pm

AB @173

Shell economists are in house trained analysts. Here is the education requirments for a and economist job posting

“Bachelors degree (Masters preferred) in a commercial or technical discipline, such as Economics, Business, Engineering, Geosciences, etc.”
https://krb-sjobs.brassring.com/tgwebhost/jobdetails.aspx?jobId=753820&PartnerId=30030&SiteId=5798

What the “economists” at shell are doing has little relation to the specialized knowledge Econ PhDs have.

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MPAVictoria 12.05.14 at 4:26 pm

“That said, its a model which has been applied to about 1% of the world and a piece of it that is particularly homegenous, industrialized and well blessed with natural resources. “

Well the parts of it that have been adapted and tried elsewhere seemed to have worked pretty well. Can you think of a better model to shoot for because I can’t.

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Jerry Vinokurov 12.05.14 at 4:47 pm

That said, its a model which has been applied to about 1% of the world and a piece of it that is particularly homegenous, industrialized and well blessed with natural resources. Presuming from this small working model that it would also work in Inida, Haiti and Greece is about the equivalent of inferring from one thriving albino squirrel that all ruminants should be white.

There’s nothing magical in the history of Scandinavia (or, you know, Germany or France or the Netherlands or lots of other parts of Europe) that somehow determined that they’d come up with successful models of democratic socialism. Neither is there any particular reason to assume that it can’t work in Greece (which, last I checked, was in Europe, and also relatively industrialized and homogenous) or Haiti or India. Lots of right-wingers love to hint at (without quite saying so) the notion that somehow non-white people simply lack the fundamental whatevers to create a democratic society, but I’m going to assume that no one engaging in this conversation actually believes that bullshit. Lots of material disadvantages and barriers of course exist for countries like Haiti (imposed primarily by Western powers, incidentally) but that’s no reason to think that Haitians don’t want the same basic things that democratic socialism was created to provide in other countries: security, a safety net, etc.

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Trader Joe 12.05.14 at 4:48 pm

@245
I don’t believe there is a single economic model that is correct in all circumstances and as such there isn’t one ideal “to shoot for”. Its my thought that economic are organic and evolutionary and adapt to their environments over time depending on the resources, wealth and population (among other factors). To take the U.S. alone, 21st centrury capitalism is vastly differnt than 19th centrury even though they are both recognizable to one another.

A Scandinavian Social Democracy would be as pointless in an impoverished country like Haiti as a miliary backed dictatorship in Denmark….

Also, my bad, squirrels (albino or colored) are sciuridae not ruminants.

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bob mcmanus 12.05.14 at 4:49 pm

If laypeople cannot be expected to gain minimal competence in economics etc, then the best we can do is somehow manage to give “our” economists, those who represent our interests (which really should be our only concern) whether or not they are completely correct accurate consistent theoretically, actual effective working authority and influence which returns to the story of the OP. And a working or minimal knowledge of sociology and politics would be much more useful than much understanding of economics. And similiarly to politics, opposition economists should be treated like Republicans, and “friendly economists” (Krugman this week said again he is just not theoretically confidant the inequality hurts growth) should be attacked as viciously and consistently as warhawk Democrats.

For a first approximation, I would suggest that incendiary slogans are more useful than rational discourse:”Workers of the World Unite,” “Property is Theft,” “Cross of Gold” etc.

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MPAVictoria 12.05.14 at 5:02 pm

“I don’t believe there is a single economic model that is correct in all circumstances and as such there isn’t one ideal “to shoot for”. “

Okay tell me a better one for the average person.
/Please

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MPAVictoria 12.05.14 at 5:06 pm

“A Scandinavian Social Democracy would be as pointless in an impoverished country like Haiti “

Why? Poor people don’t want social safety nets, strong education systems and deomcratic accountability? The neo-liberal model sure as hell hasn’t worked…

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bob mcmanus 12.05.14 at 5:07 pm

Along with slogans, when we engage “our” economists we should not get trapped into rational or scientific discourse, because of course then obscurantism and in-group affiliations will beat us like a drum.

Krugman “isn’t sure yet” about inequality mostly because he fears losing prestige and reputation with his colleagues more than he fears us.

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bob mcmanus 12.05.14 at 5:21 pm

I really doubt that liberals will ever accept irrationalism (because rationalism is their religion) because the competitive scientification of discourse seems to favor intelligent elites, even say within these threads. And of course, technocratic elites will take care of themselves and each other before those not in their meritocratic milieu.

“Iraq is a stupid war”
“Ahh, so there are smart wars and stupid wars. Let us reason together and I will show you that Iraq is indeed a smart war.”
The pigs will always win that.

“I just don’t wanna, don’t need reasons” is perfectly fine for those with confidence in their intuitions, judgements and preferences and who don’t seek their own justification with submission to experts and technocrats

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J Thomas 12.05.14 at 5:23 pm

#U238 Ronan

Obviously mainstream economists generally think the Austrian School is nonsense (or at least parts of it), and vice versa. Again, Ive no problem with that, it’s the nature of academia (I would guess) to try to develop ‘good’ ideas, which also means discarding nonsense ones. I’ll leave them argue it out as it doesnt interest me.

Well, see, 120 years ago physicists had no agreement whether atoms were real or not. Some physicists thought they were real and others thought they were only a useful mathematical formulation. But they figured it out. Atoms are real, and a physicist today who thought that atoms have no physical existence would not get his degrees.

Economics today is more like physics way back then. There are lots of basic ideas where reputable economists disagree.

Physicists have a large set of ideas they all agree on. Conservation of mass and energy. Conservation of momentum and angular momentum. Etc. For a big collection of practical problems they will pretty much all get the same answers, which will turn out to be measurably right within margins of error. For another big collection of practical problems they will all agree that physics does not (yet) have the tools to solve them. They don’t get a big spectrum of answers and then brag later about who was right.

Economics does not have that. Before economics gets that sort of status they must either develop a set of fundamental claims that are so compellingly true that they all agree, or else arrange that people who continue to disagree do not become economists. How can there be status to being an economist, when Austrians and mainstream economists both share the title?

“So if we actually had a discipline of economics that was robust enough to announce that (for example) Austrian economics is not in fact economics, that would be one good thing.”

“And if we actually admitted out loud to everybody that there is no discipline of economics, that the most fundamental assumptions are in dispute, that the Austrian school is not in fact discredited nor are economists who believe almost the opposite about almost everything, that would be a different good thing. If we agreed that economics as a discipline deserves no credibility yet. That would be good for the world.”

My only issue is with statements like your one above. It doesnt state anything explicitly. I dont know who *we* is, I’m not sure what you mean by *no* credibility and Ive no idea what your definition of *good* is.

I was unclear. If *the academic economics profession* came to an agreement about what economics is, to the point that Austrian economics was excluded, then economics would mean more than it does now. Now, if somebody says he’s an economist he could be essentially saying “I am a raving lunatic who disagrees with most of what most economists do”. What’s more, there’s some possibility that despite being a raving lunatic he could be right. Perhaps most of what most economists do is incorrect.

So I say, the sentence “I am an economist” has no operational meaning beyond “I got a degree with the label ‘Economics’ from some academic institution”. It means no more than saying “I am an astrologer”. (As I understand it, axial precession has moved the astrological signs over more than one full sign since astrology was first created and validated. Some astrologers correct for that, others don’t. Two different systems of astrology that give wildly different results, both in use, both considered OK.)

Is all mainstream ecnomics useless ? I doubt it.

If you believe that one particular school of economics is valuable, that’s fine. Just like you can believe in one particular school of psychiatry. You could be right.

Are economists given too much credence in policy debates ? I’d assume so.

Likely not. Likely, the people who want to believe something already feel a bit confirmed when a professional economist agrees with them. Then the other side brings in their economist who agrees with them, and it balances out. As the climate science controversy shows, it probably wouldn’t make one side believe less if they couldn’t find any reputable economists who agreed them. They’d just say all the economists sold out.

Is rhetoric to ‘free markets’ banal and useless ? Sure.

But there are amateurs who believe it, who actually try to apply it. And they can find professional economists who agree with them. Wouldn’t it be better if economists arranged some way to teach the public why it’s nonsense?

I have to take a lot on the assumption that all these people doing X have some degree of professional competence and integrity and that there’s some sort of professional oversight and system of correction in place.

The existence of tenured Austrian economists in 2014 tells me that there is no actual professional oversight or system of correction. They get reported in the media as “economists”, as if they are just as good as any other economist. After the 2007/2008 crisis they were widely reported as the only ones to predict the collapse. (I haven’t noticed that any of them predicted the right year, but maybe some did.) Ever since they have predicted hyperinflation, which so far has not happened. (But that doesn’t prove much, as of 2007 the collapse had not happened.)

Why would anybody have any respect for “economics” under these circumstances? You might pick one school of economic thought you think stands out from the pack, but how is “economics” as a whole better than “astrology” as a whole?

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Thornton Hall 12.05.14 at 5:30 pm

@237 MPAVictoria
Your comment demonstrates why DeLong and Krugman are the two most dangerous economists in the world.

They are both actually quite explicit about why they have been right over the last several years. Krugman tells us time and again:

Reality has a well known liberal bias.

We know, because he has explicitly told us, that his policy conclusions are not drawn from the application of economic theory. Rather, they are the combination of good history (knowing the history of Japan over the last 30 years) and ad hoc modifications to the IS/LM model.

Step back.

It is quite clear that my ad hoc modifications will be different from your ad hoc modifications. The difference will be explained by our different values, assumptions, and preferences. That’s how ad hoc modifications work.

What’s the obvious conclusion?

When Krugman says, “Reality has a well known liberal bias” he is not revealing the deductions of his economic theorizing. He’s explaining the prejudice that he adds to economic theorizing that makes it come out correct.

Krugman is liberal because he’s right. He’s right because he’s liberal.

The danger comes when you attribute his correctness to the theorietical hand waving, because in the hands of other white men, it always seems to favor white men in developed countries. By magic.

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Thornton Hall 12.05.14 at 5:50 pm

The explicit nature of what Krugman is doing is what makes his and other’s attacks on “zombie” ideas so exasperating.

How do wrong ideas persist? We’re told that economists “forget more than they learn”. But if that’s true, it’s also universal. Why do all meteorologists make 3 day forecasts in 2014 that are as accurate as 1 day forecasts in 1970 (the beginning of the great economic forgetting, according to Krugman, DeLong, et al)? The ability of other human endeavors to advance without “conservatives” at U of C and George Mason arguing for disproven ideas suggests that the “forgetting” endemic to economics is not simply the human condition.

What is it? It’s right there in Krugman’s explanation of his process: ad hoc modifications do all the work. Tyler Cowen, Glenn Hubbard, John Cochrane, et al, use ad hoc modifications that say white men always win…. er…. the free market is awesome.

The problem is that you can’t criticize them for using ad hoc modifications, because that’s explicitly how you’re supposed to do “useful economics.”

This is obvious to any lawyer who has read the work of Antonin Scalia. He argues over and over that his brand of originalist jurisprudence is correct because it is the only way to restrain judges from simply reading their policy preferences into the Constitution. Even if he can’t really see into the minds of the Founders, what matters is the restraining effect of the originalist style rules of interpretation. It sounds great. And it looks great in action, like when he uses this style to bring life to the right to confront the witnesses against you.

But then you compare his opinions where some Catholic or Christian sensibility is threatened and compare it to those where, say, Native American religion is trampled. And you realize that he only believes in the restraining effect of originalist interpretation when it matches his policy preferences. All of the sudden, you get better at predicting his views. Forget the handwaving about originalism. That just tells you the language that he’ll use. If you want to know his vote, ask, “what would an angry, old, doctrinaire Catholic bigot do?”

Economics is the same.

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LFC 12.05.14 at 5:53 pm

J Vinokurov re laypeople/competence etc:
Well, to some extent one is going to rely on one’s prior ideas and commitments, yes. For ex., when I read about a book like James Grant’s The Forgotten Depression, as described in Robert J. Samuelson’s “A Recovery Undermined?” (Wash Post op-ed, Dec. 1, p.A17), I say to myself: “This sounds like bullshit to me.”

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LFC 12.05.14 at 6:05 pm

J Thomas
How can there be status to being an economist, when Austrians and mainstream economists both share the title?

In other words, J Thomas thinks that if members of a discipline or field (or whatever word you want) disagree on some basic matters, their field has no status.

Consider some of the posters on this blog: Henry Farrell (political science), Ingrid Robeyns (philosophy), John Quiggin (economics), Kieran Healy (sociology), Chris Bertram (philosophy), Harry Brighouse (philosophy), John Holbo (philosophy), Jon Mandle (philosophy), Eszter Hargittai (sociology), Corey Robin (political science), Brian Weatherson (philosophy), Eric Rauchway (history).

J Thomas posts long comments at CT. He also thinks the CT main posters just mentioned all belong to academic fields that have no status. Interesting.

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LFC 12.05.14 at 6:22 pm

Thornton Hall 254

I somewhat disagree. You’re saying that (pundit-style or policy-oriented) economics and constitutional adjudication are nothing but manifestations of the practitioner’s politics. I don’t think that’s right. The person’s politics influence but don’t always determine the outcome, i.e. what he/she writes or, in the case of the Sup. Ct., decides.

How will Scalia vote on net neutrality, for example? I’m not sure, partly b.c I don’t think the answer is deducible from his policy preferences whatever they might be here. Could I have predicted Scalia’s vote on the drug-sniffing-dogs-on-the-porch case from a term or two ago? No, and I doubt you could have either, at least not if all you knew about Scalia was that he is, in your words, “an angry, old, doctrinaire Catholic bigot.”

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Trader Joe 12.05.14 at 6:44 pm

@250
“A Scandinavian Social Democracy would be as pointless in an impoverished country like Haiti “

Why? Poor people don’t want social safety nets, strong education systems and deomcratic accountability? The neo-liberal model sure as hell hasn’t worked…”

Are you serious? If you are I probably can’t help in explaining why you can’t leap directly from a semi-lawless state which has no infrastructure and natural resources to a fully functioning educated society with social safety nets. We might agree that over some number of centuries that would be a good endpoint, but superimposing the laws of say Sweeden on Haiti would hardly be the best first step towards change.

If asking a straw-man rhetorical is your idea of a clever way to score argument points its pretty lost on me. Your past comments indicate a much higher degree of insight than such a question implies – perhaps defending how/why you think such an economy might work in a place like Haiti would bring some substance to your viewpoint.

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Thornton Hall 12.05.14 at 6:45 pm

To bring it all back home, this is why the article in the OP by Marion Fourcade, Etienne Ollion and Yann Algan is so important.

Economics is professed by an inbred clique of white males who hale from rich families.
Economics consistently reaches conclusions that tend to reinforce the power of an inbred clique of white males who hale from rich families.
The methods used by economists to reach the above conclusions have never been shown to correspond with reality.
Those methods are still used anyway.

Huh.

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Rakesh 12.05.14 at 6:50 pm

OMG CR is a cabal of philosophers. And CR is a political theorist, not scientist, right? So why not turn 259 against the philosophers, instead of the economists. Get Brian Leiter involved. Let the fun begin.

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LFC 12.05.14 at 6:54 pm

I’m astounded that a thread that began with some sensible criticisms of economics has devolved into baseless, nonsensical assertions that “economics is professed by an inbred clique of white males who hale [hail] from rich families” (T Hall) and that no academic field can have any status unless it is one of the natural sciences (J Thomas).

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Thornton Hall 12.05.14 at 6:55 pm

@257 TFC
As usual, I was being too sweeping.

Jurrisprudence proceeds as if statutes and case law combine to form a necessary result in every case. Courts try to reach this result. Observers judge whether they got it “right” or “wrong” using language that explicitly presupposes some objective necessary result.

Everyone knows there is not, in fact, an objective necessary result in many cases, especially the cases that make it to the Supreme Court.

This system is a much looser constraint than the one advocated (but not practiced) by Scalia, but it is nonetheless a very real constraint. At the extreme, just the fact that decisions must be rendered in actual English sentences is a constraint. The ACA Halbig case is about to test this.

There are all sorts of constraints on those of us who believe in a “living Constitution”, many of them informal, and some of them counterproductive to human flourishing. Thankfully, these constraints are a fluid, dynamic thing being pushed by many factors, including people dedicated to the goal of human flourishing.

In economics, two things seem to be different. One, the constraints aren’t fluid and dynamic but rigid and dogmatic. And, two, you are explicitly allowed to pick and choose among them depending on the conclusion you wish to reach. The tools don’t change, but you can use as many or as few tools as you like.

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Thornton Hall 12.05.14 at 6:57 pm

@261 I’m fairly certain that’s an accurate rendering of the article cited by the OP.

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LFC 12.05.14 at 6:57 pm

Rakesh 260
And CR is a political theorist, not scientist, right?

I was giving Corey Robin’s formal academic affiliation: like many theorists, he teaches in a dept of political science. Since I assume you probably realized this, Rakesh, I can only conclude that you were being somewhat intentionally obtuse

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Thornton Hall 12.05.14 at 6:58 pm

p. 2 ” For instance, economics, like physics or philosophy but in sharp contrast to sociology, is a very male- dominated discipline (see Figure 1). “

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Thornton Hall 12.05.14 at 7:03 pm

pp 9, 10:

Getting a job
The hiring process in the annual junior job market confirms these differences across the social sciences. In economics, the process is very organized, with most departments collectively deciding on the rank ordering of their own students applying for positions. This procedure, which is uncommon in many academic fields, is possible only in the context of economists’ strong internal agreement on quality criteria, and because of the field’s belief that search and placement processes can be more efficient that way, with- out altering outcomes. Once a department’s own students have been ranked, market intermediaries (“placement officers”) are delegated with the task of helping to make matches, by proactively selling the products on offer (so to speak) to potential buyers at the other end. Finally, a ritualized evaluation process progressively filters the vetted candidates, starting with interviews at the annual meetings of the Allied Social Sci- ence Associations held in early January. For the aspiring PhD graduate, the real action at the ASSA conference takes place in the hotel suites where the hiring parties – other academic departments, but also government agencies, international institutions, pri- vate sector firms – interview job candidates for several days on end. Meanwhile, in the public meeting rooms, the more established scholars present their papers to their peers.

The sociology junior labor market stands in sharp contrast to this careful orchestra- tion of the circulation of students. To job applicants and faculty, the very notion of a collectively managed process of matching students to job positions would be both unworkable in practice and objectionable in principle. To be sure, social networks play a role and informal contacts sometimes precede on-site “fly outs,” but they rarely take the form of a formal interview by a full committee, as they do in economics. Hierarchies between sociology departments are also more uncertain. A vertical structure does ex- ist – sociologists, too, have “market stars” and keep a close eye on commonly referenced departmental rankings. But one would be hard-pressed to define the principles that underpin the pecking order. Devoid of consensual criteria for generating a putative hi- erarchy, and perhaps also less trusting of their colleagues’ judgment, sociologists must keep the process more open in order to build up consensus from below, inclusively. In economics, consensus is much stronger from the start; “information” about candidates is deemed homogeneous and therefore inherently reliable. As a result, the range of pos- sible options is more tightly defined and determined much earlier.

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Thornton Hall 12.05.14 at 7:08 pm

The interesting thing to me is the defense mechanisms employed by academics to defend the way their fields are defined.

Calling a perfectly obvious truth “baseless and nonsensical” is one that demonstrates, beyond a shadow of a doubt, that rationality is a poor way to understand human behavior.

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Jerry Vinokurov 12.05.14 at 7:11 pm

LFC,

Well, to some extent one is going to rely on one’s prior ideas and commitments, yes. For ex., when I read about a book like James Grant’s The Forgotten Depression, as described in Robert J. Samuelson’s “A Recovery Undermined?” (Wash Post op-ed, Dec. 1, p.A17), I say to myself: “This sounds like bullshit to me.”

It’s not just “to some extent.” It’s been demonstrated repeatedly that people aren’t good at changing their minds when new information becomes available; as often as not, it just causes them to hew stronger to views empirically shown to be wrong. That’s before you get to the complexity of a large and technical field like economics. It’s unreasonable to expect the average person (as opposed to, say, the average CT commenter, which is a rather self-selective demographic) to become literate in economics, or medicine, or environmental science to any serious degree. What happens instead, in a phenomenon that you can observe in any number of internet comments, is that people learn just enough to be dangerous and then short-circuit the rest of the complicated thinking that experts (often unconsciously and implicitly) practice and just get straight to the conclusions they like.

Punting the responsibility to the public is a tempting move, and of course we would all like the general public to know more about what we do and be better educated and so forth, but it’s just not a practical way to address these issues. There has to be some kind of internal professional policing going on where you can’t just repeatedly make large-scale policy claims that never pan out without any professional consequences.

The methods used by economists to reach the above conclusions have never been shown to correspond with reality.

It’s not so much that the methods are technically problematic, it’s the way the consequences of those methods are sold. It’s entirely possible to accept that a) Eugene Fama is a technically accomplished economist who made real, Nobel-worthy contributions to the theory of markets, and that b) his public advocacy against regulations is not only unsupported by empirical evidence but is also unmoored from his actual technical work.

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Rakesh 12.05.14 at 7:25 pm

@264 Thanks for assuming that my obtuseness had to be intentional, but, alas…. Also I meant to say that CT, not CR, is a cabal of philosophers.

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fledermaus 12.05.14 at 7:26 pm

“The methods used by economists to reach the above conclusions have never been shown to correspond with reality.”

In addition there is the selective application of general principles. The so-called Lucas Critique comes to mind. You can’t tax the rich because they will alter their behavior in response and undermine your objective. But apparently you can hand out subprime mortgages to anyone with a pulse and still rate the bonds as AAA because real estate has never gone down nationally.

And then there is selective application of moral hazard, where we can’t bail people out of bad decisions because they’ll just do it all over again. Unless it’s Wall Street where we have to give their friends $4 trillion and counting from the Fed and ECB because if we don’t we’re all going to die. But cut checks directly for the American people or let them borrow at 0% interest rates for 5-6 years? Unthinkable.

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MPAVictoria 12.05.14 at 7:28 pm

” but superimposing the laws of say Sweeden on Haiti would hardly be the best first step towards change.”

Wow. I don’t think I wrote that… If I did that is not what I meant at all. I meant that social democracy seems to be the best system for the average person. So lets go and try and get some form of it implemented. A social safety net in Haiti may look different then one in Canada but you have to start somewhere.

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bob mcmanus 12.05.14 at 7:52 pm

The article and post are also written by academics, who may sincerely believe they can internally reform a lucrative, powerful, very widespread and complicated intellectual discipline. This does not have a lot of historical backing. Something about marching on gravestone by gravestone comes to mind.

Let me remember, how was it again that Protestantism gained power, or monarchy rendered? By the application of sweet reason in rule-based discourse?

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Bruce Wilder 12.05.14 at 8:05 pm

J Thomas @ 252:

There are lots of basic ideas where reputable economists disagree.

Physicists have a large set of ideas they all agree on. Conservation of mass and energy. Conservation of momentum and angular momentum. Etc. For a big collection of practical problems they will pretty much all get the same answers, which will turn out to be measurably right within margins of error. For another big collection of practical problems they will all agree that physics does not (yet) have the tools to solve them. They don’t get a big spectrum of answers and then brag later about who was right.

Economics does not have that. Before economics gets that sort of status they must either develop a set of fundamental claims that are so compellingly true that they all agree, or else arrange that people who continue to disagree do not become economists.

JW Mason @ 160 linked to a recent blogpost by John Cochrane, in which Cochrane says Krugman is right, twice! (It’s funny, because Cochrane frequently rants that Krugman is wrong about everything. Cochrane, an expert in the theoretical analysis of asset pricing, has made an internet career out rants against the macroeconomic heresies of Krugman, an expert in the theoretical analysis of increasing returns in international trade.)

Here’s some of what Cochrane wrote:

Thus, if you read Krugman’s columns, you will see him occasionally crowing about how Keynesian economics won, and how the disciples of Stan Fisher at MIT have spread out to run the world. He’s right. Then you see him complaining about how nobody in academia understands Keynesian economics. He’s right again.

Perhaps academic research ran off the rails for 40 years producing nothing of value. Social sciences can do that. Perhaps our policy makers are stuck with simple stories they learned as undergraduates; and, as has happened countless times before, new ideas will percolate up when the generation trained in the 1980s makes their way to to top of policy circles.

I think we can agree on something. If one wants to write about “what’s wrong with economics,” such a huge divide between academic research ideas and the ideas running our policy establishment is not a good situation.

The right way to address this is with models — written down, objective models, not pundit prognostications — and data. What accounts, quantitatively, for our experience? I see old-fashioned Keynesianism losing because, having dramatically failed that test once, its advocates are unwilling to do so again, preferring a campaign of personal attack in the popular press. Models confront data in the pages of the AER, the JPE, the QJE, and Econometrica. If old-time Keynesianism really does account for the data, write it down and let’s see.

Cochrane is being misleadingly pious here, in a way that is directly relevant to the OP, in that the work of Fourcade links the legitimating authority of the journals to the pathological arrogance of economists. One of his perennial arguments in his anti-Krugman rants is that the economics of the blogposts and op-ed pages is different from the economics of professional journals, and that economists, like Krugman, often make claims in journalism that conflict with, or do not reflect the more erudite and ethically constrained claims published in peer-reviewed journals. In this particular passage, Cochrane is, quite accurately, noting that the macroeconomic ideas of actual policymakers, such as central bankers, is quite different from the macroeconomics of the journals. (For the commenters, who have been going back-and-forth on whether professional economists have practically useful skills, this would seem a more directly relevant datum, than whether economists have any involvement in siting oil derricks.)

Thornton Hall has been doing yeoman’s work in his comments on this thread. I’m afraid at any moment that he’s going to fall off his tightrope, crash to earth and not realize it, but, so far, he’s been doing really well. Certainly, he’s right about Krugman’s macroeconomics. There’s no there, there. Krugman has intuitions, which flow from his political liberalism primarily; there’s no deep theory behind what he says. And, in fact, as JW Mason and Lars Syll and others occasionally point out, Krugman, the textbook author and pedagogist of economics, is every bit as conservative and orthodox in his economics as Cochrane, pushing indoctrination of students in esoteric concepts like, say, the long-run neutrality of money. And, as another commenter pointed out, as a paid-up member of the elite inner circle, Krugman regularly does his bit to police the boundaries of the profession, scorning the unwashed or blessing the orthodox. He’s enlisted people like Eggertson and Simon Wren-Lewis, which one can see, politically, as coalition-building, but within the profession, confirms the legitimacy of mainstream methods, including the infamous DSGE models.

So, finally, getting back to J Thomas’ comment about agreeing on a set of ideas. From the outside, agreeing on ideas may look like science, but it’s the social form of science and not the substance. This is the fundamental play of sociology and anthropology: to separate the role enactments from the claims of participants, noticing the constrast. Hence, the OP. Economics — mainstream academic economics — is organized socially around agreement on a set of ideas. Unfortunately, it is a set of seriously flawed ideas, and the social organization functions to insulate those ideas from effective criticism.

The problem, as I see it, is that economists do not know what they disagree about. People like Cochrane and Krugman are going to disagree about political values — that’s built into the nature of political discussion as an airing of the range human ambivalence. We may narrow the range of ambivalence, but we are never going to wake up to find everyone is a liberal.

A subject as abstruse as astrophysics demonstrates the range of human ambivalence, and there are disagreements between points-of-view. Whether you see the universe as fundamentally random or fundamentally determined, or whether you see the universe as going on forever or having a definite beginning and definite end — these notions are founded in primitives of human psychology, and physicists translate those differing points-of-view and personal temperament into arguments, and try to externalize those disagreements into social inquiry into logic or measurement.

Having a point-of-view is essential to being a working scientist or scholar, and contrasting points-of-view drive a lot of productive argument. At least, potentially.

The problem in economics is that certain points-of-view are embedded in doctrinal amber, and economists do not engage, critically, in identifying what they disagree about. The clash of New Keynesians with the Real Business Cycle (RBC) or New Classical economists occurred in a context of increasing social comity: the New Keynesians adopted the DSGE models the RBC morons dreamed up. They agreed that modeling intertemporal optimization was a good theoretical strategy, which entailed agreeing on a point-of-view about what drives the behavior of the economy, but, somehow, they do not know what they disagree about.

The Cambridge Capital Controversy has become a favorite touchstone of the econblogs, in part because people have a lot of difficulty even understanding the issue or the outcome. Here’s the point: the critics were right, the mainstream in the person of Paul Samuelson admitted as much, and the mainstream brushed it off, and went merrily along without altering anything. The social consensus within the mainstream just decided to retain a fundamental way of conceptualizing capital, which had been proven wrong. They decided to keep agreeing on something they knew was wrong. And, in doing so, they lost the ability to know what they disagree about.

Mainstream economics entails a lot of agreement and arrogant confidence based on that agreement, that is founded in social structures, rather than intellectual accomplishment. There’s a lot of agreement on point-of-view, which is very pernicious. For example, the idea that the economy, as a system, is governed by a systemic tendency toward general equilibrium is in the nature of a point-of-view, derived from psychological primitives of temperament — there’s actually a substantial body of economic theory that suggests strongly that it is not logically possible. So, the disagreement is there, and productive in its way, but without the mainstream abandoning its devotion to its point-of-view.

By enshrining a point-of-view and social agreement in place of actual, critical inquiry into fundamental disagreements, mainstream economics has run aground. It is that dogmatic point-of-view, which lends so much weight to reactionary and conservative politics.

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bob mcmanus 12.05.14 at 8:07 pm

Although I doubt that the sociologists are copacetic about changing an elite.

There are very good reasons French and European intellectuals (and myself, who doesn’t count, over the last decade) after 1968 turned (well, 1st toward terrorism) against Marxism and to a lesser extent abandoned politics and took a sociological turn. (And maybe why economics isn’t very powerful in France)

Mitterand and Hollande (and maybe Obama) are pretty decent guys with popular backing and could do very little. Capital and its justifiers have become very powerful, almost unassailable by discursive methods.

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mattski 12.05.14 at 8:09 pm

For the life of me, “too much acid back in the day” is the only way I can make sense out of Thornton Hall.

Yak.

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js. 12.05.14 at 8:10 pm

@261 I’m fairly certain that’s an accurate rendering of the article cited by the OP.

Your certainty is hilariously misplaced. More generally, it’s a strange dynamic in this thread, where the people who think they are defending economics are inadvertently confirming Fourcade et al.’s theses (Noah Smith is just exhibit no. 1), whereas most of the people arguing against the discipline of economics (to put it generously) are being so blockheaded about it that they are probably hurting the case.

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bob mcmanus 12.05.14 at 8:12 pm

the New Keynesians adopted the DSGE models the RBC morons dreamed up.

And I think they did so for largely political and sociological reasons, involving getting published tenure, policy positions, conference invitations in the 80s. There are reasons DeLong is at Berkeley and Wray in Kansas City, and they aren’t necessarily meritocratic.

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J Thomas 12.05.14 at 8:31 pm

#256

J Thomas
“How can there be status to being an economist, when Austrians and mainstream economists both share the title?”

In other words, J Thomas thinks that if members of a discipline or field (or whatever word you want) disagree on some basic matters, their field has no status.

That wasn’t what I said, but I think the meaning is not that far off.

Consider some of the posters on this blog: Henry Farrell (political science), Ingrid Robeyns (philosophy), John Quiggin (economics), Kieran Healy (sociology), Chris Bertram (philosophy), Harry Brighouse (philosophy), John Holbo (philosophy), Jon Mandle (philosophy), Eszter Hargittai (sociology), Corey Robin (political science), Brian Weatherson (philosophy), Eric Rauchway (history).

OK, let’s consider how much status you deserve for being a philosopher.

John Frederick Lange, better known as John Norman, is a PhD philosopher who currently has an academic posting at Queens College. He advocates a morality based on the natural order of things, a Nietzscheian natural order with social darwinism. Probably he has made far more money from his publications such as Slave-Girl of Gor than from his work as a professional philosopher. Probably he has made far more money that way than most professional philosophers make from philosophy. But then, his books attempt to popularize his philosophy and persuade laymen to accept it. Probably more Americans have read his outreach literature than have read Plato or Kant outside of class assignments.

I contend that whatever status you get from being a professional philosopher is status that you fully share with John Lange. You get that status, he gets that status, you both get that status.

I think I could find a number of examples of professional philosophers that you would not particularly want to share status with.

However, you might gain considerable status by being a decent philosopher yourself. So, if my wife tells me that a philosopher will be coming to dinner, I won’t necessarily want to lock up the silver but I won’t feel any particular desire to unlock it either. But if she tells me it’s John Holbo or Chris Bertram I will be impressed. Not because they have the philosopher label but because they are them.

Clearer now?

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Collin Street 12.05.14 at 8:46 pm

In other words, J Thomas thinks that if members of a discipline or field (or whatever word you want) disagree on some basic matters, their field has no status.

You do this a lot, you know. People make long statements because their positions are complex, and you pretty much can’t ever summarise someone’s position without distorting it at least a little bit. Sometimes quite a lot.

The take-home lesson here — there are other things you need to learn not-here, some of which will [partially] contradict this — is that you shouldn’t conclude a person is speaking in absolutes, “all” or “every” or “any”, unless they introduce the absolutes themselves or you can logically demonstrate that they’ve left no possibilities out. And even if they are using absolutes, you need to make sure that the absolutes are the ones you think they are [“all black-haired people” is not “all people”, even in japan]. JT didn’t use the absolutes you need for your conclusion to be valid: you have misinterpreted him.

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bob mcmanus 12.05.14 at 8:50 pm

One of the main tenets of neoliberalism studies or post-Capitalism is that political discourse has become so infected with Capitalist reason as to make politics, understood perhaps as the Habermasian public sphere, impotent and irrelevant. Markets have been extended, mostly by liberals, to politics, such that they believe that the better arguments and evidence will always win (get the votes for the right candidates.) Eventually.

We don’t need post-post-theory to remember that isn’t how we overcame Catholicism, ended monarchy, ended slavery.

I may be accused of anti-intellectualism by those invested in their educations and skill-sets, but I’m not. The intellect can still be strongly involved even when discourse is abandoned in favor of action, tactics and strategy. And discourse will still be involved, just in a different form when trying to motivate laypersons to storm the Bastille or University of Minnesota.

You are not going to do it by talking about the ZLB.

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Thornton Hall 12.05.14 at 8:51 pm

So if some people think I’m on acid, and some think I’m blockheaded (and Mattski is someone whose comments I frequently agree with) and yet multiple people can write multiple paragraphs building constructively on what I’ve said, what does that say?

I think it says something very important. Especially when you think about the agreement between what I said, what the “superiority of economists” article describes and what any reasonable person would acknowledge about the demographics of graduate school and the academy.

I am deliberately provacative. I throw bombs. But exaggeration and rhetorical excess seem to be required where an intellectual dead end has been reached, everyone knows this is the case, and yet everyone is still there in the dead end after literally 40 years of wandering in the desert. If trying to end that wandering is “nonsense” or “on acid”, well, I guess there’s always more desert to explore.

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The Temporary Name 12.05.14 at 8:52 pm

JT didn’t use the absolutes you need for your conclusion to be valid: you have misinterpreted him.

JT thinks the meaning is not far off. I await your diagnosis.

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Rakesh 12.05.14 at 9:03 pm

only the exaggerations and distortions are true. Of course I have not been reading this thread.

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Val 12.05.14 at 9:04 pm

Perhaps if instead of talking about how the public health system in a wealthy country like Australia has been under threat for at least two decades from economic ideas about privatisation, price signals, etc, I talked about how the death rates of children went up in poor countries in Africa as a result of Structural Adjustment Packages, I could get people like Ronan (rf) or LFC, et al, to understand that there are serious consequences to economic ideas? Possibly even to see that critics aren’t just critiquing them out of misguided lefty wrong headedness?

I know that Ronan(rf) apologised for the comment about the intellectual bankruptcy of the left, but nevertheless there seems to be an ongoing line from some commenters here that people like me who criticise economics are intellectual lightweights. Insulting people you don’t agree with is a technique of argument, but not a good one.

As I’ve said before, I am not cricising “all economists”, however in the field that I know something about, certain economic ideas have caused demonstrable harm.

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Collin Street 12.05.14 at 9:05 pm

For example, the idea that the economy, as a system, is governed by a systemic tendency toward general equilibrium is in the nature of a point-of-view, derived from psychological primitives of temperament — there’s actually a substantial body of economic theory that suggests strongly that it is not logically possible.

You don’t need economic theory, because this is essentially the same problem as designing a stable amplifier with feedback.

[ans: you can’t do it unless you damp the feedback, run a fuck-off huge tax-and-transfer program to reduce income disparity.]

I pointed this out on — was it noah smith’s blog — and the blog-host[1] didn’t seem responsive to my pointing out that the problem was largely solved.

[1] where are all the lady economists, btw? I have a theory as to the exact problem here… yes it’s my normal theory.

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Thornton Hall 12.05.14 at 9:06 pm

@280 bob mcmanus

Is that a glimmer of hope I detect? I had you pegged as an utter pessimist. But I confuse commenters frequently.

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J Thomas 12.05.14 at 9:16 pm

#273 Bruce Wilder

From the outside, agreeing on ideas may look like science, but it’s the social form of science and not the substance. This is the fundamental play of sociology and anthropology: to separate the role enactments from the claims of participants, noticing the constrast. Hence, the OP. Economics — mainstream academic economics — is organized socially around agreement on a set of ideas. Unfortunately, it is a set of seriously flawed ideas, and the social organization functions to insulate those ideas from effective criticism.

I want to believe, somewhat against the evidence, that the actual worth of the ideas has some effect on how well they spread. Like, no physicists today disbelieve in atoms, but 120 years ago some did. I want to think it isn’t primarily social reasons that caused the change, but simply that the actual evidence was overwhelming. Maybe they had to wait for the atom-disbelievers to die off, but even before then nobody wanted to listen to what they had to teach.

But we have a surprising number of people who believe in and want a gold standard. The Austrians who teach gold standard have no trouble finding students. There’s every reason to think there will be as many gold-standard supporters next generation as this generation. There is no overwhelming evidence to persuade them. Of course, it probably makes a difference what rich people will pay for, too.

I’m being too idealistic, I know. In physics last generation Jaynes led a neoclassical physics revolt. They were making pretty good progress but there were no physics openings at other places for neoclassical physicists, so his surviving students worked in other traditions and the whole thing died out when Jaynes did. It wasn’t so much about the ideas as the sociology and the biome.

Still, I want to believe that if the fundamental ideas were better they could better dominate the world.

Unfortunately, it is a set of seriously flawed ideas, and the social organization functions to insulate those ideas from effective criticism.

If the ideas were better I want to think they could better outcompete alternative seriously flawed ideas.

The problem in economics is that certain points-of-view are embedded in doctrinal amber, and economists do not engage, critically, in identifying what they disagree about.

That looks like a serious problem all right. So, they have disagreements, and they sort of agree-to-disagree. They don’t look for ways to improve their own ideas by testing them against others. Multiple schools of thought that each tends to last until it becomes politically uncomfortable, or even longer.

Why would they get a lot of respect?

From the OP, Yet if you’re an economist, this is invisible. Your dominance appears to be the product of natural superiority.

It’s certainly a question that’s worth answering. Do they really get all that much respect, or do they just imagine they do? Well, but they do get more money. That’s one sign of respect. It makes sense to say it must be something social since it’s hard to argue there’s real economic justification for it. But the devil is in the details.

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Ronan(rf) 12.05.14 at 9:16 pm

“Insulting people you don’t agree with is a technique of argument, but not a good one.”

Val – you accused two people of dumbing down the conversation, made a number of (what I felt were) sweeping generalisations about economists and then responded to me dismissively with “Ronan(rf) I’m not disputing that you know some nice economists” in the comment preceding the one I made about intellectual bankruptcy.

Im in favour of having this conversation with a little generosity, and apologise for any intemperate remarks Ive been making, but this isnt a one way street.
And perhaps if you asked me questions directly, rather than made general statements to the crowd such as :

” I could get people like Ronan (rf) or LFC, et al, to understand that there are serious consequences to economic ideas?”

and gave me the slightest bit of credit that Im aware of the history of Structural Adjustment Packages in Africa and the problems associated with dodgy economic ideas (and policy) , arguments Ive repeatedly made, then we might get somewhere.

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TM 12.05.14 at 9:24 pm

247: “A Scandinavian Social Democracy would be as pointless in an impoverished country like Haiti as a miliary backed dictatorship in Denmark….”

But a military dictatorship in places like Haiti just obviously makes sense.

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bob mcmanus 12.05.14 at 9:25 pm

Is that a glimmer of hope I detect? I had you pegged as an utter pessimist. But I confuse commenters frequently.

Well, Bourdieu has come up in this thread. IIRC, he did give small hope to teaching people to think sociologically (this is also Marxism 101).

But mainly he expected things to get better after horrific catastrophe. Me too, but I don’t really call that hope.

Catastrophe and horror can’t be averted, but I think it can be lessened with pre-emptive action (see Keynes). But that will require liberals to stop arguing facts and ideology, especially with conservatives.

So no, I don’t have much hope.

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john c. halasz 12.05.14 at 9:26 pm

Val @284:

Kenneth Arrow, of all people, published a paper back in the 1960’s on how health care is a non-market good. The economics largely support your POV, even if (some) economists don’t.

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Thornton Hall 12.05.14 at 9:32 pm

@288 Ronan
I haven’t followed the specifics of your disagreement with Val, so forgive me as I mischaracterize what you are saying. But I want to note that the wandering in the desert that I describe is chock full of statements in the form of: “I am well aware of problem with economic theory x, don’t lump all economists into the same boat with sweeping generalizations.”

I’m not sure if the proper metaphor here is the hoary Whack-A-Mole or maybe one of those squishy stress balls. Either way, economics is able to dodge criticism without ever getting any closer to the truth.

In my mind it’s a tactic I identify with Nick Rowe, but that’s arbitrary as it makes up a good 30% or so of the substance of the econoblogosphere.

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LFC 12.05.14 at 9:33 pm

Val 284

Perhaps if instead of talking about how the public health system in a wealthy country like Australia has been under threat for at least two decades from economic ideas about privatisation, price signals, etc, I talked about how the death rates of children went up in poor countries in Africa as a result of Structural Adjustment Packages, I could get people like Ronan (rf) or LFC, et al, to understand that there are serious consequences to economic ideas? Possibly even to see that critics aren’t just critiquing them out of misguided lefty wrong headedness?

Val, please show me where in this thread I have: (a) defended Structural Adjustment packages or (b) said or implied that I do not think there are serious consequences to economic ideas. I spent a good chunk of my time as an undergraduate (late 1970s) studying political/economic relations between rich and poor countries. I am aware of structural adjustment and the harm it has often caused. (I also consider myself to be on the left politically, though that statement in itself doesn’t tell much, admittedly.)

I’m very tempted to respond in kind to your statement that I and Ronan don’t understand that economic ideas have serious consequences. But I’ll restrain myself.

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J Thomas 12.05.14 at 9:34 pm

#282 TTN

“JT didn’t use the absolutes you need for your conclusion to be valid: you have misinterpreted him.”

JT thinks the meaning is not far off. I await your diagnosis.

I say, if you have a professional label and there are a lot of really rotten professionals with that label, then the label should not get you a lot of respect.

If there is a professional association of used care salesmen, I will probably not be impressed if you flash your membership card at me.

If you want me to respect you because you are a professional economist, that doesn’t go very far. First you must show me that you do not belong to a raving-lunatic school of economics.

You wanted to extend that to say that the field of economics itself has no status. And I think that’s kind of true. If you say “economics” meaning the averaged outcome of everything that has the tag, including the raving-lunatic schools, then it’s a giant self-contradictory mess. Why should it have any status? But if you limit it to what some very competent person regards as economic best practice, that would be a different story. Then there’s a lot of good work, some of it theoretically based on shaky foundations but maybe not much dependent on those foundations. If you apply Sturgeon’s Law and throw out all but the good stuff, then there’s some good stuff there.

My complaint is that it appears there’s no way to throw out even the worst 10%. Brett Wilder’s complaint appears to be that most economists agree to a lot of bad stuff and if they throw anything out they might likely throw out good stuff instead of bad stuff.

What do you think? Do you want to defend the status quo in economics?

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Ronan(rf) 12.05.14 at 9:42 pm

Thornton – but (afaicr) you were making the argument in another thread that ideology doesnt explain politics (too simplify a bit), instead we should look at things like tribal affiliation and material interest based explanations for how policy gets enacted and political movements develop, which I agreed with you on more or less. (and ideas and electoral concerns as well, Id guess)
Now you appear to be saying it’s all ideology. It’s all the result of a set of recalcitrant economists and their ideas. The ideology, (not even the specific policy advisor who brings his own interpretation/simplification of the idea to the policy arena), makes the leap from the economics department to the policy making apparatus.
My reading is probably a little unfair, but is there not a contradiction here on the positon you’re holding in this specific case, and your more general theory of how politics functions and policy gets made ?

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LFC 12.05.14 at 9:45 pm

Collin Street 279
you [LFC] have misinterpreted him [JT]

I’ll concede that I might have overgeneralized his point, though istm to be a fairly close interpretive call.

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LFC 12.05.14 at 9:49 pm

Following on Ronan @295, I’m also a little puzzled about T Hall’s take on ideology. I suspect his position rests on a particular definition of “ideology.” He uses “ideology” as more or less synonymous with “dogma,” which of course he opposes. That’s not how I tend to use the word “ideology,” tho it may be one of the acceptable dictionary definitions of the word.

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Trader Joe 12.05.14 at 10:06 pm

@271MPAVic

Just to close the loop on our sub-thread (I didn’t intend to wander off, but a trader’s gotta trade sometime). If I misinterpreted your suggestion than my mistake. As noted previously, I think Scandinavian style social democracies have much merit, but I’m not of the opinion its something all countries can move towards. My original point was that there is no one answer to the ‘best economic form’. If you’re satisfied that the equation has only one right answer I doubt we’ll convince one another otherwise.

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Thornton Hall 12.05.14 at 10:08 pm

@291 John c. Halasz

This is, of course, “pulling a DeLong.”

If you look at his course materials, you’ll see that DeLong introduces static equilibrium in week 1 of Econ 101 and has his students using math to solve problem sets by week 3. Actual human behavior plays no role whatsoever.

Then, in blog posts, he moans endlessly about people who apply this same analysis to the topic de jure. “I don’t understand [Prof. Freemarket] when he says blah, blah, blah… Doesn’t he know about [public goods, imperfect competition, asymmetric information, etc. etc.].

It is yet another defense mechanism against real introspection.

The important problems here are revealed in a comparison to a real social science like psychology. Imagine if Psych 101 were devoted entirely to “normal” psychology, with all sorts of fancy math about how well adjusted adults behave? Then there would be the necessary result that all children would be well raised by their normal healthy parents. Only in graduate studies would you learn about mental illness and the whole realm of the “abnormal”.

But, of course, no one is normal. So the first problem is the utter lack of subject: neither perfect markets nor perfect people exist.

Far more importantly, it’s only by studying the abnormal that psychiatrists learn anything at all. Theories of psychology have as their subject matter the question “how do things go wrong?” Going wrong is the thing to be studied.

So the DeLong move is to say, all the questions that should be the subject matter of economic theory are explicitly defined as not the subject of economic theory.

Now, he still thinks they should be studied. Indeed, the study of abnormal economics is absolutely critical according to DeLong. But only in a way that it is never allowed to cast doubt on the methods and reasoning which he dutifully teaches every year in Econ 101.

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js. 12.05.14 at 10:08 pm

Val @284:

Just to clarify, my @276 was not directed at you. In fact the last bit of that comment was directed at a couple of rather voluble commenters in particular, and I should, and do, take back the “most of etc.” phrasing. (Tho in this context, I’ll also note that, at least as I see it, even a lot of the valid criticisms of the practice and influence of economics that you and others have brought up aren’t obviously related to the Fourcade article. But I guess we’re well past that point anyway.)

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J Thomas 12.05.14 at 10:13 pm

#297 LFC

“you [LFC] have misinterpreted him [JT]”

I’ll concede that I might have overgeneralized his point, though istm to be a fairly close interpretive call.

I get a vague impression that you disagree.

Can you say what your view is on this, if it’s something different?

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LFC 12.05.14 at 10:15 pm

J Thomas

John Frederick Lange, better known as John Norman, is a PhD philosopher who currently has an academic posting at Queens College. He advocates a morality based on the natural order of things, a Nietzscheian natural order with social darwinism. Probably he has made far more money from his publications such as Slave-Girl of Gor than from his work as a professional philosopher. Probably he has made far more money that way than most professional philosophers make from philosophy. But then, his books attempt to popularize his philosophy and persuade laymen to accept it. Probably more Americans have read his outreach literature than have read Plato or Kant outside of class assignments.

I contend that whatever status you get from being a professional philosopher is status that you fully share with John Lange. You get that status, he gets that status, you both get that status.

This is a different point, I think, from the one I took issue with earlier, which was directed to a whole field and its (perceived) status, rather than to the status of particular practitioners (or the question whether every prof of X is marred by association with the worst prof of X).

The basic point I was trying to get at is this: istm there are good ways and less good ways to criticize either mainstream economics specifically or the discipline of economics as a whole. Pointing out that “reputable” economists, or any economists period, disagree on some basic issues does not strike me as a particularly compelling way to criticize the field, b.c in itself such disagreement is not all that surprising. It does deflate the pretensions of those economists who think they are like physicists, true. But that’s about it, istm. Others apparently disagree w me on this. Fine, we’ll agree to disagree.

As for B Wilder’s emphasis on the fact (or alleged fact) that Krugman’s pundit opinions don’t flow from his professional theories, yeah, what a surprise. One can find the same phenomenon in pol sci or specifically int’l relations, a field I’m much more familiar with than econ. Take John Mearsheimer. His theories are one thing, his interventions in policy debates quite another. They sit v. uneasily together, in the view of many people. But I fail to see that this kind of disjunction is, standing alone, a decisive indictment of someone’s academic work. It does show, I suppose, that big-name profs can be sometimes inconsistent and arguably self-contradictory. So are a lot of other people.

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Jerry Vinokurov 12.05.14 at 10:15 pm

Imagine if Psych 101 were devoted entirely to “normal” psychology, with all sorts of fancy math about how well adjusted adults behave? Then there would be the necessary result that all children would be well raised by their normal healthy parents. Only in graduate studies would you learn about mental illness and the whole realm of the “abnormal”.

In psychology it’s actually almost the reverse of this. You can take math-based cognitive modeling classes (e.g. 85-412 at CMU) but they tend to be more advanced and taught after people have had the basic grounding to not mistake the math for The Truth.

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The Temporary Name 12.05.14 at 10:16 pm

What do you think? Do you want to defend the status quo in economics?

I don’t think I should be trusted to articulate what I think the status quo or its opposite is, but I’m interested in reading the arguments.

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phenomenal cat 12.05.14 at 10:17 pm

Mainstream economics entails a lot of agreement and arrogant confidence based on that agreement, that is founded in social structures, rather than intellectual accomplishment. There’s a lot of agreement on point-of-view, which is very pernicious. Wilder@273

Yeah, well there’s a lot of this in Lit, Rlst, and Phil departments as well; and a fair bit of it in social science departments that are not econ. Despite valiant efforts, economists haven’t cornered the market on intellectual conformity, mediocrity, and cowardice. It’s their power and, more to the point, the power of that which they claim to seek to understand that is the problem–talk about agreement, and social structures, and psychological primitives is perhaps sociologically useful, but pointless otherwise. It’s reformation non-sense talk among the cardinals at Vatican City.

McManus offers a good, askew point here. Why did the intellectual European left turn away from Marxism and politics generally after 68? If you can answer that then you can come up with a reasonable explanation for the ascendancy of economists as world-explaining priests, uh, I mean experts over the last forty years. Economics departments and economists generally are just signals or signs of something much larger and powerful. The game was already lost the minute you knew who Gary Becker was.

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mattski 12.05.14 at 10:19 pm

Thornton,

Your heart is obviously in a good place and I’m sure the two of us would get along just fine over beer. And sandwiches.

However, you have these tendencies…

@ 253 you went after MPAV for allegedly, “demonstrat[ing] why DeLong and Krugman are the two most dangerous economists in the world.”

How did MPAV do this? By claiming that Krugman & DeLong’s Keynesian approach has illuminated the aftermath of the financial crisis better than any other we have seen.

You continued with some sort of broadside at Krugman having to do with a phrase he sometimes employs,

“Reality has a well known liberal bias.” You say,

We know, because he has explicitly told us, that his policy conclusions are not drawn from the application of economic theory. Rather, they are the combination of good history (knowing the history of Japan over the last 30 years) and ad hoc modifications to the IS/LM model.

OK, I call this rank nonsense. And for what? What in god’s name are you trying to say? What is so difficult about Krugman describing a liquidity trap as a) essentially a Keynesian idea and b) a unique situation that calls for unique policy? “Virtue is vice” and etc. Demand is weak so we need the government to prop it up by borrowing essentially free money.

Most dangerous economists in the world?

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Thornton Hall 12.05.14 at 10:20 pm

@295
I fell into the language of ideology because that the language used by Krugman and others. As I categorize the defense mechanisms of economics, one of them is definitely “But those criticisms only apply to conservative economists.”

Two things. To the extent there are people whose behavior is actually explained by reference to a “system of ideas” (ideology), almost all of those people are part of academia. Our continued confusion in politics is partially the result of straight forward projection.

Second, in most cases it would still better explain economist’s behavior by reference to their interests and identity, not ideology. Indeed, that is exactly the method of the article referenced in the OP. The process described there is not a conscious shaping of systems of ideas but one in which our identy is deeply tied to the values of our social peers.

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LFC 12.05.14 at 10:20 pm

p.s. I am not defending Krugman specifically. I don’t even read him, except on very rare occasions. Was trying to make a broader pt about the wearing of different hats and whether one shd nec. expect policy views and theory to match up well. I guess if they consistently diverge it’s a legit ground for criticism.

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Ronan(rf) 12.05.14 at 10:28 pm

J Thomas – just to return to that comment (Im only reading up now) my take away was more or less the same as LFCs. If you’re saying that economics shouldnt be given recognition or status until it has a clear set of standard and accepted theories accepted by the profession as a whole, doesnt that imply the same for all the other areas in the social sciences and humanities who find themselves in the same boat ?
What if we figure out that you cant reduce human social systems to a set of fundamental rules and theories, that the expectations in the social sciences are not the same as in the natural, does that mean that these subjects never get recognition and status ?

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LFC 12.05.14 at 10:30 pm

T Hall 299

If you look at his course materials, you’ll see that DeLong introduces static equilibrium in week 1 of Econ 101 and has his students using math to solve problem sets by week 3. Actual human behavior plays no role whatsoever.

Then, in blog posts, he moans endlessly about people who apply this same analysis to the topic de jure. “I don’t understand [Prof. Freemarket] when he says blah, blah, blah… Doesn’t he know about [public goods, imperfect competition, asymmetric information, etc. etc.].

But what does DeLong do in weeks 9, 10, 11, 12, 13 of his Econ 101 course? Are you saying he never introduces the notions of imperfect competition, asymmetric info, market imperfections in general, to his intro students? I’d be surprised if that were the case, tho if it’s a one-semester course (which I seem to recall his is) he might have to compress things.

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bob mcmanus 12.05.14 at 10:37 pm

What is so difficult about Krugman describing a liquidity trap as a) essentially a Keynesian idea and b) a unique situation that calls for unique policy?

Well, because consistent Keynesian demand management (50s-60s, MMT, JG), not just at the ZLB, most likely is the best available liberal program and much safer. And ZLB as a radical difference is incoherent and unsupportable. What, .00005 real interest we can relax? The saner expression is simply “when monetary policy is ineffective” which I bet can come at 15% (if business gets panicky and won’t invest.)

Krug’s basic assumptions re ZLB are still closer to neo-classicism than to Keynes.

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Ronan(rf) 12.05.14 at 10:40 pm

Thornton @307 – ok, fair enough. But then you’re critiquing the discipline itself (the way it’s taught, the assumptions they use etc) rather than its effect on policy ?

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Thornton Hall 12.05.14 at 10:42 pm

@306 You are of course familiar with Krugman’s habit of dismissing all complaints that “that’s not what Keynes said.” He eventually came around and said, “well ok, IS/LM is Hicks, not Keynes, but that’s not the point.”

But it is the point. Once “Keynesian Economics” turns into a squishy stress ball that can fit any shape, then we are headed for the coal pit. If you can’t pin it down then it can’t be wrong. It can’t be right either, but Krugman is explicitly willing to accept this outcome.

But there’s a bigger problem: how do you criticize others when the economics you claim that they “forgot” is actually a squishy stress ball that can’t be pinned down?

Here’s what he does in practice: he points out the facts, eg, no inflation, points out (eg) Cochrane was wrong about inflation, and then flatly asserts that “textbook economics” would not have made the same error. Then it’s off to the races about IS/LM and the zero lower bound, which sounds convincing.

But when you poke into it, you find no necessary connection between Keynes, IS/LM, and inflation. The way Krugman connects those dots is utterly idiosyncratic. From a policy maker’s prospective, the task for Krugman is this: “teach me an economic method to follow so I will know in the future to listen to you and not to Cochrane?”

There’s no answer. There’s no “textbook” method that works.

I wasn’t going after MPAVictoria. Liberals look to liberal experts for guidance. Those experts, Krugman and DeLong especially, tell us that Econ, writ large, is just fine. But it’s not, and it’s hurting the people that liberals want to help.

The worst thing about it is that what Krugman actually uses is far more reliable than he lets on: history plus trial and error. But he’s religiously committed to hiding that.

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Ronan(rf) 12.05.14 at 10:53 pm

“But it’s not, and it’s hurting the people that liberals want to help. “

But this is the bit I dont get. If your theory of how policy gets made (which I more or less agree with) says you should look at interests and electoral concerns, how does *economic theory specifically* hurt people ?
For example, say a Republican administration wants to implement a set of high income tax cuts, the story here would be they’re responding to pressure in their party or among their constituents or lobbying from relevant interest groups. Here, the bit of economic theory they butcher to justify the cuts is a post hoc justification, not the cause.
Personally, I would say there’s more room for ideas and ideology as a causal factor in the above, but if you’re stressing interests and electoral politics as the main driver of policy, then ‘economic theory’ is not a primary cause of bad policy, it’s a justification.

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Thornton Hall 12.05.14 at 11:02 pm

@312Ronan
One of the biggest defense mechanisms employed by Econ is the claim “policy makers don’t listen to us.” I cant’t get beyond the pay wall, but this mechanism is explicitly employed by Blinder in his current review in the NYReview of Books.

The problem with this method is that it is deliberately obtuse about how policy is shaped by the academy and deliberately ignores insights from economists such as… (Veblen? Someone else? I know there’s a reference there). There is a constant interaction between the academy, the press and policy makers. Think tanks play a role, mostly by packaging ideas in less offensive language.

This discourse creates a baseline. The Capitol is filled with people on both sides of the aisle who think it is a fact that the purose of every corporation is to maximize shareholder value. Of course, this “fact” is a blatantly false assertion that Milton Friedman literally pulled out of his ass. But we don’t teach that anymore, the academy claims. And true, it’s not in their lectures, but that’s hardly a defense. Where was the mechanism that prevents such nonsense from becoming dogma in the first place? Where is the acknowledgement that the idea still resonates on Wall Street?

That’s just one example.

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Ronan(rf) 12.05.14 at 11:11 pm

Thornton @315 – I agree with you re policy advisors, think tanks etc, although I wouldnt put too much weight into their influence .. but that’s (imo) speaking to something different. Not to economics as a discipline, but to specific economists acting as political agents. (and this works both ways. Krugman* has lobbied relentlessly against austerity, simplifying complicated research and at a level of certainty that – apparently – isnt neccesarily justified. I dont personally mind that, as I agree with him, but it’s the same role just from a left position)

*I know you dont particularly like Krugman, but Im talking about the policy (opposition to austerity) rather than the person, which I think could be broadly seen as a positive left position regardless of who’s making the case.

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Thornton Hall 12.05.14 at 11:11 pm

@315 The best years the American economy ever had are when top tax rates were over 90%.

How do you get people to beliveve that this didn’t happen?

Certainly not an explicit system of ideas. Ideology, in the sense I criticize, can’t make claims which as an empirical matter are flatly false. The beauty of calling a political disagreement “ideological” is that it puts it beyond empirical examination.

No. Instead what happens is an unconscious and largely uncoordinated process that consistently rewards–with money and status–plausible ideas like “efficient markets” and “rational choice.” Again, I think the method by which this happens is the subject of the article from the OP.

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Thornton Hall 12.05.14 at 11:18 pm

@316 What if I told you there was no basis for the claim: “the private sector is more efficient than the public sector”?

The role economics plays in policy is not really centered in Op-Ed columns. It’s the creation of a language that grants normative status to market phenomena. It’s so deeply embedded in our discourse today that no one, but especially the press, notices that it didn’t really exist before the late 19th Century and was flatly rejected as evil “Social Darwinism” for much of the 20th Century.

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Ronan(rf) 12.05.14 at 11:28 pm

I agree with you it can play a role in setting the terms of the game. But again, I dont know to what extent (1) this causes major societal/policy changes rather than is a consequence of/justification for them and (2) that this has a huge amount to do with economics as a discipline.
I assume I could find an economist willing to tell me anything I wanted to hear, or research to justify pretty much any policy I wanted to sell. This is a big, open, contested area. The question is still (imo) who are the people making the arguments, selling this line and what are their interests.
IMO this has very little to do with what goes on in economic graduate programs, very little to do with complicated, caveated research, and more to do with people and groups selling shit as deep insight.

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Ronan(rf) 12.05.14 at 11:28 pm

..anyway, that’s too much off topic and Im posting too much on it so Ill bow out there.

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Thornton Hall 12.05.14 at 11:31 pm

How does economic theory hurt poor people?

A. We need more roads.
B. we have plenty of money with which to build those roads.
C. Building roads puts people to work now and helps build future economic activity and therefore jobs.

Economic theory, with it’s epicycylcles of “natural rates of interest”‘ “inefficient allocation of capital” and “crowding out of private industry” has the effect of causing widespread beleif that even when everyone is certain that A, B, and C are true, there is, nonetheless, lots of very complicated math that one needs to consider.

In fact, all economics is dogmatically dedicated to the idea that in public policy, there is always a consideration “D”, which always involves complicated math, the complicatedness of which obscures the fact that “D” is really just a thumb on the scale tilting it away from government action.

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Ronan(rf) 12.05.14 at 11:34 pm

Okay, last thing. This is what polled ‘star’ mainstream economists actually say about infrastructure spending

http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_9yTmaqlHpp1JzH7

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Peter Dorman 12.05.14 at 11:41 pm

I realize I’m extremely late to this party, and all but a few stragglers have gone home. But I read this long thread with interest. A few brief points:

1. The structure of academic salaries, not only economics but all the other disciplines, is an interesting topic, and one that could be illuminated by careful research. Perhaps it’s already been done. If so, it would be nice to invoke it rather than just speculate. In addition to looking at cross-sections in the US in a given year, you could observe the longer term trends and also compare the salary structure in the US and other countries, at least those that allow wage flexibility to the academic employer. (Civil service rules in many countries prevent this.)

2. The public prominence of economists has to do in part with the prominence of the issues they study. Not all economic subfields are prominent! Economic history, for instance, is fascinating and important, but it’s not a route to glory. What to do about financial crises is. Sociologists of race get a lot of attention when race relations is on the agenda, and some sectors of political science, like the linkage between economic and political inequality, are very hot at present.

3. The critiques of economics by noneconomists are often misaimed because they are familiar with the popularizations of the field but not its professional research. This is not to say there aren’t serious problems with economics—I think there are—but its representation to the lay public is much worse. This shows up especially in the undergraduate textbooks, which are formulaic, obtuse and blinkered, much more so than the profession as a whole. That’s why I wrote my own textbooks, to close that unnecessary gap.

4. The invidious attitude held by many economists toward other social sciences (“they’re not smart enough to do math”) is apparently real and a big problem. In my experience, economists don’t read outside their discipline as much as they should, partly because they think noneconomists don’t have the skills or brains to justify reading one less article in an econ journal. Fourcade et al. point to this.

5. I haven’t read Chetty’s article, so I should keep my mouth shut, but: there are characteristic problems that show up in a lot of econometrics. One is the failure to recognize that, if the goal of statistical work is to test a theory, it needs to be tested against other theories. What other explanations are out there? What results would support your theory against its competitors? You can’t do this unless you consider all the plausible theories that you want to pit against each other. Economists find that theory A is “not disconfirmed” and then think that lends credence to it, when the data may just as well support theory B or C. Second, there is a commitment to average effects that render economists susceptible to noise or data mining. If you have a large N and enough specifications, you can probably, with enough trial and error, get whatever result you are looking for. But large population averages are poor guides to how the world works. You should look at subsamples. You should try to explain error in addition to significance. And report all your specifications in some summary fashion. Third, the dodge that no one cares about R2 (as opposed to p) is not acceptable. A coefficient is only as credible as the model used to estimate it. You have to convince me that the model is plausible, or at least that the shortcomings of the model should not be held against the coefficient of interest.

Econometricians often treat large-sample patterns (suitably massaged) as the end of the process, when they should be seen as just a step along the way. You don’t know what’s happening out there until you have a process that generates the end results which you can observe and document.

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LFC 12.05.14 at 11:48 pm

mcmanus 311

Well, because consistent Keynesian demand management (50s-60s, MMT, JG), not just at the ZLB, most likely is the best available liberal program and much safer. And ZLB as a radical difference is incoherent and unsupportable. What, .00005 real interest we can relax? The saner expression is simply “when monetary policy is ineffective” which I bet can come at 15% (if business gets panicky and won’t invest.)

why don’t you tell people that ZLB means zero lower bound or whatever in fact it means (and the other acronyms), rather than assuming we all know? i wd still have some trouble parsing this, but whatever.

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Thornton Hall 12.05.14 at 11:55 pm

@310 The point I’m making is about the difference between less wrong and more right.

In physics, you start with Newton. You roll a ball on the floor and you notice that Newton’s equations accurately predict the time when the ball will reach the other side of the classroom. Many students never get past Newton to Einstein, which is fine, because Newton correctly describes the world they live in. Sure, it breaks down as your train approaches the speed of light, but… Trains never approach the speed of light. Newton is right, but Einstein is more right.

In economics, on the other hand, you start with imaginary apple stands in DeLongs class (IIRC). The world is full of real apple stands, but no one pays attention to them. Instead you get a story about supply and demand at the imaginary apple stand. But it’s not Newton. The ball doesnt arrive on time. Walk out the door and talk to an apple vendor and you will learn, without much difficulty, that his prices are not set at the equilibrium point where supply equals demand. Equilibrium isn’t a simplified view of reality. It isn’t what reality looks like until you approach very extreme conditions. It’s just… Wrong.

At that point the game is lost. Sure, if students remember week 10 and models incorporating asymmetric information they will have a view of the world that is less wrong. But there’s no additive process by which you can keep getting less wrong until you get it right when you start with a basic idea like equilibrium that simply does not correspond with reality.

DeLong (and Quiggin, too) earnestly belive that there is some sum of “less wrong” modifications that get to right. But it’s ultimately in vain.

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LFC 12.06.14 at 12:09 am

T Hall
Liberals look to liberal experts for guidance. Those experts, Krugman and DeLong especially, tell us that Econ, writ large, is just fine. But it’s not, and it’s hurting the people that liberals want to help. The worst thing about it is that what Krugman actually uses is far more reliable than he lets on: history plus trial and error. But he’s religiously committed to hiding that.

Why this single-minded focus on Krugman? There are other left/liberal economists out there: James Galbraith, Dean Baker, L. Mishel are a few names that come to mind, just on the U.S. scene. Are they all “religiously committed” to hiding the flaws of “textbook economics” and pretending that “textbook econ” can never be wrong about anything? (Then are the economists to their left, of course, who tend to have smaller audiences, I suppose.)

If Krugman’s policy advice makes sense or partial sense to you, why not just mentally edit out his defenses of professional orthodoxy, if that’s what they are? How many of K’s readers even know or remember what IS/LM stands for? How many of K’s readers have even heard of John Hicks or give a flying **** who he was?

Someone can agree with Mearsheimer on Ukraine, say, w/o agreeing w his theory of ‘offensive realism’, so why can’t someone agree w Krugman on policy question X without agreeing w Krugman on economic theory? His job at the NYT is presumably to write about policy; if he’s somewhat right about policy, does it matter all that much if he’s disingenuous or dishonest about the actual sources of his policy recommendations? I can see that it would really annoy someone who thinks that Economics capital E is The Problem that K as an economist won’t face up to, but surely most of his readers are not that interested in that question? Is it better to have a disingenuous Krugman at the NYT, or not to have Krugman at all? Because those wd seem to be yr choices. If what you say is accurate, there’s no way he’s going to get up tomorrow and announce to the world: “I’ve seen the light! Textbook Econ is horse manure!”

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J Thomas 12.06.14 at 12:13 am

#302 LFC

“I contend that whatever status you get from being a professional philosopher is status that you fully share with John Lange. You get that status, he gets that status, you both get that status.”

This is a different point, I think, from the one I took issue with earlier, which was directed to a whole field and its (perceived) status, rather than to the status of particular practitioners (or the question whether every prof of X is marred by association with the worst prof of X).

Well, the one you took issue with was not what I was saying. But it could be a sort of logical extension of it.

The basic point I was trying to get at is this: istm there are good ways and less good ways to criticize either mainstream economics specifically or the discipline of economics as a whole. Pointing out that “reputable” economists, or any economists period, disagree on some basic issues does not strike me as a particularly compelling way to criticize the field, b.c in itself such disagreement is not all that surprising.

There’s nothing wrong with reputable members of a discipline disagreeing about things on the boundary of the field that are not yet well-understood. How are they going to expend the field unless they go and look?

What I say is wrong with economics is that a bunch of raving lunatics are for all practical purposes reputable members of the discipline. They teach at universities. They publish (mostly in their own journals, but everybody else has their own journals too). They talk to Congress. They talk to the media. The big difference between them and normal sane economists is that the mainstream economists say they’re crazy, while they say that mainstream economists are crazy. Plus if you look in detail at what they say, it looks crazy.

So we have some economists who do good work on an insecure foundation, and we have others who do bad work on a crazy foundation. And to tell the difference you have to actually look closely at what they’re doing.

This is different from reputable physicists disagreeing about cutting-edge physics. Economists disagree about the foundations of their discipline, and Bruce Wilder says even the mainstream foundations are not good enough to support a heavy superstructure.

physicists have conservation laws etc they can depend on. They don’t know about the real fundamental particles, they don’t really know how the rules of physics have changed since the Big Bang, there’s lots of fundamental stuff they don’t know, but there’s a lot they can do and they know the difference between what they know and what they don’t know.

Economists have conservation laws that are only true when they are defined to be true. They have lots of concepts like comparative advantage which are trivially true under utterly-unrealistic conditions, which get extended so far they become untrue. It’s as if 10% or more of physicists were saying that relativity is disproven or that they can build internal combustion engines that run on water and get 70 miles per gallon of water.

It does deflate the pretensions of those economists who think they are like physicists, true. But that’s about it, istm. Others apparently disagree w me on this. Fine, we’ll agree to disagree.

Are they more like astrologers, then? Given that their fundamental assumptions are flawed, and they agree to disagree about those rather than find ways to test them, do you see something respectable there?

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J Thomas 12.06.14 at 12:26 am

#314 Ronan

For example, say a Republican administration wants to implement a set of high income tax cuts, the story here would be they’re responding to pressure in their party or among their constituents or lobbying from relevant interest groups. Here, the bit of economic theory they butcher to justify the cuts is a post hoc justification, not the cause.
Personally, I would say there’s more room for ideas and ideology as a causal factor in the above, but if you’re stressing interests and electoral politics as the main driver of policy, then ‘economic theory’ is not a primary cause of bad policy, it’s a justification.

Yes. On the one hand, economists feel superior. They get paid more, they get called into Congress to tell the government how to run the economy, etc. But on the other hand they only get called into Congress to say what the people who called them want them to say. Maybe they don’t actually have any influence. Maybe they have a special prestige, so Congressmen want that prestige to rub off onto their pet projects. But maybe they don’t have so much prestige and they only get called in more than sociologists because of historical accident.

Anyway, why would people give them prestige after 2007? Any more than we gave the CIA continuing prestige after the USSR collapsed by surprise. The CIA was still saying the USSR was a big threat when it fell apart. Why would we believe they know what’s going on?

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Thornton Hall 12.06.14 at 12:57 am

@322 yes, the claim “they never listen to us” is an effective defense mechanism which is superficially true.

Of course, all those surveyed somehow let the following die without the press even noticing:
http://en.m.wikipedia.org/wiki/American_Jobs_Act

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Robert 12.06.14 at 12:58 am

As far as mainstream economists are concerned, James Galbraith is not an economist. Dean Baker is not as much interested in theory or schools of thought, but he is fairly close to a non-person, too. I do not know Mishel.

I welcome Krugman’s short-run policy advocacy. I hope he changes his theory sometime. And he does put in effort to ensure mainstream economists continue to perceive some economists as silly. I think, for example, of his misrepresentation of Keen, although, I suppose, the publicity for Keen was not bad.

333

Thornton Hall 12.06.14 at 1:13 am

@323 #3: this really is a Catch 22. To be able to defend against this charge, you need to get a PhD (or somehow be able to match wits with those that do). Putting that much effort into something has a well known effect on human beings: it makes them think that, whatever it was, it must be very important. See, also, fraternity hazing.

Those really dedicated to actual truth survive the hazing, but come out as heterodox economists. Not only do they labor in obscurity, they still generally refuse to see their critiques through to their logical end: we really should just walk away from all the work done over the last half century. But, says the heterodox, certainly there are some insights, maybe from behavioral Econ or some other field that doesn’t get much press, that is worthwhile, says the heterodox economist. Indeed, “we don’t have to burn it all” seems to be sort of a ritualized throat clearing to gain entrance to the discussion.

And then we end up back in the coal pit. Never quite questioning the basic idea that reflection about supply and demand is simply not the way to start an enquiry if what one is interested in is actual humanity.

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LFC 12.06.14 at 2:08 am

J Thomas 327: I’m going to let you have the last word here, b/c I don’t think further conversation between us on this issue will be productive.

Robert 330: I’m sure James Galbraith will be interested to learn (if he does not already know) that mainstream economists don’t consider him an economist; likewise Baker will no doubt be interested to hear that he “is fairly close to a non-person, too.”

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LFC 12.06.14 at 2:36 am

Since Val @284 had raised the matter of structural adjustment programs (SAPs, for convenience), I think it worth pointing out (and I hope this will be my last comment on the thread, though who knows) that while some economists advocated and helped design and implement SAPs, other economists severely criticized them. The sub-field of development economics, virtually ignored in this thread, has been characterized by sharp disagreements over the years, and some people on what many of us would view as the ‘correct’ or enlightened side of those disagreements have made significant contributions to/in the real world.

I’d remind people that Albert Hirschman was an economist. Raul Prebisch was an economist. Mahbub ul Haq was an economist. Amartya Sen is an economist. I could go on, but will stop there.

Finally, I don’t agree w T Hall that any exposure to or reflection on the notion of supply and demand is contaminating and warps the minds of anyone unlucky enough to encounter it. (I can see, however, that it might make sense not to start with simple supply-and-demand and equilibrium models but somehow go right to stuff that is more reflective of how much of the ‘real world’ tends to work.)

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Thornton Hall 12.06.14 at 4:02 am

@333 (This may sound snarky, but it’s sincere) Thanks for the three names. Hopefully a little googling will lead to some interesting reading. I’m wondering if perhaps they might include additions to my list that currently contains just one entry: the designing of certain auctions. The list, of course, is productive interactions between economics and reality.

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Thornton Hall 12.06.14 at 4:27 am

Well then, Albert Hirshman is now one of my heroes. Clearly ADD, yet managed to succeed in academia and government while relentlessly rejecting the prejudices of his peers in both institutions. And… He fought the Nazis! But I don’t think he would have been in the UofC survey.

But, a bit inspired and typical of my bleary liberal optimism, I would look up thread and say that many look at economics and choose exit. I look at economics and choose voice.
http://www.newyorker.com/magazine/2013/06/24/the-gift-of-doubt

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mattski 12.06.14 at 5:33 am

Thornton,

You are of course familiar with Krugman’s habit of dismissing all complaints that “that’s not what Keynes said.”

No, I’m not.

He eventually came around and said, “well ok, IS/LM is Hicks, not Keynes, but that’s not the point.” But it is the point. Once “Keynesian Economics” turns into a squishy stress ball that can fit any shape, then we are headed for the coal pit.

So, if economic understanding can be deepened by using the ideas of more than one economist somehow this is an indictment of the profession? God forbid Hicks had some insights that could compliment Keynes!

But when you poke into it, you find no necessary connection between Keynes, IS/LM, and inflation.

???

From a policy maker’s prospective, the task for Krugman is this: “teach me an economic method to follow so I will know in the future to listen to you and not to Cochrane?”

I would say differently. Krugman’s task is to explain his model, explain his reasoning and explain why he reaches conclusions which are borne out by experience more successfully than Cochranes. And I find that he satisfies this standard quite frequently.

Those experts, Krugman and DeLong especially, tell us that Econ, writ large, is just fine. But it’s not, and it’s hurting the people that liberals want to help.

Krugman criticizes the state of his profession very harshly at times. That’s just a fact. And how is economics per se hurting the less fortunate?

The worst thing about it is that what Krugman actually uses is far more reliable than he lets on: history plus trial and error. But he’s religiously committed to hiding that.

You’re embarrassingly wrong.

http://krugman.blogs.nytimes.com/2011/09/13/how-much-hoc-to-add-wonkish-and-methodological/#more-24221

http://krugman.blogs.nytimes.com/2013/10/04/the-virtues-of-adding-hoc-wonkish/

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MPAVictoria 12.06.14 at 5:49 am

I think part of the problem is that Thorton doesn’t regularly read Krugman.

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Bruce Wilder 12.06.14 at 7:07 am

Peter Dorman @ 325: Not all economic subfields are prominent! Economic history, for instance, is fascinating and important, but it’s not a route to glory. What to do about financial crises is.

Wow.

Just wow.

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Robert 12.06.14 at 7:46 am

Hirschman, a German Jew, fought the fascists in the Italian and French underground, the republican army in the Spanish civil war, and the American army. I had known something of his work, but not his bio until reading Adleman’s book.

Anyways, to today’s hierarchical, mathematical mainstream economist, what Hirschman did doesn’t count as real economics. See Krugman’s essay, The Rise and Fall of Development Economics, where he describes Hirschman as leading the field into an “intellectual desert”.

Sen’s work in the 1970s on choice was very mathematical and in the right journals. But, despite the prize, I think your current mainstream economist pays much attention to the capabilities approach.

The point of the Fourcade paper is that orthodox economists have social mechanisms for dismissing lots of work. Citing economists whose work is dismissed or ignored does not seem a good way to defend the profession in this context.

342

Rakesh 12.06.14 at 8:31 am

Is Paul Krugman still telling the baby-sitting coop story? I mean: who is going to care that many new coupons have been put in circulation if the new movies and restaurants [new investment prospects] suck? More coupons or not, I’d rather stay at home with the kids [sit on close to 2 trillion dollars in cash reserves]?

343

Rakesh 12.06.14 at 8:38 am

So Krugman: “Well, imagine there is a seasonality in the demand and supply for baby-sitting. During the winter, when it’s cold and dark, couples don’t want to go out much but are quite willing to stay home and look after other people’s children–thereby accumulating points they can use on balmy summer evenings. If this seasonality isn’t too pronounced, the co-op could still keep the supply and demand for baby-sitting in balance by charging low interest rates in the winter months, higher rates in the summer. But suppose that the seasonality is very strong indeed. Then in the winter, even at a zero interest rate, there will be more couples seeking opportunities to baby-sit than there are couples going out, which will mean that baby-sitting opportunities will be hard to find, which means that couples seeking to build up reserves for summer fun will be even less willing to use those points in the winter, meaning even fewer opportunities to baby-sit … and the co-op will slide into a recession even at a zero interest rate.

And this is the winter of Japan’s discontent. Perhaps because of its aging population, perhaps also because of a general nervousness about the future, the Japanese public does not appear willing to spend enough to use the economy’s capacity, even at a zero interest rate. Japan, say the economists, has fallen into the dread “liquidity trap.” Well, what you have just read is an infantile explanation of what a liquidity trap is and how it can happen. And once you understand that this is what has gone wrong, the answer to Japan’s problems is, of course, quite obvious.”

So the story of the baby-sitting co-op is not a mere amusement. If people would only take it seriously–if they could only understand that when great economic issues are at stake, whimsical parables are not a waste of time but the key to enlightenment–it is a story that could save the world.”

What’s the obvious solution? Inflation eroding the value of coupons borrowed over the summer? Why are we confident that will encourage couples to go out on the town?

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Rakesh 12.06.14 at 8:39 am

coupons borrowed in the winter? is the obvious solution: inflating away the value of the debt incurred in the winter?

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Bruce Wilder 12.06.14 at 8:43 am

mattski @ 338

Krugman: those ad hoc approaches tend to get lost in the valley of ignorance. They’re too technical for politicians, and too non-technical to be taught in grad school.

I am not sure why you think the Krugman pieces you linked to contradicted what Thornton Hall (not a school in Toronto) was saying about K’s method. For myself, it looks more like guided intuition, rather than trial and error. K is trying to be reasonable in his appraisal, but he has a remarkable trust in the power of his own reasonableness.

The problem K is confronting is almost lost in his discussion of his own largely subjective and sketchy coping mechanisms. The problem is: how will people (re)act? It is the common problem of the social sciences — how are people to understand the behavior of themselves and others?

What counts as an explanatory or casual factor, when the phenomena are people acting strategically?

Economics has an easier case than other social sciences often enough, because economics can sometimes predict or shape behavior by prescribing behavior: figure out an optimal decision strategy and teach it as the optimal strategy to business students.

Curious then that K thinks the little kludge of IS/LM analysis falls into a valley of ignorance.

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Robespierre 12.06.14 at 8:48 am

Paul Krugman has been more than clear on the relative impotence of monetary policy alone during a depression; his main argument in favour of loose policy today is a reverse confidence argument, stating that the impression of a growth-friendly, non hawkish monetary policy is necessary to encourage investment.

Also, if the baby sitting coop where set up as a realistic economy, the coupons would go to people who may or may not hire other people to set up cinema shows for the parents, and there’s no point in setting up entertainment if customers can’t pay. The example was meant to show the fallacy of the economy-as-family-budget argument, which is a very powerful framing for many (most?) people.

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J Thomas 12.06.14 at 9:05 am

#334 LFC

J Thomas 327: I’m going to let you have the last word here, b/c I don’t think further conversation between us on this issue will be productive.

Too bad. I was starting to ask what your disagreement was, and you said that you thought there were good ways and less good ways to criticise the status quo in economics. Plus you had some sort of quibble with a point I hadn’t made. I was hoping that you might say what you disagreed with, or what you looked down on me for, or what you would say that was better than what I said.

Oh well.

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Rakesh 12.06.14 at 9:06 am

Yes, I agree that Krugman has spoken of the inadequacy of monetary policy alone recently. But isn’t the point of the parable still inescapably a monetary one, i.e. the problem is a shortage of circulating media. For example, the solution would be that the coop central bank will give you four coupons to use for babysitting in the winter for the price of only three to be paid back in the summer. Isn’t this what is supposed to get people to start going out in the winter again?

And the problem is that people don’t want to go out because entertainment (investment) prospects suck in the winter. Plus, they are not sure that they are going to be able to earn even the three coupons that they have to pay back in the summer because they think the other parents will also think the entertainment prospects suck in the summer and thus not want babysitting services.

And the price of not being able to pay back the coupons in the summer could be repossession of your home.

Maybe, just maybe if you get confident that the new anticipated summer Broadway show or the new 3-D movie technology will be really hot with new parents, you can confidently borrow coupons to go out now in the Winter. But you are just not that optimistic, your animal spirits are dying.

Now how does fiscal policy work here?

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bob mcmanus 12.06.14 at 10:35 am

Varoufakis versus Piketty …video, 36m

Interview by Andrew Mazzone (Georgist). Varoufakis, who is very left (Marxist?), appreciates Krugman for his prescriptions but not Krug’s theory

Interesting toward the end where he compares Piketty to Rawls, and then says Nozick destroyed/refuted Rawls, and thinks Piketty’s theoretical inadequacies condemn him to the same fate.

My take is that Piketty, like many French intellectuals, is pragmatic and realistic, and doesn’t discuss for instance bargaining power/unions or monetary policy as factors in reducing inequality because it simply ain’t gonna happen. Neither may be likely, but increasing taxes on wealth is more likely than CB’s allowing high inflation.

Varoufakis also, as a quasi-Marxist, is also a productionist, and dislikes Piketty’s conflation of wealth and capital. I think Piketty is more correct here.

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Thornton Hall 12.06.14 at 12:49 pm

@338 Mattski
Your definition of Krugman’s task is the same as Krugman’s. He does more or less live up to the job he sets for himself. But is it a task worth doing?

J Thomas got side tracked with the notion that true sciences come to an agreement, which isn’t right, but he was driving at the same thing I’m driving at here. Economics can be a coherent endeavor and still contain disparate views like those of Cochrane and Krugman, but only if there’s an answer to the question that I put in the mouth of policy makers.

As long as Krugman can’t answer my question, economics writ large is incoherent, subtle nonsense.

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Thornton Hall 12.06.14 at 12:54 pm

Bruce Wilder is likely correct that the ad hoc process is more like guided intuition than my take which was history plus trial and error. But either way, it’s the mushiness of that process, the in ability to even really put it in words, that makes economics incoherent and inferior to other social sciences.

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Thornton Hall 12.06.14 at 12:55 pm

The fact that at the end he can tell stories that make sense really doesn’t amount to much.

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mattski 12.06.14 at 1:02 pm

Bruce,

TH made the claim that Krugman is, “religiously committed to hiding” the ad hoc aspects of his reasoning process. So can we agree that’s a ludicrous claim?

And by ‘valley of ignorance’ K is, ISTM, talking about societal ignorance. The difficulty people have understanding the reasoning process, which I admit this debate illustrates.

We’ve been over this ground before. Economics is an imperfect social science, it can be used for good or ill, but smart, compassionate, socially conscious economists like Krugman, Stiglitz and many others do good work that has enormous value and would have even MORE positive effect if only our public discourse wasn’t dominated by, in a word, the rich.

We should be surprised that economists who say things the plutocracy finds convenient have a bigger megaphone than others. AND, we shouldn’t blame economics for this unfortunate political fact.

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mattski 12.06.14 at 1:04 pm

The fact that at the end he can tell stories that make sense really doesn’t amount to much.

Unless for some reason you value stories that make sense more highly than stories which do not make sense.

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mattski 12.06.14 at 1:12 pm

We shouldn’t be surprised…

Yak.

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Thornton Hall 12.06.14 at 1:13 pm

@339 MPAVictoria
This is precisely wrong. It’s only by reading every word he wrote for a year, especially the posts labeled “Wonkish” that I was able to see that buried in the parts which I initially did not understand was a bit of hocus pocus.

But when you see it, it is life changing. I’ve written about it here (a link I put up here before):
http://thorntonhalldesign.com/philosophy/2014/5/8/change-your-mind-and-see-what-was-always-there

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Thornton Hall 12.06.14 at 1:35 pm

@mattski
In the social science of psychology Freud told stories that made sense. They were mostly stupid. But the reasoning process that he used was brilliant. Changed the world for the better. Advanced human knowledge massively.

Krugman and Stiglitz are two menschen (http://krugman.blogs.nytimes.com/2006/02/21/no-menschen-in-washington/?_r=0)–good, compassionate people. Unlike Freud, they tell smart good stories. People who believe their stories do good in this world. But the reasoning process, the part that made Freud a world changing genius, is pure bunk.

This conclusion is partially obscured by the fact that it’s substance is the aforementioned mensch-ness of Krugman and Stiglitz. The problem: the human condition is characterized by a chronic shortage of menchen. And even if it weren’t, it’s very hard to know in advance whether your economist is a mensch.

Bad people can do good history. They can do good anthropology. But you can’t get good economics out of a bad person. That’s a problem that cannot be defeated by Krugman’s stories.

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Thornton Hall 12.06.14 at 1:37 pm

I mean the substance of the bunk is their good compassionate souls.

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Ronan(rf) 12.06.14 at 1:44 pm

Thornton – genuine question. What would a worthwhile economics look like to you ? I can see your critique on your blog, but what would you replace it with ? (obviously I dont expect a perfect flawless response, so this isnt a gotcha, but Im wondering where you’d begin to replace it ? You say in your linked post economists dont ‘look at the world’, what would that mean – practically – when trying to create a different, more plausible economics?)

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J Thomas 12.06.14 at 2:05 pm

Yes, I agree that Krugman has spoken of the inadequacy of monetary policy alone recently. But isn’t the point of the parable still inescapably a monetary one, i.e. the problem is a shortage of circulating media. For example, the solution would be that the coop central bank will give you four coupons to use for babysitting in the winter for the price of only three to be paid back in the summer. Isn’t this what is supposed to get people to start going out in the winter again?

The problem is that people prefer to baby-sit in the winter, when there’s nothing else they’d rather do, and get baby-sitters in the summer. Lots of people don’t get to baby-sit in the winter, so their available labor is wasted. They want to baby-sit, and they can’t, and the wasted hours of their lives are lost forever.

Given that people have enough coupons but they’d prefer to save them, I’d think the obvious choice would be to set up a co-op website where people can bid on fractional hours. Instead of passing around coupons each good for 1 hour, you have a balance in the co-op database in floating-point.

And let people put up bids for what they want. For any given evening there might be bids up for baby-sitters, offering to pay .95 hours or less for an hour of sitting, and bids for parents offering to baby-sit at a rate of 1.05 hours per hour or more. If you really want a baby-sitter you take the best bid (assuming it’s somebody you trust). Or you make your own bid and see whether somebody takes you up on it.

So if it turns out that people really want to baby-sit in the winter, maybe they’ll do it for half price. And maybe at half price you’ll want to go out more. If they want to save their half-price earnings to spend in the summer, that’s fine. It’s what they want.

And if people don’t actually want to baby-sit for long hours in the winter for low pay? If there isn’t a price that results in a lot of transactions? OK, too bad. A lot of time gets wasted because nobody wants to pay for it at a rate that people are willing to do it. That’s life. We could get a lot more baby-sitting production done if people wanted more in the winter, but they don’t. We just have to accept that.

When the problem is that people just don’t want to buy even when they can, it isn’t easy to make them buy. It’s only when the problem is circulation of coupons that you can solve it by changing the circulation of coupons. And it makes sense that sometimes the problem is circulation of coupons.

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William Timberman 12.06.14 at 2:14 pm

bob mcmanus @ 349

In a recent blog post, De Long praises Matt Rognlie’s criticism of Piketty, which is much like what you say about Varoufakis’s criticism, i.e. that Piketty confused wealth and productive capital. Confused? Conflated the two, that I’ll grant, but confused? I don’t think so.

Lord knows I might have missed something in reading him — easy enough for an amateur to do — but it seemed to me that Piketty blurred the distinction between wealth and capital intentionally, with malice aforethought, and did so precisely because preserving that distinction has become so crucial to mainstream economists in their defense of a normalcy that many of us, for our own non-economical reasons, consider insane. I suspect that this is why the right immediately denounced him as a closet Marxist. My own take is that they were more right than wrong, which, when all is said and done, has to be a Good Thing. Stealth in the face of prejudice — we use what tools are given to us.

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Robert 12.06.14 at 2:34 pm

Post Keynesian, (Old) Institutionalism, Feminist Economics, etc. already exist. And they were driven out of the profession by the bullying and folderol documented by, for example , Fourcade et al.

If you judge by immediate policy recommendations, you might not see the difference between these schools of thought and a Krugman or a DeLong. But they are there.

Such approaches as behavioral economics, complexity economics, agent-based modeling, and econophysics make the story more complicated.

I don’t think Noah Smith is exceptional among recent PhDs. He has great difficulty conducting a conversation about the state of economics, since I’ve already described a wider range of views than he has had academic exposure to.

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Ronan(rf) 12.06.14 at 2:45 pm

Were they mainly bullied out or incorporated into it, though ? My impression is that mainstream economics has made room for some behavioural insights and for agent based modelling ? Isnt the same true for a number of the perspectives given by feminist economics ? I dont know about post Keynesian , but havent political economy and sociology taken the mantle on institutional arguments, so how would an institutional economics differ and why would it be better ? I dont know about econophysics but would guess complexity economics at heart is incompatible with the reductionism of mainstream economics so might potentially be a potential paradigm shift, ? But what would an economics that took all of these other schools of thought seriously look like ? Would it just shift from neoclassical to one of the above, or would it make more of an effort to incorporate insights from each ? What would fundamentally have to change in how neo classical is conceptualised to make it take the insights from the schools mentioned above seriously ?

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Thornton Hall 12.06.14 at 2:50 pm

@Ronan
Two things.
First, it occurs to me that the identity of “aspires to being a mensch” is the correct substitute for “liberal” in my account above. Did a young Krugman or Stiglitz consciously systematize their ideas into a “liberal” ideology? No. Did they consciously aspire to be what their parents described as a “mensch”? Almost certainly. But Pew never asks that question. (Totally off topic: David Brooks almost certainly had/has the same aspiration. I think it’s why Krugman–against all advise and basic good manners–seeks to correct Brooks in print. They have the same goal, but Brooks is doing it wrong. That Brooks is paid to do it wrong is a tragedy they all understand and agree to not speak about.)

As to your specific question, my brother (trained in economics but MA not PhD) frequently complains about the totally negative blog, too. Anyway… My social science vision of economics would start with an army of graduate student Jane Goodalls. Just go out into the field and write down what you see. Go into the past like Piketty and write down what you find. Instead of imagining apple stands, go to grocery stores like the one I worked at in high school. Notice that the trash always smells like rotting produce.

I’m not sure what they would find, but they certainly wouldn’t smell those rotten apples and then write books about how prices are set at the level where the market clears (ie, a theoretical approach which declares those rotten apples not only do not, but cannot exist.

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Ronan(rf) 12.06.14 at 2:54 pm

..theyre all genuine questions by the way. Im not claiming to know anything about this so dont really think any of my impressions above are neccesarily accurate. Id assume, though, at some stage any discipline is going to have to start homogenising theories and concepts and start to develop a consistent set of assumptions, methods and beliefs. Was there a way that could have worked out without the problems associated with neo classical economics ?

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Ronan(rf) 12.06.14 at 3:03 pm

thornton @364 – ok, I wouldnt neccesarily disagree, but there are still problems associated with ‘observing the world’ (biases, difficulty in generalising, telling convenient stories, non reproducibility, becoming overwhelmed by complexity etc I would guess, as a start)
If you’re at a level where rotting apples in grocery stores negates very fundamental economic principles, where this level of detail is seen as relevant, then I dont think there’s really anything you can say about the world except ‘it’s all too complicated.’

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J Thomas 12.06.14 at 3:03 pm

When the problem is that people just don’t want to buy even when they can, it isn’t easy to make them buy. It’s only when the problem is circulation of coupons that you can solve it by changing the circulation of coupons. And it makes sense that sometimes the problem is circulation of coupons.

So, imagine that the federal government decided that to jump-start the economy they should give every middle-class family $5000, free. If they spend their money then demand is up, it delays unemployment, etc. But what if a scared middle-class is afraid that interest rates will go up and they will be unable to pay their crushing debts? What if they instead each pay down their debt by $5000? Then demand has not increased at all. The net result is only that the money supply has *decreased*.

The co-op model is too limited anyway. It assumes the co-op members are equal and their need to get baby-sitting and their need to do baby-sitting are equal.

What if one co-op member is sitting on a great big pile of coupons, and everybody else lacks coupons. Whenever he wants babysitting he can say the word and somebody will be eager to do it. That situation is ideal for him. If they flood the system with coupons, so that people are less desperate to baby-sit, that’s bad for him. Is the system designed for average co-op members, or for him?

He’s better off if there’s a chronic shortage of coupons so that very often when people want a baby-sitter they must borrow a coupon from his bank. But on average they can never pay back the loans no matter how hard they look for baby-sitting jobs. On average the number of coupon loans always goes up, and people area always desperate to baby-sit so they can pay down their loans, and he only loses when people emigrate away and forget their debts, or when their children grow up enough to not need baby-sitting and their parents forget the debts.

And if the system really is designed for him, he can get it written into their leases and mortgages that if they don’t pay their baby-sitting debts he can throw them out of their homes.
If that’s how it’s designed, then a chronic shortage of coupons is not a bug. It’s a feature.

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Thornton Hall 12.06.14 at 3:07 pm

@Ronan
In addition to massive amounts of observation, a social science of economics would start from the premise that crisies are not “exogenous” to anything, they are the moments when causal forces reveal themselves. There’s this really basic error that you see time and again: “We look at the world and see that, mostly, prices are stable–changing gradually, and that markets are stable, and this fact must be explained.”

But this sort of reasoning precludes both plate tectonics and the Big Bang. It’s just really basic. And once the math and stats gets going, utterly impossible to expose. I haven’t read widely in the heterodox world, but I’ve seen this error there, too.

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J Thomas 12.06.14 at 3:25 pm

There’s this really basic error that you see time and again: “We look at the world and see that, mostly, prices are stable–changing gradually, and that markets are stable, and this fact must be explained.”

Yes! If you throw away the outliers, you can always make things look like they follow a traditional probability distribution.

And as you point out, big explanations are not necessary for the stability and gradual change. Because throwing away the outliers is a sufficient explanation right there.

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Thornton Hall 12.06.14 at 3:36 pm

@366 Disertations could be written about how this comment goes wrong.

So Galileo shouldn’t have looked at the moons of Jupiter!? That can’t actually be what you mean.

As a I categorize the defense mechanism of economics, one of them is surely this routine about “where we start”.

The routine goes like this (my commentary in italics)
We can’t do experiments.
more or less true
And the world is very complicated, with an infinite amount of causes and effects.
well, finite, actually, but very big, and very, very complex
Meanwhile, we (humans) always have a world view or theory in our heads when we observe the world.
True, but I’m concerned about where you are going with this.
So to simplify things, we imagine that that complexity resolves into a few important variables, and then we look at the world to see if it’s correct. Science.
But that’s not how science actually works.
[Fingers in ears] Supieror… La, La, la…
Where did you get the world view to start with, why doesn’t it sound anything like reality, and why do all economists start with the same basic world view?
Laaaaaa….
Just to take one example, why start with rationality? There is not a single social scientist alive who thinks that the baseline of human decision making is rationality. Literally, not a single one. Hard sciences are quite sure, actually. And yet every economist starts with the opposite. It makes no sense.
Well, you agreed that we have to have a theory before we observe the world! And haven’t you heard of all the new economics that doesn’t assume rational actors?
But you start with identical world views? That’s not science. It’s not social science. It’s religion. And this “new” economics you refer to? You mean “bounded rationality”? Did you find that in the world? You saw humans making decisions using “bounded rationality”?
Observe humans? I’m sure they did. Don’t know the details. Have to ask a behavioral economist. But that doesn’t matter, because you said we don’t observe behavior and change our models, but behavioral economics has done that. So you’re a liar.
But you don’t know the details? How, exactly, does observation of real human behavior change you basic view of micro, like pricing… or macro, like financial crisies?
I’m done feeding you, troll.
Fuck

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Ronan(rf) 12.06.14 at 4:08 pm

TH @370 – I’m really not sure what your point is. I agreed with the general observation that economists should be sent out ‘to observe more’, I just questioned how far that really gets anything, except to perhaps breed a little bit of scepticism into the heart of the average economist.
To go back to your bit about DeLong’s econ 101 class. I dont know if there’s a huge problem with teaching people methods and technical skills at the start and allowing them ‘observe the world’, or read X, in their spare time. As a method of teaching this would seem to make some sense. And so I dont really know what sending people out to recognise market imperfections or how people actually make decisions really accomplishes. Certainly at 101 level you’re not really going to develop great insights. Hopefully the more thoughtful class members will pick this up themsleves next time their at the shop. Who knows.
Anyway, there’s a huge amount of research by people actually trained in the area on decision making processes, psychological biases etc. I dont see why economists cant use the insights from this research where applicable, rather than having to do their own independent research down the local grocer.
My impression is that economics *has* adopted some of these insights. Afaik all ‘rational choice theory’ does at this stage is assume people have preferences and know how to rank them. There’s also (afaik) work on how social networks effect economic decision making etc. This is pretty consistent with your view of politics (interests and tribal affiliation – ie rational choice and social networks – explain most) And are there insights to be gained from assuming some level of personal rationality (and economics is far from the only field to do this) Id say, yeah.
Anyway, look, Im not really going to argue this anymore as I dont know enough about it and Ive other stuff to do. So Ill leave it there.

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Thornton Hall 12.06.14 at 4:23 pm

@Ronan
I went too far with the bit about writing disertations. You’re well informed and arguing in good faith. No reason for me to be antagonistic.

But your wrote this:
And so I dont really know what sending people out to recognise market imperfections or how people actually make decisions really accomplishes.

Before Jane Goodall went to Africa, we defined humans as the only animal that uses tools. It’s all about the unknown, unknowns.

But that’s not fair, because later you write:
Anyway, there’s a huge amount of research by people actually trained in the area on decision making processes, psychological biases etc. I dont see why economists cant use the insights from this research where applicable, rather than having to do their own independent research down the local grocer.

Why, indeed? That, of course, is exactly the question that the article referred to in the OP is all about. And the answer is: for a lot of reasons that have proven very, very difficult to overcome.

The question has been begged. The end.

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Ronan(rf) 12.06.14 at 4:26 pm

Dont worry about it Thornton, I didnt find you overly antagonistic (I was a little snarky in my response but also I really do have to go!) Anyway, Ive enjoyed your comments here and will be checking out your blog more regularly.

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mattski 12.06.14 at 4:30 pm

Thornton writes,

But the reasoning process, the part that made Freud a world changing genius, is pure bunk. … I mean the substance of the bunk is their good compassionate souls.

This is quite simply addled. People who read this are not going to take anything but confusion away from the experience.

Bad people can do good history. They can do good anthropology. But you can’t get good economics out of a bad person. That’s a problem that cannot be defeated by Krugman’s stories.

It’s great to have Moralists to tell us the bad people are a bummer. Thank God for that kind of penetrating wisdom! What’s your big idea, Thornton? Should we round up all the BAD PEOPLE and put them in camps? Fire up some ovens perhaps?

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mattski 12.06.14 at 4:39 pm

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J Thomas 12.06.14 at 5:18 pm

#371 Ronan

I agreed with the general observation that economists should be sent out ‘to observe more’, I just questioned how far that really gets anything, except to perhaps breed a little bit of scepticism into the heart of the average economist.

Well, if they notice that their assumptions are not true in practice, that might do nothing except breed a little scepticism. But it’s possible that somebody might notice new assumptions which are compatible with the world they observe. That would be a plus.

So, for example, markets. The “job market” does not behave much like the traditional description of a market for various reasons. each employment candidate is largely a pig-in-a-poke, you can’t begin to tell how well he can do the job unless he has been doing that job already for somebody else and you have a reliable spy who can tell you what his supervisor and co-workers think. However, the jobs are usually designed to be simple enough that anybody can figure out how to do them. That is, after six months to a year of collecting experience. Meanwhile job candidates can’t tell much about the job unless it’s a “commodity” job that’s just like a lot of others. If you’re a nurse you can get a job nursing pretty much anywhere you go, and expect to be competent. Etc. But lots of jobs are idiosyncratic to the point that you can’t tell much about what they will be like until you do them. And of course your future will be tied to the future of your employer to some extent. If you work for an inferior company it won’t help your chances to transfer to a better one. Lots of asymmetric information, lots of missing information, hard to change your mind after you choose, prior job history influences future pay, etc etc etc.

Supermarkets are not really markets. It isn’t very easy or cheap to get from one supermarket to another, they sell commodities and offer one price, take it or leave it. Different prices for different brand names, of course. You’re supposed to substitute brand name for actual estimates of quality. The supermarket does not price to clear the market. If a canned good doesn’t sell then they leave it on the shelf and don’t get more, then eventually they reduce the shelf space devoted to that product. If a perishable product doesn’t sell at its price they throw it out before it goes bad. Some of the products are loss-leaders, sold to persuade customers to come to this store and buy other things with a high markup since they’re already here and don’t want to take two trips.

My father bought some diamonds in Amsterdam. He spoke only english and still he thought he got a better deal than he would from local retailers. Most of the market was people who knew each other, who did a lot of repeat business. They agreed to deals with a handshake. They told each other secrets that would soon be public — the goodwill was worth more than a temporary deal. They were all close together so it was easy to shop around. It was more like a real market, but repeat business was everything and so they didn’t try to get things exact for individual deals provided they averaged out. (Except, of course, with outsiders.)

Most of the economic ideas that filter down to the public are wrong. Like, a lot of laymen believe that comparative advantage means that if imports destroy a home industry, there will be something else you can trade that will more than make up for it, because comparative advantage. Even if the foreign economy is better than yours at everything, you will have exports because they will have full employment making the most valuable things they can make, and they will buy your inferior products — even though they could make them better themselves — because they don’t have the time to make low-value stuff instead of buy it from you. But comparative advantage does not say this at all. It gives no guarantee that you can have low-value exports. Or jobs. And economists don’t seem to make much effort to educate the public about the economic idiocies they have already been taught by somebody-or-other.

Economics shares too much with evolutionary psychology and sociobiology. In both cases there’s a tendency to believe in inevitable feedback mechanisms (evolution or markets) and then make up stories about how the feedback mechanisms might work given interesting assumptions. It’s all good fun so long as nobody actually takes it seriously.

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LFC 12.06.14 at 5:20 pm

Robert 341

Hirschman, a German Jew, fought the fascists in the Italian and French underground, the republican army in the Spanish civil war, and the American army. I had known something of his work, but not his bio until reading Adleman’s book.

Anyways, to today’s hierarchical, mathematical mainstream economist, what Hirschman did doesn’t count as real economics. See Krugman’s essay, The Rise and Fall of Development Economics, where he describes Hirschman as leading the field into an “intellectual desert”.

Sen’s work in the 1970s on choice was very mathematical and in the right journals. But, despite the prize, I [don’t] think your current mainstream economist pays much attention to the capabilities approach.

The point of the Fourcade paper is that orthodox economists have social mechanisms for dismissing lots of work. Citing economists whose work is dismissed or ignored does not seem a good way to defend the profession in this context.

I’m going to try to explain why I find the above comment somewhat annoying.

What you (Robert) don’t seem to grasp is that is a conversation in a comment thread, and I was responding not to the Fourcade paper, which I have not read, but to what I took (wrongly or rightly) to be T Hall’s implication that all of economics, and all economists, are intellectually and otherwise bankrupt. Although T Hall’s main fire was directed at Krugman and DeLong, he had made broader statements from which the broader implication (i.e., all economists bankrupt) seemed a reasonable inference.

It was in that context that I mentioned the names I did. Hirschman had an extremely successful academic career; Sen got the Nobel prize. I’m not disputing that mainstream economists largely ignore or dismiss them. But I thought it was worth mentioning them (and the others I mentioned) given what I took to be the broader tenor of T Hall’s remarks to that point in the thread.

As I said upthread, I’m not an economist. I have no interest in defending the profession as such, and certainly no interest in defending the “social mechanisms” described by Fourcade et al.

Because my aim was not to defend the profession, your remark that “citing economists whose work is dismissed or ignored does not seem a good way to defend the profession in this context” mistakes the point of my comment.

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LFC 12.06.14 at 5:24 pm

Btw, Robert, did Sen get the prize for his work in the 70s that was, to quote you, “mathematical and in the right journals” or did he also get it for, e.g., his well-known work on the political roots of famine?

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LFC 12.06.14 at 5:31 pm

mcmanus 349
Interesting toward the end where he [Varoufakis] compares Piketty to Rawls, and then says Nozick destroyed/refuted Rawls, and thinks Piketty’s theoretical inadequacies condemn him to the same fate.

I don’t know anything about Varoufakis and I haven’t read Piketty’s Capital in the 21st Century; however, in my opinion, anyone who thinks Nozick “destroyed/refuted” Rawls is, to put it mildly, WRONG.

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Robert 12.06.14 at 5:32 pm

I’m not all that happy about some of Thorton’s comments myself.

Some of this thread though is about how much economists disagree. I think you and I can see that there is a distinction between the disagreements between saltwater and freshwater economists and the disagreements among mainstream and non-mainstream economists.

Anyways, obviously some of us are agreed in liking Hirschman’s work. By the way, thanks for reading the “not” or whatever it was I dropped off in my remark about Sen.

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J Thomas 12.06.14 at 5:34 pm

#377 LFC

I was responding not to the Fourcade paper, which I have not read, but to what I took (wrongly or rightly) to be T Hall’s implication that all of economics, and all economists, are intellectually and otherwise bankrupt.

Ah! But that’s an extreme interpretation.

I wouldn’t say that all of astrology is intellectually and otherwise bankrupt. Some astrologers give people useful readings, that are based on what they intuit about the situation they observe. So what if it doesn’t come from the intellectual models of the craft? It can be good stuff. And the mathematically involved parts of astrology serve to give their advice a gravity and respect it would not otherwise have. Often laymen can’t tell the difference between astrology and science, and so the claim that the advice comes from special knowledge can inspire a sort of awe that human intuition would not get.

Wouldn’t it be better to create a new astrology that was based on actual facts? Maybe. But the old astrology gets respect now, and a new astrology might not. Its assumptions would be open to observation, and if they didn’t actually explain much of the behavior that would be bad. Maybe a new astrology could not get much of a start, if it were to turn out that there simply is not much about human behavior that can be predicted that way. But the old astrology gets a whole lot of respect.

I claim that this whole argument works about as well if you substitute “economics” for “astrology and “economists” for “astrologers”.

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Ronan(rf) 12.06.14 at 5:50 pm

“Like, a lot of laymen believe that comparative advantage means that if imports destroy a home industry, there will be something else you can trade that will more than make up for it, because comparative advantage.”

I actually disagree with this. I think a lot of laymen instinctively understand how ‘markets work’, and the negatives associated with trade, and so experts should encourage these instincts and not demand they accept economic theory X as gospel, just as one part of a more complex whole. And for the layman (which i am) comparative adavantage is a relatively interesting insight, a simplification that forces you to think in a different way and that clarifies certain ideas.
So how is this different than any other social science subject ? Take international relations. Non quant heavy IR 101 will probably introduce you to the theoretical wars, realism vs liberalism etc, so you can understand the terminology of the discipline, place yourself in the conversation and begin to develop specific ways of thinking etc But none of the grand IR theories actually explain the world, they explain certain aspects of it and work as simplifications to help you think things through and understand the historical debates in the field. I dont understand why this fact (simplifications at intro level) is meant to matter so much in economics when it’s the norm in every subject. YES there are better and worse ways to teach something, but anyone teaching an introductory course is going to face these same problems (Afaict) So it becomes a pedagogical matter, for each teacer to resolve as they see fit.

Back to DeLong’s econ 1o1 class. What he seems to be doing is teaching specific skills and methods. Surely this is a good thing ? Move away from more generalised (and contested) theory to teaching specific tools to answer specific questions ?

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LFC 12.06.14 at 6:07 pm

Robert: Yes, we are agreed on some things, or at least in liking Hirschman’s work.

J Thomas: Why don’t you go to California and interview Nancy Reagan about why she consulted astrologers in the White House? Sorry to be rude, but I’m not in an esp. great mood right now and I’m not taking the bait here.

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Thornton Hall 12.06.14 at 6:18 pm

@374 I’m not going to escape the trap of being deliberately misread, so this might just be for my own benefit.

What, exactly, is the contribution from academic economics in the substance of Krugman’s critique of Osborne? Keeping in mind the fact that we would still be able to point to history for examples of 2+2 not equalling 5.

The answer might be that in order to achieve the position on the Op-Ed page that he occupies, he had to rise through the ranks of his profession. Of course, Thomas Friedman did genuinely rise through the ranks as well.

It might be that whether at the NYT or elsewhere, people listen to him because of the quality of his economics. Maybe so. If you want to know how that game works, read the article in the OP.

We agree that Krugman almost always endorses policy choices that would be good. We define good pretty much the same way. You say that what we agree on means he can’t be the most dangerous economist in the world. Perfectly reasonable.

But then you look at my reasons behind my clime and you (twice) chalk them up to brain damage.

Say an institution as a whole is destructive. Is it brain damaged to ask the liberals within that institution to stop providing it with cover?

You can say that’s not what he’s doing. Or you can say he is, but it doesn’t qualify as “most dangerous.” But brain damage? It suggests that the proper bounds of economics have been internalized by the public at large to the point of brutality. It’s kinda scary.

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Thornton Hall 12.06.14 at 6:34 pm

@mattski
And “fire up the ovens”?

This is in response to my claim that there is no method to distinguish the way John Cochrane does econ and the way Krugman does it. And therefore the radically different policy recommendations that they produce must come from some other cause, namely, their personal character.

To put it in terms that might not invoke the Holocaust, I might rephrase my point:

All policy recommendations are under-determined with respect to economic theory. There is therefore some other cause which figures in their content. But economists claim their recommendations are fully determined by their theory. This leaves us to speculate as to way some always favor the rich and powerful while others do not.

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bob mcmanus 12.06.14 at 6:41 pm

379: Oh, maybe I was just having fun.

I just tried to read Julian Sanchez on the Wilt argument, but honestly I don’t have the heart to follow all the Abstract Competing Methods of Bourgeois Self-Justification.

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J Thomas 12.06.14 at 6:52 pm

#382 Ronan

And for the layman (which i am) comparative adavantage is a relatively interesting insight, a simplification that forces you to think in a different way and that clarifies certain ideas.

Agreed. There’s a useful idea there. But just as evolutionary theory gives us an explanation for adaptation but not a prediction that all imperfections will be evolved away, and just as free market theory gives us an explanation for adaptation but not a prediction that all market imperfections will be competed away, comparative advantage gives us an explanation that claims that when people trade across borders etc they both will think they are better off, and tariffs etc will leave them thinking they are not as well off. It does not predict whether or when they will choose to make those trades.

As a simple example, say that you own a subsistence farm and a forest. Somebody can sell you food cheaper than you can grow it, giving you time to cut down your forest faster and sell the lumber. There is no gurantee whatsoever that after you have let your farm run down and your forest is clearcut, that they will want to buy anything else from you or that they will have any job for you to do. Unless they give you some other way to buy food from them, you then need to quickly rebuild your farm to feed yourself while your forest is growing back.

Back to DeLong’s econ 1o1 class. What he seems to be doing is teaching specific skills and methods. Surely this is a good thing ?

For Berkeley student’s it’s fine. I’d have a preference for everybody to learn the general skills about dealing with feedback systems etc. Like, it’s easy to fit a one-parameter curve by eye and then estimate the errors. It’s easy to fit a two-parameter curve by eye. It’s possible to fit a three parameter curve. Four is likely to turn very very hard.

I think it’s better to learn the skills with made-up problems than with something that appears to provide real information about economics. It doesn’t hurt smart perceptive students to make it seem like they’re learning something real, but it can be very bad for average students who might later become president of the USA or something.

Move away from more generalised (and contested) theory to teaching specific tools to answer specific questions ?

That’s *fine*. Start with rough-and-ready methods that reveal possible connections. Give historical examples where the methods were dead wrong on closer examination. Emphasize the uncertainty.

I think the central problem with economics teaching is that too many students come out of it with certainty about things which in fact are wrong and also about things which are very much uncertain.

Far better to teach economics with more of the attitude that the centaur Firenze taught divination in Harry Potter.

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JimV 12.06.14 at 7:06 pm

Re:
Thornton: But the reasoning process, the part that made Freud a world changing genius, is pure bunk. … I mean the substance of the bunk is their good compassionate souls.

Mattski: This is quite simply addled. People who read this are not going to take anything but confusion away from the experience.

In context, I took away from it that Mr. Thornton is saying that Dr. Krugman’s economic conclusions and prescriptions are strongly motivated by his compassion, and that the theoretical justifications he gives for them are not often rigorously reasoned; and perhaps that the logic of compassion can succeed when the logic of economics fails.(I agree that the excerpt could have been worded better – as could all of my comments.)

This does not mean, nor would Mr. Thornton I think agree, that Dr. Krugman’s prescriptions are wrong. The main point I am getting from Mr. Thornton’s comments is that the economics that Dr. Krugman and others learned and practice is not well-enough grounded empirically to provide rigorous theoretical justifications. I find his comments rather convincing on this point, despite the fact that Dr. Krugman and Dr. DeLong remain heroes of mine. (As do JFK and Mickey Mantle, with even less justification for their feet of clay.)

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LFC 12.06.14 at 8:42 pm

J Thomas on comparative advantage:

a lot of laymen believe that comparative advantage means that if imports destroy a home industry, there will be something else you can trade that will more than make up for it, because comparative advantage. Even if the foreign economy is better than yours at everything, you will have exports because they will have full employment making the most valuable things they can make, and they will buy your inferior products — even though they could make them better themselves — because they don’t have the time to make low-value stuff instead of buy it from you. But comparative advantage does not say this at all.

My recollection is that the theory of c.a. does say that an economy (read: country) will be ‘better off’ if it specializes in producing and trading what it can produce most ‘efficiently’. So countries, acc. to the theory, shd specialize in “making the most valuable things they can make” (at a reasonable cost). That does not mean countries always do actually do that, of course, and there are various (often good) reasons they do not (e.g., they might want to retain a domestic XYZ industry for reasons of employment stability or ‘nat’l security’, etc.) , but the theory, insofar as it has an implicit prescriptive aspect, suggests that they should act as mentioned.

If one is armed only w the theory of c.a. from second day of intro econ, one’s understanding of int’l trade will be very incomplete and in some cases wrong, but it’s not so much that the theory of c.a. has been misunderstood by laymen so much as that the theory itself, unsupplemented by many other considerations, is a much less-than-perfect guide to the real world. (Or so I wd suggest — but stand open to correction.)

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LFC 12.06.14 at 8:44 pm

p.s. where “most valuable” is measured in relative terms

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Tom 12.06.14 at 9:44 pm

Just some belated points:
– Austrian economists are strongly marginalized in the profession, few take them seriously. Same for the Laffer’s curve. So, there is some pushback against more extreme elements.
– But I guess that is not enough for many here. We should marginalize other right-wing economists. Let’s see: Mankiw contributed to bring back keynesian elements in modern macro; Rogoff contributed to bring back keynesian elements in modern open economy macro; Alesina wrote a paper with Rodrik about how inequality slows down growth. But they are all hacks and so, I gather, we should ignore them.
– No, still not enough. For some the entire profession is completely useless. Sorry for Saez-Piketty of top 1% fame, for Gruber (Obamacare), for Card & Krueger (minimum wage increases do not necessarily reduce employment).
– Basically, the only economists we may keep are those who agree with your views (the stimulus helps, Sweden’s model works etc.), which are obviously true and need no economist to be ascertained. I am sure many here also think of themselves as open-minded and tolerant; and they decry the epistemic closure of conservatives.
– You may argue that left neo-liberals swung too much to the right, fair enough. But at least they engaged with economics; at a minimum they read a introductory textbook on economics. It is clear from the comments here that many did not do so – or they stopped as soon as they found what they thought a contradiction and called it a day. This is quite a pity because some of the points raised against economists could be argued more cogently but your ideology does not allow to do so.

p.s.: oh, and when somebody gets a chance, please tell me about the track record of other social sciences in predicting social events.

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Tom 12.06.14 at 9:45 pm

@TM
(late reply as my internet went down)
Your original point was about the AER publication. There the graphs have lengthy notes explaining how the graphs are constructed. In economics a graph is a useful summary, but ultimately we need to see the regression result: the authors were not hiding anything from another economist’s view. As to how to report the results to a judge, that is a separate discussion. One could make the claim that the graph undersells the results as you only see the effect for a student but a teacher affects many students at once and so the total effect is larger. But I agree that economists may be too cocky about their results when they report them to the public; hence my approval of Rodrik’s link above. In any event, if Chetty’s alleged over-confidence in his assertions concerns you, Krugman’s confidence that IS/LM is all you needed to know for understanding the crisis should give you some concern as well. You can’t have it both ways. (BTW, I have no idea if Chetty’s result is correct or not. I am just answering to your points about his graphs.) Anyway, this was OT since the beginning and I doubt I can change your mind; so I’ll end it here on the subject.

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Bruce Wilder 12.06.14 at 10:10 pm

Comparative advantage impresses the analytic thinker, because it is very robust against changes in assumptions. Even when every other motive to specialize and trade is minimized or absent, comparative advantage remains. There are other compelling reasons to specialize and trade, however, and what most of us are instinctively interested in, is a strategic argument focused on the terms of trade, in the presence of these other factors.

In practice, I think it is fair to say, that many economists, in their roles as public intellectuals and teachers of undergraduates, prefer to stop short of a either the strategic arguments that might shape a national policy, or a full data-driven explication of the reasons driving actual, historical patterns of trade and investment. Instead, they make a moral argument for the virtues of laissez-faire “free trade”. (And, yes, Krugman dutifully makes an argument for “free trade” from time to time, despite having received a faux Nobel for theoretical work making mincemeat out of simple-minded comparative advantage arguments for “free trade”.)

Particularly problematic, imho, is the way comparative advantage arguments get embedded in allocative efficiency arguments, in which resource ratios and substitution become explanators: capital-rich economies produce capital-intensive goods to trade with labor-rich economies that produce labor-intensive goods. (Heckscher–Ohlin is the canonical model of Ricardian comparative advantage expressed as factor endowments; literally hundreds of papers have been published proving that H-O does not explain much about actual patterns of international trade.) Pretty soon, a kind of semantic drift takes over, and there’s a lot of pious nonsense about highly skilled populations with accumulated capital stock producing high-value added goods to trade with low-skilled countries producing low-value commodities, or neoliberal claptrap about the importance of direct foreign investment supplying capital and technology to enabling the desperately poor in undeveloped countries to better themselves in sweatshops.

Comparative advantage and free trade are great illustrations of how mainstream economics betrays itself as a research project and transforms itself into a religious project.

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Bruce Wilder 12.06.14 at 10:14 pm

Tom @ 392: Krugman’s confidence that IS/LM is all you needed to know for understanding the crisis should give you some concern as well

D’oh!

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Rakesh 12.06.14 at 10:20 pm

I worry about the positivist narrowness of economics. We have this idea: Build a simple model that shows in a state of secular stagnation/liquidity trap you just push the button G to bolster aggregate demand without fear of inflation and crowding out.

But there is a problem here with such a technical approach. As Erich Roll noted in 1938:
To Keynes and his followers “the state is a mechanism
which can be used to influence the economic system according to one’s
ideals. One can readily grant that the ideals of Mr. Keynes and his
followers are noble. But can their analysis offer an effective
opposition to those whose ideals are less exalted and whose policies
are abhorrent? It is clear that they cannot. Their approach uses
abstract categories which demagogy can use and fill with its own real
content. Sismondi and Proudhon used an analysis somewhat similar to
that of Mr. Keynes for Utopian, quasi-socialist purposes. Malthus
used it to defend the remnants of feudalism against capitalist
revolution. A progressive and reactionary purpose can find
support–or at least indifference–in an economic theory that is
confined to the sphere of circulation and that operates with
psychological concepts.”

Joan Robinson who I think coined the term military Keynesian raised a concern: the kind of robust government intervention that secular stagnation requires can only take the form of warfare Keynesianism ; only the possible spoils of war gives business the confidence to put up with an enlarged government sector and the future taxation required to relieve counter-cyclical debt.

Moreover, a state of war allows the state to break strikes with impunity and thus maintain business confidence (or a high marginal efficiency of capital) even as Kaleckian full employment is reached.

One cannot dissociate Keynesian economics from ethics and politics. Social science is necessarily value-oriented and interdisciplinary.

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mattski 12.06.14 at 10:22 pm

Thornton,

OK, in my infinite imperfection I got just a teeny-weeny bit irritated with you and plopped a Godwin on the thread. I apologize for my intemperate remarks. I’ll plead guilty, too, to one count of invoking cognitive disability. That’s the “too much acid” plum. Whereas “addled” is merely a synonym for confused. So, again, sorry about my manners.

What, exactly, is the contribution from academic economics in the substance of Krugman’s critique of Osborne?

You seem to be hung up on the fact that professional economists have a diversity of viewpoints, or maybe I’m misreading you. The idea that there can be a deficiency of DEMAND comes from Keynes. Is that sufficiently academic? People like Cochrane don’t recognize such a problem could occur. Cochrane has his reasons for believing as he does. Are they good reasons? That’s for you and me to judge. But why should you be so dismayed about the social science of economics having a normative component? So what?

Say an institution as a whole is destructive. Is it brain damaged to ask the liberals within that institution to stop providing it with cover?

OK, now maybe (maybe!) we’re getting somewhere. To say the least, your premise is controversial. Me, I don’t accept it at all. My analysis of your position–I stated it earlier in the thread–is you’re blaming the fact that conservative economists have more influence on the national debate than liberal ones on the profession. I’m saying, that’s not correct. It isn’t the fault of the economics profession that the wealthy have more influence in our society than people of modest means. Democracy is corrupted by wealth. That is a timeless truth.

Your claim that the institution of economics is on the whole destructive could as easily be made about the news media. Does that mean that people shouldn’t pursue careers in journalism? Does it mean we shouldn’t read newspapers?

All policy recommendations are under-determined with respect to economic theory. There is therefore some other cause which figures in their content. But economists claim their recommendations are fully determined by their theory. This leaves us to speculate as to way some always favor the rich and powerful while others do not.

You’re making too many sweeping statements, Thornton. Who cares if part of an economists recommendations come from hidden preferences? I mean, we’re all human, right? We all have prejudices, right? So what?! We aren’t relieved of our responsibility to exercise our own judgement about the advice we get from ‘professionals’ or anyone else for that matter.

Some economists DO in fact have biases in favor of the rich. Is that surprising? Is that an indictment of economics? Or is the fact that such economists have outsized influence a function of WHO their allies are? And I would direct your attention once again to this statement:

But you can’t get good economics out of a bad person.

Is this the sort of thing that raises the level of debate? Who is the arbiter of our character? Are you seriously suggesting that people can be objectively classified as “good” or “bad”? I mean, that might be plausible in extremis but to me, that’s just not a helpful way of looking at the human condition.

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Rakesh 12.06.14 at 10:31 pm

Aren’t some of the important American voices for financial regulation not economists (undergrad degrees in parentheses)–Brooklsey Born (English), Lynn Stout (Public Policy) and Anat Admati (Math)? Women too.

398

Bruce Wilder 12.06.14 at 11:04 pm

Rakesh @ 395

Opposed interests can create a paralytic paralysis instead of a consensus for effective collective action. That political leadership manages to fashion some workable program at any place or time may be acknowledged to be something of a miracle.

Keynes tried to by-pass the paralysis of his own time, with an argument that abstracted away from some difficult political issues in a way that he hoped would make a political consensus in favor of useful action easier to attain, and created a technical basis for technocratic management. He argued that, in terms of reflating the economy and restoring full-employment prosperity, it did not really matter what the government spent money on — presumably, he thought this might be a useful signal to politicians that they had flexibility to assemble a fiscal policy cum log-rolling and pork barrel politics. His analysis of aggregate demand did prove useful as a framework for managing the wartime economy and finance of the U.S.

What wars can supply is a sense of common purpose in the state, extended by a shared sense of political solidarity to every individual citizen, which may be otherwise hard to supply. A peacetime economy serves diverse and opposing private interests, as well as a common, public interest, and the boundaries between private and public interests become confounded with the opposed interests of elite and common, rich and poor.

Economics as a doctrine — as Thornton Hall has pointed out — has its thumb on the scale weighing public v private interest in a way that is pernicious.

The canonical market failures analysis hides the necessity of public goods in framing markets, by positing a default of “no public intervention” and an invisible hand in the opposed interests of competing buyers and sellers creating a ideal, equilibrium result. It is historically and logically indefensible to imagine that there can be a market (or even a metaphoric “market”) without some public authority making space for it, bounding it with public goods of convention and arbitration, and governing emergent strategic competition. But, most economists do not care; market failures is canonical as it is.

As Thornton Hall pointed out, this carries over into Friedmanite cost-benefit analysis, in which government interventions to correct even canonical market failures that all acknowledge, have to pass a threshold where the cost of the intervention itself is counted as an additional deadweight loss, to be weighed against the loss attributable to the consequences of not remedying the market failure.

Economics could provide a more robust case for public interests and public purposes, even outside the case of war, if it were not so corrupted on the right and so lazy and complacent and stupid on the left. I’m not holding my breath, though.

399

Bruce Wilder 12.06.14 at 11:09 pm

mattski @ 396: Your claim that the institution of economics is on the whole destructive could as easily be made about the news media. Does that mean that people shouldn’t pursue careers in journalism? Does it mean we shouldn’t read newspapers?

So, economics and the news media need to be reformed, and critically informed consumers of economics or the media may be a factor shaping the opportunities for effective reform, no?

Are Krugman and DeLong really the best the left can do? Cui bono?

400

mattski 12.06.14 at 11:46 pm

Bruce,

So, economics and the news media need to be reformed, and critically informed consumers of economics or the media may be a factor shaping the opportunities for effective reform, no?

Indeed, yes.

Are Krugman and DeLong really the best the left can do?

I don’t know. I think Stiglitz is pretty damn good too. There are quite a few inspired voices on the left. I’m rather fond of Bernie Sanders & Elizabeth Warren too. Whoever it is, they have to speak a language the average person can understand. I pine for a prominent athlete to speak up. Someone like LeBron James seemed to flirt with it a little. Where are the Muhammed Ali’s of yesteryear?

It’s tough, the deck is stacked against us, but we slog on.

401

MPAVictoria 12.06.14 at 11:47 pm

Robert Reich is pretty great.

402

mattski 12.06.14 at 11:53 pm

401

Yes! And Bill Moyers has done some really good stuff. Terry Gross is one of my favorites, but I’m just a smelly, NPR-listening hippie I guess…

403

LFC 12.07.14 at 12:12 am

B Wilder @393
neoliberal claptrap about the importance of direct foreign investment supplying capital and technology to enabling the desperately poor in undeveloped countries to better themselves in sweatshops.

Seems to me one has to oppose the sweatshops (and corporate-driven globalization) while at the same time acknowledging that, bad as they are, they represent for many an improvement over rural poverty — hence,e.g., why a lot of poor Chinese have left their villages to go work in the sweatshops. Of course, China’s own domestic growth policy has not been esp. egalitarian, but that’s a somewhat separate issue.

404

geo 12.07.14 at 12:26 am

Dean Baker, Mike Konczai, and David Cay Johnston are also very good.

405

Rakesh 12.07.14 at 12:26 am

I don’t really think of DeLong and Stiglitz as economists, more social scientists. DeLong is actually an economic historian–and will refer in posts over a week to Keynes, Rawls, Polanyi, Pomeranz and goodness knows who else. Actually Krugman who has done as much as anyone to raise critical discussion in the country strikes me as a economist. I appreciate their contributions very much, though I much more sympathetic to Marx than all three of them combined.

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Rakesh 12.07.14 at 12:28 am

Check out DeLong’s twitter account in regards to the TNR controversy.

407

Rakesh 12.07.14 at 12:37 am

I have been reading from this site; it seems to be a major step in integrating economics into the social sciences–history, sociology, political science, even anthropology (though not enough).
http://core-econ.org

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Rakesh 12.07.14 at 1:02 am

409

J Thomas 12.07.14 at 1:59 am

#395 Rakesh

I worry about the positivist narrowness of economics. We have this idea: Build a simple model that shows in a state of secular stagnation/liquidity trap you just push the button G to bolster aggregate demand without fear of inflation and crowding out.

To my way of thinking, the big value of simple models is that they give people the idea that unintuitive results are possible.

You have a simple model that includes plausible elements, and they interact in plausible ways, and the result is something people wouldn’t have expected. So they can look at just how the model works and see how simple interactions can get that unexpected result. Done well, the result is that people get less certain what to expect, less dogmatic, more ready to consider possibilities they might otherwise have rejected out of hand.

When they instead take the simple mode and dogmaticly assume that the real world has to work like the model does, I feel like they completely missed the point.

So, the beauty of Krugman’s babysitting coop story is that it shows vividly how a lack of circulating currency can slow down trade. It demonstrates that very very well.

Krugman fixes the problem by giving away coupons. But it would also work to instead make a coupon bank. People who want babysitters could then borrow coupons to spend, and they could pay interest until they could repay them. Either approach has its advantages. The banking approach particularly has advantages for the banker.

It’s a good story. It doesn’t tell you everything you need to know about monetary policy, about what’s a feature versus a bug, about the right way to solve problems, etc. But it gets one idea across very very well.

You seem to be hung up on the fact that professional economists have a diversity of viewpoints, or maybe I’m misreading you.

I think you are. The problem is not that there are multiple viewpoints. The problem is that some of the multiple viewpoints are batshit insane, and everybody else mostly seems to agree to disagree. I tend to think there’s something wrong with that, though maybe it’s that way everywhere and I just don’t know any better.

#391 Tom

Austrian economists are strongly marginalized in the profession, few take them seriously. Same for the Laffer’s curve. So, there is some pushback against more extreme elements.

Congress doesn’t seem to realize that they are marginalized. When we have GOP presidents, they don’t seem to realize that either. A big share of the public hasn’t noticed.

Maybe possibly there might be a way to marginalize them marginally *more*?

But I remember Krugman in one of his books (maybe Dangerous Currents) pointed out that Laffer etc were using the same reasoning as the rest of the profession, they just took it a little farther than others would. And of course he was right. So if Laffer is so marginalized, maybe the people who are doing it could notice just what it is he does wrong, and figure out how to not do it themselves?

We should marginalize other right-wing economists. Let’s see: Mankiw contributed to bring back keynesian elements in modern macro; Rogoff contributed to bring back keynesian elements in modern open economy macro; Alesina wrote a paper with Rodrik about how inequality slows down growth. But they are all hacks and so, I gather, we should ignore them.

If they’re using methods that are wrong, let’s figure out what they’re doing wrong and try not to do it ourselves.

If they are completely batshit insane, let’s figure out how to persuade laymen that they’re wrong.

If instead the good-guy economists ignore them, occasionally saying something like “Oh, we disagree with them. It’s OK that professional economists disagree about things like whether to measure something to test economic ideas or instead use praxeology. Economists don’t have to agree” then it starts to look like there are in fact no standards.

410

Robespierre 12.07.14 at 10:31 am

While it’s true that individual tweaks to the general perfect rationality, inter-temporal maximisation paradigm have been presented and accepted, I think 1) they are almost always treated individually as small adjustments to a basically sound model, and the adjustments are used one at a time without interacting with other adjustments (how many epicycles can you add to a model before it becomes a different model?); and 2) there is a strong dose of double-think: it is entirely possible to call an adjusted model into existence when it is needed, and then forget it and revert to standard “econ-101” assumptions for general economic policy.

411

J Thomas 12.07.14 at 5:20 pm

Assumptions of perfect rationality can have some value. They can predict vulnerabilities in a system.

Like, if the economy provides an easy way for people to do fraud, a whole lot of people won’t do it. Predicting that they all will, gives you a bad result. But it’s predictable that somebody with perfect rationality and imperfect morals will do it, and he may in fact steal as much as he can, enough to threaten the survival of the institutions that allow it.

If your system has a hole in it, predicting perfect rationality (with no morals) can help you find the hole. And your status as an economist can sometimes help persuade people to do the rational thing. “Hey, it’s raining soup! Get a bowl. Get a punchbowl. Attach a pump to your rain gutter! This opportunity can’t last forever, they’re going to figure out how to shut it down!”

412

Thornton Hall 12.07.14 at 5:21 pm

@391 Tom

Two points:
The work on the minimum wage is exactly the ideal I describe. Just look at the world and write down what you see. The indictment of the profession which follows is rather obvious. When faced with an observation the practitioners of theory continue to play Pope to Card and Krueger’s Galileo.

No other social science has the hubris to predict the future. This might be down to the fact that other social sciences are familiar with human behavior. Such familiarity reveals that human beings have never ever successfully predicted the further. That economics tries anyway is direct evidence that the entire profession is blind to basic facts about the human condition.
The reply from economists has become rote:
“But policy makers ask us to?” or “How would we choose path A (build road x) over path B (road y)?”
And the answer is as obvious as it is ignored:
We will look at how things worked out in the past and do our best.

This response has been derided recently by Simon Wren-Lewis as “intelligent guesswork”. The amazing thing is that he, like yourself, sees the resurrection of Keynes as the salvation of economics. But if you actually read what Keynes says about uncertainty, you realize that “intelligent guesswork” might better be labeled “pure Keynesian policy making.”

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Ze Kraggash 12.07.14 at 6:17 pm

“We will look at how things worked out in the past and do our best.”

That’s not good, imo, it’s the other extreme; it sounds like ‘technical analysis’ of stocks. You need to have at least some idea of the mechanism behind the phenomenon.

414

Thornton Hall 12.07.14 at 6:25 pm

@396 Mattski
I’m glad you re-engaged because your comment here brings up one of the most important points that needs to be understood: how to properly calculate the opportunity cost of [neoliberal, academic, status quo, neoclassical, New Keynesian (delete to taste)] economics?

You write:
The idea that there can be a deficiency of DEMAND comes from Keynes.

From Brad DeLong (http://equitablegrowth.org/2014/11/22/hobsons-choice-late-friday-focus/)

The original argument was John A. Hobson’s, in his 1902 book Imperialism. The poor have to spend their incomes in order to buy their necessities. The middle class have to spend their incomes to buy their necessities and the conveniences they need in order to ensure themselves that they are not among the poor. The rich can spend their incomes or not.
Hence the more unequal distribution of income, the more the potential for slack aggregate demand. With monetary policy constrained by the rules of the game that was the gold standard, Full employment in an unequal society required either unusually optimistic financiers and industrialists or something else. Hobson thought that the “something else” what inevitably be imperialism. Governments that spent to conquer and then forced the conquered colonies to spend buying the exports of the metropolis would tend to stay in power. Governments that did not would either be turned out at the ballot box or by the North Atlantic street.

Is Stiglitz simply saying what Keynes helped obscure?

Back in the bad old days of Classical economics one of the two major political parties had a platform of protective tarriffs and internal improvements like canals and railroads. The Whigs advocated for, more or less, exactly the kind of stimulus program that the AFL-CIO might today. Did we need economics to defeat Laissez Faire or did we know better all along? I don’t know, and neither do economists, because in schools like the UofC they no longer teach economic history.

**A second point is this. You really should read the article from the OP. The problem isn’t the difference of opinion between Krugman and Cochrane. The problem is the utter lack of disagreement on every important point that forms the economic world view. It’s not a debate between creationists and Darwin. Policy debates between economists are more like creationists debating about whether the two, different creation myths contained within Genesis can both be literally true. The heterodox come in and say, “maybe we aren’t meant to take them literally.” Darwin is tied up in the basement.

The question might be phrased this way: is there a problem that Krugman and DeLong solve that wouldn’t exit but for the hegemonic economic world view viciously defended by Krugman and DeLong?

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Thornton Hall 12.07.14 at 6:36 pm

@mattski
PS in fact I frequently blog about the destructive influence of the news media. The solution there, however, is underway. The problem itself was confined to the totally anomalous character of the media in the post war period. Objective journalism was quite easy to bamboozle.

“We lost Walter Cronkite on Vietnam!” This hoary old tale doen’t reveal how great Walter Cronkite was. It reveals that to prosecute the Vietnam war you only needed to pull the wool over the eyes of four or five lazy white men!

The objective media told us that everyone who took to the streets in LA in response to the Rodney King verdict was a looter. No one mentioned protests. We aren’t fooled like that any more. Tell me where the TNR is buried so I can shit on its warmongering grave.

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Rakesh 12.07.14 at 7:35 pm

So let’s say an editor claims that women witches being a persistent or resilient source of misfortune throughout the world should not be dismissed as a patriarchal claim on the basis of a new book in which new evidence is presented and careful criticisms are not addressed.
I would think that the job is not only or not even mostly to show yet again that witches (like deep heritable racial differences in cognitive and socio-emotional skill) do not exist; the academic puzzle would be understand the conditions that make it possible for such false belief to take hold of so many again.
In fact there is the danger that by getting on the terrain of proving that evil women witches do not exit, one gets up in the distortion and possibly strengthens it.

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Rakesh 12.07.14 at 7:44 pm

sorry meant for other thread.

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bob mcmanus 12.07.14 at 7:56 pm

412: But if you actually read what Keynes says about uncertainty, you realize that “intelligent guesswork” might better be labeled “pure Keynesian policy making.”

Exactly. But perhaps understates.

I would strongly recommend the 70s Minsky book on Keynes as the place to start studying Keynes, before the GT. Minsky really got it. A lot of others, like Davidson, maybe Skidelsky are close but more challenging. Advanced graduate readers can get to the Probability Treatise early.

I don’t much trust anyone who claims to be “Keynesian” and not calling for a mixed economy with 50%+ of GDP from gov’t spending.

It’s unpredictable. It can’t be made predictable even in theory. Even with the hyperstabilization program outlined by Minsky Minsky still claims there will be financial crashes and recessions in the private sector. You have to make the private sector much smaller, even at the cost of efficiency, in order to minimize the damage the private sector does.

I went looking for the Post-WWII program Keynes recommended for Britain, because I think he calls for the confiscation of wealth and a public sector greater than 65%. Couldn’t find it, but I did read the very friendly correspondence between Keynes and Beveridge.

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mattski 12.07.14 at 8:15 pm

Thornton,

Do you have some utopian vision behind your remarks? It seems that way. If the debate between saltwater and freshwater is little different in your eyes than a debate between 2 schools of creationism then who or what is playing “Darwin” in this vignette?

is there a problem that Krugman and DeLong solve that wouldn’t exit but for the hegemonic economic world view viciously defended by Krugman and DeLong?

I take it you believe we’d be living in paradise were it not for the pernicious influence of K & D. Or something.

420

Rakesh 12.07.14 at 8:39 pm

The US would be a measurably worse place if Krugman had not used his NYT column to advance his own and refer to others’ critical thinking. There was no guarantee that a critic of Bush would use such a prominent editorial position for so much good.

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J Thomas 12.07.14 at 8:45 pm

#413 Ze Kraggash

“We will look at how things worked out in the past and do our best.”

<i.That’s not good, imo, it’s the other extreme; it sounds like ‘technical analysis’ of stocks. You need to have at least some idea of the mechanism behind the phenomenon.

It’s of course pleasant to have a Just-So story to explain your data. But having the story does not actually make your predictions more predictive.

So technical analysis of stocks can predict stock movement by statistical correlation — when it works. But of course other people who do technical analysis will tend to undo the correlations so it will tend to stop working at frequent intervals.

But if you have made up a mechanism to explain stock movement, then you have a reason to predict it will work that way, not just a statistical correlation. But of course other people who notice the correlations will tend to undo them, so your mechanism will fail to work for any length of time.

In general, if you want to predict human behavior you do better when people benefit by making your prediction come true, than when somebody important benefits by doing things that make it not come true.

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Rakesh 12.07.14 at 9:05 pm

I heard James Galbraith in a video debate with Krugman and Buiter refer to himself as wading not in fresh or saltwater but the backwaters in which (despite appearances of being stagnant) evolution tends to take place.

423

john c. halasz 12.07.14 at 9:30 pm

Beveridge was a grandee of the U.K. Liberal Party, which was pretty much Keynes’ position. What few people realize is that the Nazis also commissioned studies for the post-war economic order, which, with suitable modifications, became the basis for the implementation of the post-war welfare state in the BRD.

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Layman 12.07.14 at 9:53 pm

Thornton Hall @ 414: “The question might be phrased this way: is there a problem that Krugman and DeLong solve that wouldn’t exit but for the hegemonic economic world view viciously defended by Krugman and DeLong?”

This is simply a formula for ignoring everyone. Ignore Al Gore on the environment, because he’s rich and fat and flies around the world. Clearly a tool of the establishment! In fact, there’s Thornton Hall, using the trappings of the economic order to rail against the economic order. Don’t trust him, either.

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J Thomas 12.08.14 at 1:41 am

#424 Layman

This is simply a formula for ignoring everyone. Ignore Al Gore on the environment, because he’s rich and fat and flies around the world. Clearly a tool of the establishment! In fact, there’s Thornton Hall, using the trappings of the economic order to rail against the economic order. Don’t trust him, either.

I don’t think he’s saying that.

I think he’s asking what the opportunity cost is for the schools of academic economics.

If we hadn’t had any of these schools stifling amateur economic thought, what might we have accomplished?

He points out that people were arguing similar economic remedies before any of the modern schools had been born. Maybe the academics haven’t produced anything important?

But of course it’s impossible to truly answer the question because we have only one world and we can’t repeat the experiment. If we could make or find 50 worlds just like ours and another 50 that were just like ours except with no economists, then we could find out something. But we don’t know how to do that. So we’re limited to things like Thornton Hall’s understanding of history.

Oh well. I think it’s kind of an academic exercise unless we find a way to do things different. If our only choice is Krugman/DeLong versus their opponents, then we can pick them. Just like we can pick Obama over Mitt Romney. Krugman and DeLong use traditional economics in traditional ways and come up with better answers than their opponents do. Even if the tools are warped, still they can use them to create beautiful works of art.

If some new guys were to develop better tools, that give more truthful results, how could they get anybody to pay attention? Krugman and DeLong get credibility by using the tools that everybody important believes in. Why would something new get status just because it was better?

Opportunity cost?

426

Ze Kraggash 12.08.14 at 9:53 am

@421 “But of course other people who notice the correlations will tend to undo them, so your mechanism will fail to work for any length of time.”

I understand what you’re saying, but isn’t there a fair chance I might be able to detect some fundamental mechanism? People are not likely to undo it, if undoing it would require, for example, a mass suicide, or something like that.

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Layman 12.08.14 at 12:22 pm

J Thomas @ 425

What he’s saying is indistinguishable from that. Per TH, he disapproves of Krugman because Krugman is part of the establishment, and the establishment is bad. Even when K might be right, that’s bad, because it just lends credibility to the establishment. Thus all establishment figures are tainted and should be reviled. So, as has been asked but not answered, where should one go for an acceptable countervailing voice?

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Zamfir 12.08.14 at 1:34 pm

@ Layman, there might not be any correct countervailing voice. To my best knowledge, no academic social studies are good enough to base major technocratic governance on them. The world is complicated.

But economics claims a lot of such technocratic power anyway. And the field gets it as well, more than any comparable field . Krugman and DeLong are very much part of that process. They derive a status as experts from being high-ranking academics, and they expect that politicians (and others) listen to them based on that status. They worked as experts in government, and are still influential from the relative outside.

I don’t want such voices replaced by other voices that I believe more. I want all such voices to have less influence. I don’t think they are crowding out an obvious superior alternative. I think they are crowding out a wider, more diverse palette of views.

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mattski 12.08.14 at 2:01 pm

I think they are crowding out a wider, more diverse palette of views.

Blaming the forest on a tree?

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J Thomas 12.08.14 at 3:07 pm

#426 Ze Kraggash

I understand what you’re saying, but isn’t there a fair chance I might be able to detect some fundamental mechanism? People are not likely to undo it, if undoing it would require, for example, a mass suicide, or something like that.

Sure. Fundamental mechanisms are good. You might find one, and then find ways to experimentally isolate it well enough to actually measure it. That’s good too.

But in the usual run of events, when you actually try to use your fundamental mechanism to predict something useful, you get lots of confounding variables and things you can’t measure and you’re pretty much back to guessing.

That happens in physics too. Some physicists get so good at quantum mechanics that they can use it to sort of intuit some properties of metals etc. But ask them to explain human consciousness and it’s no use at all. Predict which way a cat will jump? The failure time of an alloy with a particular shape given particular stresses? For that last you do better to just try it repeatedly and see, or possibly you can do simulations based on the shape and the empirically known properties of the alloy.

So you can do things like neural nets which predict things moderately well when they’re predictable, but which don’t give you much hint why their methods work. Or you can make up JustSo stories that give a sense of satisfaction. Better still, you can do statistics to get a sense how well the stories help you predict. Better *still*, you can test how well the stories actually fit the reality, whether or not they help you predict.

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J Thomas 12.08.14 at 3:09 pm

#427 Layman

Thus all establishment figures are tainted and should be reviled. So, as has been asked but not answered, where should one go for an acceptable countervailing voice?

I can see how it would look like he objects to them because they’re “establishment”. But what I read him objecting to is their flawed methods.

It’s like, if the whole establishment agreed that the way to decide how to run the economy was with astrology, and then we had conservative astrologers who said the only way the economy could work was if the people who were already rich got to make all the decisions, and liberal astrologers said that we needed to make sure that money circulated whether the rich people wanted it to or not. And they both used astrology to justify their stands….

So, as has been asked but not answered, where should one go for an acceptable countervailing voice?

One possibility would be to look among the crackpots who don’t accept the mainstream dogmas. Some of them will be worthless crackpots, but since anything that doesn’t accept the mainstream dogmas will be classified with them, it’s one place to look.

Another is to look for people who are basicly doing economics without being economists. That would include some operations research people, maybe some sociologists, etc. And you might get a lot of data and maybe some useful ideas from people who have jobs that involve economic decisions but who haven’t been trained in economics. Like, people who buy supplies for factories, people who sell things to retailers, etc.

As a slight possibility, you might be able to get some online companies to give you lots of old data about how they used to work. Recent data might be useful to their competitors, enough to be worth real money if you sold it, but say it’s 4 years old, that’s pretty much ancient history and yet it might show you something about real businesses in the real world.

Traditional economics assumes that there are feedback mechanisms, from markets and prices. In reality there are surely feedback mechanisms but they might not always work the way traditional economists assumed they did. Find out how they really work and you’re a step ahead just from that.

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Harold 12.08.14 at 3:30 pm

It seems to me that for a while there a lot of the most intelligent people studied or went into economics. It is sort of like theology in late antiquity or the middle ages or physics in the 1930s and 40s. You can’t easily dismiss what they have to say even if you don’t share the particular ideology of their profession.

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Ze Kraggash 12.08.14 at 3:49 pm

“Predict which way a cat will jump?”

This is a good example. Your pure technical analysis (as suggested by Thornton Hall) might conclude that, based on the past performance, there is a 0.53 chance that the cat will jump to the left, and 0.47 to the right. Fair enough. But my analysis, based on cat’s nature, may conclude that, for example, that if there is a rustling sound or slight movement in either side of the room, there is a 95% chance the cat will jump towards it; otherwise 50/50. And even if some cats do act ‘irrational’, in the end my odds just might beat yours. My only point being: of course human behavior is not completely predictable, but neither is it completely unpredictable.

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bdbd 12.08.14 at 3:56 pm

433 @Ze Kraggash The informed proportions about direction of jump are, of course, reversed if the cat is a scaredy cat

435

gianni 12.08.14 at 4:18 pm

“most intelligent people”

this is a joke, right?

436

Harold 12.08.14 at 4:24 pm

I didn’t say all of the most intelligent. But perhaps I should have said, more intelligent. Marx was an economist, no?

I find that when I started reading blogs I found myself preferring the ones by economists, such as Atrios, and also for news, for a time, the business pages. Even though I am not especially interested in either one.

437

bob mcmanus 12.08.14 at 4:29 pm

433:1) An tasmanian devil just ate your cat.

2) It’s 1912, and those Russian cats are a bargain. He may have been wrong to think it would continue, but this is the world Keynes watched. He also lost two fortunes. Let’s not talk about Fisher.

3) Your accountant just took your capital and your cat to Buenos Aires

Your job, as a reader of entrails economist, is not to predict the world, but to make the world predictable, safe for capital and investment. Economics is not a science of discovery, but a totalitarian hegemonic project

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bob mcmanus 12.08.14 at 4:50 pm

And the biggest part of making human behavior predictable is making them believe their spontaneity is revealed in “free market choices.”

439

mattski 12.08.14 at 5:15 pm

On planet mcmanus they dre-e-e-e-eam of living in the lake social chaos.

See here for details.

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Ze Kraggash 12.08.14 at 5:19 pm

“Your job, as a reader of entrails economist, is not to predict the world, but to make the world predictable, safe for capital and investment.”

In that case, what’s the point of analyzing my methods? If I have an agenda, even an innocent one (Thornton Hall believes Krugman’s agenda is altruistic), then I can reach the desired conclusion via a large variety of methods: human behavior, empirical observations, algebra, computer models, reading of entrails, etc.

It would seem illogical to blacklist analytic methods just because they are used by people with agendas.

441

Thornton Hall 12.08.14 at 5:36 pm

@Ze Kraggish
You consistently use an error of reasoning. It’s a bit hard to single out, but it’s a sort of flip-flopping, unconsciously, between taking nouns to represent absolutes and then taking the same nouns to be individual tokens. The result is that other people’s points always tend toward reductio ad absurdum.

To take one of the more innocent occasions: there’s a lot of room between what I described as policy guidance and your reduction of it to technical analysis. But then you recognize that at some points, but not others.

442

Zamfir 12.08.14 at 5:41 pm

Harold, yes, there are many very intelligent economists. And we can’t dismiss them even if we wanted to, that’s just how it is. That’s why we are discussing them here, because they are so strongly present in public debates.

At the same time, the world is big. Even the smartest people don’t have expert knowledge on most issues. And when an issue is fundamentally ill-understood, you can be better off with people who know their limits than with the guesses of smart guys.

And I would venture that economics, especially American academic economics, is very good at producing Smartest Guys in the Room. People who are intelligent, but also highly, highly skilled in the social game to make others defer to their intelligence. That’s partially what the OP is about, right?

You see that in a lot of academic fields, even if economics is a strong example. And I think it is a universal problem, when it comes to technocratic advice on public matters. The top-ranked people whose advice gets most heard, are also overconfident people overselling their views.

So, if you want expert advice from a field, you should not have to go to the smart people in the field. The most valuable knowledge in a field (for public affairs) is exactly the common knowledge, the time-tested knowledge that everyone knows, that gains you no credits to become a Smart Guy.

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Ze Kraggash 12.08.14 at 5:54 pm

@441, I reacted to what you said:
“And the answer is as obvious as it is ignored:
We will look at how things worked out in the past and do our best.”

This brought to mind the technical analysis of stocks, with moving averages, resistance levels, and so on. And it’s not a reductio ad absurdum: the internets are full of this sort of analysis. I’m just saying that this probably isn’t the best approach either. If I misinterpreted, I apologize.

444

Thornton Hall 12.08.14 at 6:02 pm

@Layman and Ze Kraggish
There’s a bit more logical space in the world than either of you allow. But it’s a common mistake.

Take fraternities. At my alma mater, Dartmouth, they were an essential part of the psychological well being of most students. “The D Plan” is a system whereby class is in session all year long, with students being on campus 3 out of every 4 quarters. A huge emphasis on foreign study programs means that one of those “on campus” quarters will actually take place in another country. The result is that best friends from freshman year might miss each other for two full years. Students simply cannot survive without a broader, organized group of companions that provide assurance that you won’t go a semester with literally no one to eat lunch with.

This role is played by the Outing Club, by a cappela groups, by ethic affinity housing, etc., but for more than 50% of students, home at Dartmouth is either a fraternity or sorority. And those organizations, in turn, are mostly led by very good people, people who want to end sexual assault on campus.

So if the President of Sigma Nu is the single biggest activist against sexual assault on campus, does that mean that the fraternity system doesn’t encourage sexual assault? And if 60% of students truthfully say that the D Plan would have destroyed their social lives but for the existence of the Greek system, is that an argument that it must be preserved?

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bob mcmanus 12.08.14 at 6:38 pm

439: And the most enlightened bourgeois liberal is the first to push back. “Of course your vote really matters.”

Richard Sennett (at hand, there are so many more):

But this “primitive” capitalism was indeed too primitive to survive socially and politically; primitive capitalism was a recipe for revolution. Over a hundred-year stretch, from the 1860s through the 1970s, corporations learned the art of stability, assuring the longevity of businesses and increasing the number of
employed. The free market did not effect this stabilizing change; rather, the way businesses were internally organized played a more significant role. They were
saved from revolution by applying military models of organization to capitalism.

It’s to Max Weber that we owe the analysis of the militarization of civil society at the end of the nineteenth century—corporations operating increasingly
like armies in which everyone had a place and each place a defined function.

In Otto von Bismarck’s Germany this military model began to be applied to businesses and to the institutions of civil society, principally, in Bismarck’s mind, for the
sake of peace and the prevention of revolution. No matter how poor he may be, the worker who knows he has an established position is less likely to revolt than
the worker who can’t make any sense of his or her position in society. This was the founding politics of what can be called social capitalism.

I’ve turned to sociology because it is a harder colder discipline than economics.

Does anybody really understand Krugman’s youthful motivation found in Asimov’s Foundation? Of course economics is about shaping history, society, human psychology, absolutely realizing that in order to be effective the people must not know what’s going on.

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J Thomas 12.08.14 at 6:39 pm

It would seem illogical to blacklist analytic methods just because they are used by people with agendas

I don’t think that’s the point.

Try this story. I was told that Aristotle correctly analysed that heavy things shouldn’t fall the same way as light things. But then he decided that the difference should be that they fell faster. Nowadays we think they fall the same speed but they hit harder. More than a thousand years later, people were claiming that heavy things fall faster than light things quoting Aristotle as an authority, and if anybody said otherwise they got shouted down. It took a long time before physicists actually measured stuff and reported what they saw, instead of reasoning out how it had to be from the stories they believed.

Today when people argue from supply-and-demand, or free markets, or comparative advantage, or the rewards of risk, or insufficient demand, etc, they are hardly ever talking about things they have measured. They are mostly talking about stories that made sense to them, stories that were told by authorities like Adam Smith, or Ricardo, or Keynes, or whoever.

It really looks to me like Thornton Hall is advocating that people actually notice how things work in practice, things that happen on a small enough scale that people can see them, and build their models starting with what they see instead of what they think they would see if they looked.

It certainly shouldn’t hurt to try that.

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bob mcmanus 12.08.14 at 6:50 pm

On planet mcmanus they dre-e-e-e-eam of … social chaos.

Nah. Its called democracy. To an authoritarian it looks like social chaos.

448

TM 12.08.14 at 8:54 pm

Tom 392, you are wrong. The AER charts do have captions but the captions do not include the information necessary for a reader to understand the extent to which the charts represent a sanitized version of an extremely messy data set. What I am referring to (also for those not familiar with the Chetty article) is most easily seen by comparing slide 18 with slide 8 in the presentation at
http://michaelstepner.com/binscatter/binscatter-StataConference2014.pdf. Go tell me with a straight face that slide 18 is an appropriate representation of the data set depicted in slide 8. This is the extent of the manipulation, and in Chetty’s case it’s actually worse since his purported effect is far smaller.

The rest of your comment, Tom, is just apologetics. There is no defense for presenting data in such a misleading way – even in economics. I haven’t even gone into detail of Moshe Adler’s critique who shows that Chetty used other tricks to overstate his effects.

A brief excerpt from Adler (http://nepc.colorado.edu/thinktank/review-measuring-impact-of-teachers, response June 24) and I’ll leave it:

In their response Chetty et al. inflate their results by a factor of 10. On page 39 of the original version of their research they state: “A 1 SD increase in teacher VA in a single grade increases earnings at age 28 by *$182 [a year].”* This is also what Figure 6 of their paper shows: *“1 sd TVA [teacher value-added] = $182.”* (This result is statistically significant.) In the sample of 30-year-olds, a 1 SD increase in teacher value-added increases earnings at 30 by *$206 a year*. (*This result is not statistically significant.*) Both magnitudes are small, if not negligible. In their response
Chetty et al. report figures that are *10 times larger, $1,815 and $2,058 respectively*. These values would be the results of increasing the value-added of a teacher by *10 standard deviations*, which is, of course, not possible because such a teacher does not exist. Chetty et al. inflate their results by a factor of 10 throughout their paper. Before I
published my review of this paper I wrote to Jonah Rockoff about this problem as it
applies to test scores. His written response is quoted and discussed below, where I
examine the inflation of the effect of teacher value-added on test scores. The fact that they repeat this misrepresentation after it was called to their attention is troubling. The result that Chetty et al. found is very small for all ages and statistically insignificant
for age 30, which invalidates their main claim that having a high value-added teacher in
one year increases income over a lifetime. They should have divulged this result, and in
their response to me they should not have justified the omission by misrepresenting its
magnitude.

449

gianni 12.08.14 at 9:38 pm

thanks Zamfir above for spelling it out, i didn’t have the patience.

the notion of ‘smartness’ or ‘the brightest guys in the room’ or whatever is trotted out far too often in american society today to rationalize elite status – most often in the face of clear failure practically speaking. we hear about how ‘smart’ all these economists are, people tout the smartness and intelligence of all those i-bankers and their ilk, and so on and so on. oh, we must defer to them, for they are the Best and Brightest!

but when you tease it out, it breaks down into some combination of elite pedigree (generally bequeathed through inherited wealth/status) and the endorsement of like-minded individuals, which is fairly self-referential (he is smart because other smart people say he is smart – but who is to say that they are smart? why, he did – and he knows because he is so smart! and so on).

the fetishization of ‘smartness’ or ‘intelligence’ or the ‘bright’ – however you want to phrase it – is just masking deference to elite credentials and inside access in the supposedly more neutral category of intellect.

any time i see someone make an ‘argument’ appealing to this element/quality, i know right away that someone is regurgitating a stinking pile of barely digested received ‘wisdom’. some people eat that ish up… but those who can chew their own food generally find it repugnant

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J Thomas 12.08.14 at 11:21 pm

#448 TM

Thank you for exposing Tom’s failure on the Chetty stuff. I hope your effort has some use.

My experience has been that people who do not know that they are innumerate cannot be convinced by numbers at all. I don’t know what to do about that.

451

mattski 12.08.14 at 11:53 pm

Why don’t you take a stab at this, Thornton? I asked you above,

Do you have some utopian vision behind your remarks? It seems that way. If the debate between saltwater and freshwater is little different in your eyes than a debate between 2 schools of creationism then who or what is playing “Darwin” in this vignette?

gianni,

the fetishization of ‘smartness’ or ‘intelligence’ or the ‘bright’ – however you want to phrase it – is just masking deference to elite credentials and inside access in the supposedly more neutral category of intellect.

If dunces formed a confederacy this would be their credo, no?

452

AB 12.08.14 at 11:58 pm

@445
Richard Sennet? Wasn’t he the son-in-law of a Nazi?

453

mattski 12.09.14 at 12:03 am

To an authoritarian it looks like social chaos.

Good point. Average folks would take a good riot over a good latte any day.

454

Layman 12.09.14 at 1:09 am

I confess, I kinda like you, Mattski.

455

mattski 12.09.14 at 1:31 am

Layman, how about a hug?

456

Thornton Hall 12.09.14 at 1:53 am

@451 My utopian vision? I’ve spelled it out in detail above. Basically, a disciple of economics that seeks to describe the world as it is, and that starts with the assumption that crisies are when underlying forces are most in evidence. A discipline that asks, “what tool is best to understand human behavior?” Amazingly, these would be radical departures.

Who is Darwin? If I knew that… I’d be as smart as economists think they are. But Agent Based Models seem promising because the are similar to weather modeling, which has seen amazing improvements, despite being amazingly complex and ever changing.

457

mattski 12.09.14 at 4:19 am

Thornton,

You seem to me to speak off the top of your head without much heed to whether your words add up to anything. Here you say Krugman is the most dangerous economist in the world, there you say his policy recommendations would have commendable results. You casually, flippantly suggest that your common sense ideas would be “radical departures” from saltwater (roughly speaking, Keynesian) economic thinking.

You might be a good egg, I think you are, but what comes out of your mouth is incomprehensible. Really.

458

gianni 12.09.14 at 6:02 am

@451

i very much doubt that they would, but honestly have little idea, as i have never interacted with a ‘confederacy of dunces’ nor heard a credo from such a group.

if you care to make an affirmative point or respond to my comment, just be on with it and save me the coy rhetorical questions.

459

Thornton Hall 12.09.14 at 12:37 pm

@457 calling him “the most dangerous” was deliberately provacative and provoked exactly the discussion I hoped it would. That said, you don’t really have such a cribbed view of the world such that a person can’t be both right on policy and dangerously wrong on the reasons?

I meant to address @444 to you as well. Check it out.

460

Thornton Hall 12.09.14 at 12:50 pm

@457 I’m quite right that they would be radical departures. If you think that’s insane, then you’ll begin to understand why I would be deliberately provacative.

Read the posts labeled “(Wonkish)” with the assumption that you are plenty smart enough to understand, despite the warning. You are smart enough, clearly. When you do that, you’ll be tempted to believe that it’s too complicated, that Krugman is just over your head. That’s the painful part of the learning curve. Press thru it. On the other side you’ll start to see the underlying emptiness. You’ll ask questions like, “How, exactly, do ‘wrong but interesting’ models advance our thoughts?” and “Why are accounting identities there in the first place, did someone observe that relationship?” and “Why the fuck does no one ever ask businessmen why they aren’t hiring or why they aren’t investing?”

Eventually you’ll see that the formal stuff is Sudoku–solutions to meaningless logic puzzles–and the policy arguments are moral philosophy–as practiced by free market believers and justified by reference to Sudoku solutions.

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mattski 12.09.14 at 4:18 pm

That said, you don’t really have such a cribbed view of the world such that a person can’t be both right on policy and dangerously wrong on the reasons?

It is unclear to me that Krugman is dangerously wrong or wrong at all on the reasons for his helpful policy suggestions.

When you do that, you’ll be tempted to believe that it’s too complicated, that Krugman is just over your head.

That’s not the way I approach Krugman, at all. I read him because I believe I can understand him. It helps that he writes extremely well, using plain language and avoiding unnecessary provocation.

“Why the fuck does no one ever ask businessmen why they aren’t hiring or why they aren’t investing?”

Krugman touches on this frequently, Thornton. What’s the big mystery?

462

mattski 12.09.14 at 4:28 pm

gianni,

It bugs me when my lefty brothers go into weird contortions around questions of competence and the necessary connection between competence and authority/hierarchy.

I don’t see any “fetishization” of intelligence to speak of, and I would prefer that people who rise to positions of leadership be smart and competent. It beats stupid and incompetent. If you think democracy can function without leaders then I think that’s an unrealistic and unhelpful position.

463

TM 12.09.14 at 5:18 pm

I haven’t followed that part of the discussion but if you really can’t see any “fetishization of intelligence” in contemporary America, I don’t know what to tell you. I mean, IQ? standardized test scores? Ivy League? The Bell Curve? These are specifically American obsessions that have never really caught on elsewhere to that extent. We want those in positions of power to be smart and competent – well competent at what? Competent at winning and keeping power, competent at furthering the interests of their oligarchical network? You cannot meaningfully speak in these terms without encountering contradictions. We like to accuse our opponents of stupidity and incompetence (I do that myself) but really, the climate change deniers running this country are not stupid. They are very competent at the jobs they are doing. Likewise, the finance leaders responsible for the worst economic crisis in 80 years are smart and competent and successful at what they are doing. They perfectly fit the ideal defined by the fetishization of “smartness”.

Why not judge people by their accomplishments instead of their perceived smartness.

464

Rakesh 12.09.14 at 5:24 pm

In her Liquidated Karen Ho carries out an ethnographic study of the cult of smartness among investment bankers (smartest guy in the room). Probably needs to complemented with ethnographic studies of cults of moral nihilism and the problem of moral breakdown in the financial sector.
http://www.reuters.com/article/2014/11/21/us-science-banking-honesty-idUSKCN0J51UU20141121
The Fourcade paper does broach the question of the ethical consequences of of an economics education.

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js. 12.09.14 at 7:28 pm

I don’t see any “fetishization” of intelligence to speak of

Wow! You may want to check out the JQ post at the top of the page (just for starters).

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Thornton Hall 12.09.14 at 8:01 pm

@461 “Krugman touched on this frequently.”

Really? Krugman talks about how businessmen described to him their choices and how that decision making process works? Is the “I” in “IS/LM” for “interview”? Or does he consistently talk about the IS curve, which represents the way business and government react to interest rate changes, with absolutely zero reference to any knowledge whatsoever of the functioning of either business or government?

In fact, I’d be a shocked if you can find a reference anywhere where an economist talks about an IS/LM liquidity trap and in the same article demonstrates empirical evidence of businesses and/or governments responding to interest rates.

467

Thornton Hall 12.09.14 at 8:04 pm

PS This is where, if he’s still reading, Bruce explains how I’ve gone off the rails.

But riddle me this: you state that Krugman does not write provocatively. Why then does he have a series of blog posts about “civility” where he endorses the view that he must write provocatively?

468

gianni 12.09.14 at 8:18 pm

yeah, mattski as others above have kindly pointed out, if you have not seen it, you just haven’t been paying attention.

and the dichotomy between ‘smart’ and ‘stupid’ that you are setting up in order to leverage this supposed alternative path where the country is run by complete morons is a false one (and you know this).

.

Rakesh points out Karen Ho, which I have only read excerpts from, but is really illuminating. a shorter version of the same idea (‘ethnography of wall st.) has been done by Alexis Goldstein (sp?) as well.

as for “the ethical consequences of of an economics education” – there is decent data out there demonstrating that said education, at least in the US context, encourages selfish behavior, very aggressive splits in ‘ultimatum’ games, and that these ethical consequences are more noticeable after an econ degree than with many other disciplines. i don’t have the research on me, but could probably find it as this was a pet issue of a colleague of mine.

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J Thomas 12.09.14 at 11:24 pm

#466 Thornton Hall

In fact, I’d be a shocked if you can find a reference anywhere where an economist talks about an IS/LM liquidity trap and in the same article demonstrates empirical evidence of businesses and/or governments responding to interest rates.

Suppose an economist wrote about how he was on the plane heading to a convention and three businessmen he was sitting with told him how they were responding to interest rates. That would be anecdotal evidence, right?

So instead maybe he sends a questionnaire to 1000 businessmen, and 52 of them reply, and then he can do statistics on the replies? The sort of thing that sociologists might do? And he faces the problem that the ones who answer might be somehow different from the ones who don’t. (They are different! They took the time to answer a survey from an economist! You know they’re different from the ones who just circular-filed it.) And then he faces the problem that businessmen don’t necessarily tell the exact truth all the time, especially if they’re not completely comfortable that they don’t act like ideal homo economicus. And then he might make subtle statistical mistakes that somebody might call him on.

Would peer reviewers be impressed? Later reviewers? Far easier to write a normal economics paper.

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mattski 12.09.14 at 11:43 pm

466

Yes, Krugman frequently talks about why businesses choose not to invest. No, he doesn’t typically refer to interest rates in this regard, but rather to insufficient demand. If you’re business is satisfying current demand while running at 80% capacity what is your incentive to invest in increased capacity? So, what’s the big deal?

And if you read me carefully you’d know I wrote that Krugman avoids unnecessary provocation. Riddle solved!

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mattski 12.10.14 at 12:06 am

465

I read JQ’s post. I saw this:

In many parts of economics, the status rankings and evaluation criteria are driven much more by internal and aesthetic factors than by empirical validity or policy relevance.

Also this:

The idea that an understanding of economics combined with attention to actual events is more useful than mastery of a highly specialised bag of tricks is totally antithetical to the ethos of the site (unsurprisingly, they hate Krugman even more than me).

So, no, I don’t see a fetishization of intelligence. Noah Smith has written some about the “specialized bag of tricks” problem, where a lot of highly technical, math heavy papers get written about arcane and ultimately trivial problems. Is this “fetishization of intelligence?” I think it might better be described as fetishization of technique and specialization at the expense of utility.

472

mattski 12.10.14 at 12:09 am

463

Why not judge people by their accomplishments instead of their perceived smartness.

It escapes me why you presume I would disagree with this.

473

Thornton Hall 12.10.14 at 12:28 am

@471 You’re not paying attention. According to Krugman, and others, the “internal and aesthetic” factors are generally the ability to do extremely fancy math.

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Rakesh 12.10.14 at 12:32 am

@470

Just because Brad DeLong and those inspired by him like mattski have not recently had occasion to refer to the Marx-Hayek-Hoover axix…

If demand is weak you may have incentive to make innovatory investments/invest in capital goods in which technological change is embodied so that you can cut costs even faster than prices are falling. It may also be the practical point of view of those leading the advanced capital goods industry.

The theoretical point here is–to use Hayek’s metaphor as noted by GR Steele–that the
continuous flow of the river of investment can vary independently of
the level of the tide (sales of final goods) at the mouth. The upper
reaches of the volume of water is affected by the immediate flow of
the tributaries to the mainstream (variations in new and replacement
technology). In any given period there is no obvious correspondence
bttween changes in the upper reaches and the sale of final goods; nor
between the sale of final goods and employment. Moreover, as Marx
first and Hayek later recognized, it is generally the case that in a
slump the revival of final demand is an effect rather than a cause of
revival in the upper reaches of the stream of production.

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js. 12.10.14 at 1:16 am

Is this “fetishization of intelligence?” I think it might better be described as fetishization of technique and specialization at the expense of utility.

You can describe it like that but the people who fetishize it describe it as intelligence. And they have better access to the airwaves than you or me. This isn’t an argument about the “true meaning of intelligence” or whatever.

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mattski 12.10.14 at 2:10 am

474

So you & Marx are Supply-siders? Who knew!

477

mattski 12.10.14 at 2:28 am

473

This is from Krugman’s post on Fourcade:

Again and again we’ve seen freshwater macroeconomists declare that New Keynesians, let alone those who respect the older stuff, don’t get some basic point;

Funny. That’s what YOU do, Thornton.

Krugman goes on:

But the macro wars have been revealing: we’ve seen quite a few highly successful academics, with lots of widely cited papers, prove remarkably dense when trying to weigh in on real-world events. It has been all too obvious that there are people with big reputations who can push equations around but don’t seem to have any sense of what the equations mean.

So, I think there is something going on with using mathematics as a proxy for intelligence. But what should interest us about this is the difference between social climbing (achieving for the sake of status) and excelling in your field in the best sense. In the sense of doing useful work.

Because in that latter sense we want our economists to be intelligent! Is that controversial?

478

mattski 12.10.14 at 2:40 am

js.

I wrote above, “using mathematics as a proxy for intelligence.” Maybe a better way to put it is using mathematics (and the ability to apply mathematics cleverly in a paper) as a game for achieving status.

People are going to compete with each other for status, especially within an academic discipline. As you say, we’re not arguing about the true meaning of intelligence. It’s about the fight for status. But despite this–usually–unsavory aspect of human nature we still get some pretty damn good economists achieving influence. I’m not defending the profession as a whole, I’m pointing to the really good ones out there. Piketty, Krugman, Stiglitz, etc.

479

Jerry Vinokurov 12.10.14 at 2:42 am

I’ve been following this thread for a while since posting last and it’s gotten away from me, but now that we’re circling around Krugman, let me say something that’s maybe orthogonal to the points being made here.

A number of years ago, Krugman wrote a column titled Economics is not a Morality Play. In this column, he takes right-wingers to task for attributing a moral agency to the market, and he’s not wrong to do so. But he’s not entirely right either. Because economics, ultimately, is a moral science (and if you google that phrase the top result is a post by one of our esteemed hosts), since bundled into the application of technical jargon is some normative notion of the desirability of the outcomes of applying that technical expertise.

Krugman wonders in that column why people don’t understand the necessity of spending, but the question is not about the actual technical outcomes. He doesn’t understand (or maybe pretends not to understand) the opposition because ultimately he has a different moral compass. He sees the economy stagnating and people suffering and says, oh, you can fix this by doing X. And you should do X regardless of whether you think someone undeserving is going to benefit, because we’ll all be better off. But he’s up against a moral code which is explicitly dedicated to the meting out of punishments and rewards, and the code is enforced by interests that don’t care if things go to shit because they have enough resources (they think) to ride it out. And it’s more important to them to punish the undeserving than to do the sensible thing, since that sensible thing would likely leave most of those “undeserving” better off. Krugman wants to fix the economy because he values things like stability and widely shared prosperity, and his arguments are all based on the assumption that these would be good things. Unfortunately he’s up against people who don’t share that view.

This little story crystalizes something that Thornton Hall has been hitting at from a different angle, but I think the attack on the actual technical models and so on is misguided. The issue isn’t that Krugman is so smart that he knows we should spend more and conservative economists are so dumb that they don’t know that. Of course they know it; they just don’t care. They know they’re going to survive no matter what, and advocating for shitty policies gives them a chance to punch down at the proles. That’s what they value, as demonstrated by the actual choices they make; I believe that’s a little something called “revealed preferences.” Hiding behind the purportedly amoral nature of technical economics, as Krugman tries to do, is harmful not because he’s wrong about the facts, but because it obscures this moral conflict. Once the debate enters the heady realms of theory, you can always count on someone to show up with a model that tells the poor to go fuck themselves.

I don’t think Krugman actually doesn’t know this. He’s probably just too polite to say to his conservative colleagues, hey, you know your policies are harmful and therefore you’re bad people. But that shouldn’t keep us from saying it and making the moral case rather than the technical one.

480

JimV 12.10.14 at 2:45 am

@466 “And if you read me carefully you’d know I wrote that Krugman avoids unnecessary provocation. Riddle solved!”

Who gets to decide what provocation is necessary? Where are the standards published? How is the necessity of provocation measured? (These are all rhetorical questions not intended to be answered, unless there actually is an objective way to determine that Dr. Krugman is within the bounds and Thornton Hall exceeds them.)

481

mattski 12.10.14 at 2:59 am

480

The difference is between provoking your allies and provoking your adversaries. Add to that the difference between provoking socially-minded, empirically inclined readers of CT versus provoking self-interested, ideologically blinkered reality deniers…

482

gianni 12.10.14 at 3:04 am

mattski @476
please re-read your Marx
he accords the profitability of capital (ie the rate of profit) a central role in crisis and business cycle phenomena
i have no idea why you flippantly call this being a ‘supply-sider’ or what that is supposedly contributing to the discussion

also, when relaying your reading of JQ, you missed this part: “If the seminal (sic) paper by the recognised smartest guy (sic) in the field formulated the core problem in a particular way” – i will direct you to the “smartest guy (sic) in the field” part there because you seem to have missed it.

stop being so obtuse mattski, it is annoying

483

gianni 12.10.14 at 3:06 am

Jerry Vinokurov @479
yup, well put.

484

mattski 12.10.14 at 3:13 am

gianni,

i will direct you to the “smartest guy (sic) in the field” part there because you seem to have missed it.

I direct you to my comments @ 478.

485

gianni 12.10.14 at 3:31 am

if you read the succession of replies to your initial objection, you would be looking at this beyond the immediate issue of academic economics as well, ie the culture of ‘smartness’ in wall st. and b-schools, and in non-econ related areas too.

i don’t know what your comment 478 is really saying. are you conceding that certain sub-cultures fetishize ‘smartness’ but just dissolving this into status competition, then contending that status competition is natural and inevitable, and not a big deal anyways because we still get stars like Krugman?

i also want you to know that i do not hold either Krugman or Piketty in particularly high esteem. both for the same reason: they are exceedingly hostile to any moves toward heterodoxy, which is, in my mind, turf-policing behavior that limits rather than enhances critical thinking on their areas of focus. re Krugman, see ‘frustrations of the heterodox’ (or similarly titled), re Piketty, see his dismissive comments regarding Das Kapital in interviews in the wake of him publishing a book called Capital that was widely panned for having an incoherent definition of capital (conflating it with wealth) that could have been remedied by reading that book’s namesake.

i tell you this because many of your comments seem to come down to ‘but we have these luminaries right now aren’t they good enough?’ . my answer is no, i think that the value of Krugman is overrated in the current context by US and Euro economic policy is straight up terrible and he is the most prominent voice arguing the case for change. it makes him look like some great champion, but it is just because this is such an ‘easy case’, if our economic problems were not so obvious things would be more interesting

486

js. 12.10.14 at 3:33 am

mattski @478:

It’s hard to respond to this because you’re making various assumptions I don’t agree with (“it’s human nature”, “it’s about math”, etc.), but basically: you were claiming that there’s no fetisization of intelligence, and more egregiously, implying that to point out such fetisization was to argue against competence. Both of these claims strike me as flat out false, and they’re what I was objecting to. I’ve made no claims as to whether there’re any good economists around (fwiw, I think there are some). So it seems to me like you’re just changing the topic.

Also, what Jerry Vinokurov said.

487

Thornton Hall 12.10.14 at 12:31 pm

@Jerry Vinokurov 479

I don’t think Krugman actually doesn’t know this. He’s probably just too polite to say to his conservative colleagues, hey, you know your policies are harmful and therefore you’re bad people. But that shouldn’t keep us from saying it and making the moral case rather than the technical one.

I think you’re right about this. Krugman seems to say we have no choice but the battle between Fresh and Salt because nothing else has panned out. At the end of “Paradigming is Hard” (IIRC) where he goes thru a list of heterodoxies, including Agent Based Models (my favored horse) and says, “So far, these are all useless, but maybe they’ll come up with something. Until then, we have to do it my way.”

Obviously it’s difficult to attract talent and make progress when Krugman calls your project useless. And I still can never quite follow where he explains just what is so useful about the current state of affairs.

488

William Timberman 12.10.14 at 1:42 pm

I’m also with Jerry Vinokurov @ 479, and, caveat lector, I’m not feeling particularly charitable this morning:

De Long: Like Larry Summers, I’m smarter than Marx and Graeber (I know Latin and Greek and Math and History), and I also have access to better information. What you parlor leftists miss is that with all the rough and tumble of capitalism, the poor in the aggregate are better off now than they ever have been. When I worked in the Federal Government, under Clinton in 1994, we did the right thing and it would have worked but for the damned Republicans. I’ve made a few significant errors, but they were errors of enthusiasm. So sue me.

Krugman I’m short, but I’m pretty smart and I’ve done some pretty good work, with math and without. The Nobel Prize and the column at the Times are nice, but I don’t have a swelled head about that stuff. I keep telling you I was right because I actually was right. I was right then, and I’m right now, but still nobody listens. The poor will probably always be with us, but if people in the government and industry would listen to people like me, they poor would be a lot better off than they are.

As the Vietnamese general was supposed to have said to the American general: This may all be true, but it is also irrelevant.

489

mattski 12.10.14 at 2:05 pm

gianni & js.

I agree with both of you that Jerry’s 479 is well said. The little issue I would take with it is merely that I think Krugman, saying “economics is not a morality play” is trying to point to the scientific aspects of the discipline. Jerry is correct that doing economics is ultimately going to involve normative/moral choices. Krugman–I think–is saying that there is plenty of cause & effect to study before applying our moral preferences.

My original comment was a response to gianni’s 449, which I thought, and still do, is much too sweeping and general in nature.

I realize this is something we’re not going to agree on so I’ll leave it there.

490

Harold 12.10.14 at 3:07 pm

I don’t see how one can say that it is a “fetishization of intelligence” to say that a lot of intelligent people went into economics. That a lot of intelligent people went into Medieval Scholasticism doesn’t make scholasticism valid. They went into it because it was the thing to do at the time.

491

Ronan(rf) 12.10.14 at 3:42 pm

Relatedly, Fourcade actualy wrote about ‘Moral categories’ in economics. Abstract is here

http://ser.oxfordjournals.org/content/11/3/601.abstract

pdf can be found online

492

Rakesh 12.10.14 at 4:00 pm

But Krugman has to show that his Keynesian economics are a viable method to alleviate suffering and that won’t make but a small dent in unemployment along with runaway inflation. He needs his scientific apparatus to do this. Or just take baby coop parable instead of an IS-LM model. As I have already indicated, I am not convinced that this is a good parable to understand deficient aggregate demand. But Krugman needs his scientific apparatus to argue for the *viability* of Keynesian economics.
What has long flummoxed Krugman and DeLong is the political *unfeasibility* of Keynesian economics. They do not understand the opposition to it, and have at times thrown up their hands in despair.
I think that I got the viability/feasibility distinction from EO Wright’s book on utopia.

493

Jerry Vinokurov 12.10.14 at 4:15 pm

The little issue I would take with it is merely that I think Krugman, saying “economics is not a morality play” is trying to point to the scientific aspects of the discipline. Jerry is correct that doing economics is ultimately going to involve normative/moral choices. Krugman–I think–is saying that there is plenty of cause & effect to study before applying our moral preferences.

Actually, that seems backwards to me from what Krugman is saying. He’s pretty explicit in saying that the cause-and-effect stuff is effectively solved: we know that someone needs to spend more, the government can do that, ergo the government should spend more, and we’ll all be better off. It’s a bit like saying that we’ll all be better off regulating some pollutant; the science is (mostly) in, even if it’s also (mostly) correlational, but we still don’t get the regulation we should have, because a bunch of people have material or ideological incentives to impede it. Demonstrating technical accuracy is a good thing from a scientific perspective, but it pretty much gets you nowhere with people who don’t share your moral framework.

494

mattski 12.10.14 at 4:32 pm

I am not convinced that this [baby-sitting coop] is a good parable to understand deficient aggregate demand.

I don’t think Krugman presents it as a complete example of deficient demand. I think it is an illustration of how a monetary problem can be solved by printing more money. There may be other sources of inadequate demand also which might require a more fiscal approach, i.e., gov’t spending. Here’s Krugman:

The whole point of the true story of the baby-sitting coop, which brings it down to a human scale, is that it’s quite possible for economies to get into a snarl that can be solved by printing more money, or having the government spend more.

At the end of this blog post, from Feb. 4, 2013, he writes:

It’s important to emphasize the conditionality here. The haters love to claim that people like me view more demand, more money printing, as the solution to all problems. But of course that’s not true. Aggregate demand won’t solve a problem of low productivity, or inadequate productive capacity, or for that matter extreme inequality due to technology or market power. But it can solve certain problems, which happen to be the problems we have now.

I don’t understand what you mean by “unfeasibility.” And what are you proposing as an alternative?

495

mattski 12.10.14 at 4:33 pm

493

I don’t see where the disagreement is Jerry.

496

Jerry Vinokurov 12.10.14 at 5:01 pm

mattski, I read this:

Krugman–I think–is saying that there is plenty of cause & effect to study before applying our moral preferences.

and interpreted it as referring to the specific instance rather than the general point. That was my misreading, as I think I now understand you to be saying that this is generally what Krugman advocates. And I think you’re right about that (about what Krugman is saying). But I think that’s just where the mistake is that he’s making, because I don’t think cause and effect decouples so neatly from moral preferences.

For example, let’s take efficiency, a pretty central economic concept. The problem is that narrow technical definitions of efficiency already come with certain normative preferences baked in. Too often the unasked questions are, as MacIntyre might have put it, “Whose efficiency? Which rationality?” Turns out that it’s quite possible to have outcomes that satisfy some technical definition of economic efficiency and are yet socially undesirable, either by themselves or in aggregate. If a case for a particular economic policy is made on the basis of efficiency, it’s usually taken to mean that efficiency itself is socially desirable; efficiency assumes the guise of a different norm that we actually want.

How you think about efficiency is ultimately going to be influenced by your other commitments. Of course you can formulate a technical definition of efficiency as e.g. Pareto optimality given some assumptions about the utility curves of the actors involved in the economic transaction, but already that implies a narrow focus on a certain kind of process to the exclusion of others. Which might be the right thing to do in some cases and the wrong thing in others, and whether you think it’s wrong or right ultimately doesn’t depend on any sort of apparatus of economic theory but on much more basic beliefs: what you think counts determines what is counted.

497

TM 12.10.14 at 5:09 pm

472: “It escapes me why you presume I would disagree with this.”

I don’t presume that. What I do presume is that our prevalent culture disagrees with it. In this (American) society, people are far more likely to be judged by their credentials and their reputation (including whether they were admitted to an Ivy League school, but also more generally the kind of circles they belong to) than by their proven accomplishments. That is why for example media pundits who have been demonstrably wrong in almost every respect can continue to be admired for their “smart” expert advice. Likewise, economists with a proven track record of being (empirically) wrong suffer no reputational consequences (as Krugman laments so often). The point is that the American fetishization of “intelligence” (has to be in scare-quotes) is fully compatible with the uninformedness and indeed anti-intellectualism of our public discourse.

498

Rakesh 12.10.14 at 5:11 pm

@494 really quick.

Unfeasible–meaning that given balance of forces and structure of state it is proving unfeasible to put together a governing coalition in favor of Keynesian policies though they would be viable if implemented. The models give us the viability, but the politics are giving us the unfeasibility.

Please disabuse me of this worry: We have seen business opposition to Keynesianism historically unless it has taken the form of military Keynesianism. Only the spoils of war and the anti-labor climate created by war have historically been sufficient inducements for the business community to countenance the radical expansion of the government sector in times of deep recession. Without war ruling elites have been too divided about Keynesian policies to support their implementation. Perhaps Keynes hoped that peaceful government investments could be made, or even treasury bills just worried; but he sensed deep down that it would take war for policy makers to start pressing the G button. In fact he even envied the war time powers that Hitler had for the implementation of his program.

Last point. How are monetary and fiscal policy supposed to work when the parents just don’t think it’s worth leaving the kids (their massive cash reserves) for the utility they would get from going out on the down (the profitability of marginal investments is not projected as strong). The parents would rather stay home even if they could be borrow coupons at negative interest rates. In fact the parents have figured out that the best thing to do in light of the poor entertainment prospects is not to go out at all (make new investments) but rather to invite each other’s families over for bridge and a home cooked meal (that is, firms have decided to merge and acquire which only compounds the unemployment problem).

499

Rakesh 12.10.14 at 5:13 pm

or treasury bills just buried. Sorry for typo above.

500

TM 12.10.14 at 5:13 pm

Also second 475.

501

TM 12.10.14 at 5:14 pm

Wow, I just posted comment number 500. What’s going on here? Oh, economics-bashing – how we love it ;-)

502

gianni 12.10.14 at 6:28 pm

WTimb. @488
goodness, DeLong is actively terrible when he talks about the history of the discipline. he fluctuates between active scorn for marginally leftist economists (even those whose ideas he later rehashes himself) and mis-readings that would be laughable if they were not so prominently featured by an ‘expert’ in the discipline. on the latter point, i don’t know if he considers his own training to be so superior that he does care to take the time/effort to be accurate, or if that training has actually made it near impossible to read these old authors at their word without subjecting their thought to his blinkered conception of what ‘economics’ ‘really is’, but it is very frustrating and i can’t take the man seriously in the slightest.

DeLong is also, if you have ever interacted with him in person, about as pompous as it can get. the first sentence that i heard out of his mouth ‘as a descendant of a long line of harvard graduates, my father went to harvard, as did my father’s father’. the topic was something along the lines of ‘how do we better disseminate information about financial aid to poor HS students of high aptitude’. the rest of his comment was not pertinent to this question either.

503

mattski 12.10.14 at 6:31 pm

Jerry,

Yes, I am with you pretty much all the way.

because I don’t think cause and effect decouples so neatly from moral preferences.

I think you’re right. BUT, my view: we can’t even DO economics unless we make some abstractions. I think this is basically what Krugman would say. I think that if we follow your critique too rigorously we end up not having a discipline of economics. What would we have then? I’m curious what you think about this.

504

mattski 12.10.14 at 6:43 pm

Rakesh,

The models give us the viability, but the politics are giving us the unfeasibility.

Ok, but is that a problem with economics or politics?

2nd P- Norms change. Eisenhower called the opponents of Social Security “stupid.” Starting in the 70’s* the US shifted rightward and Reagan had a big influence on the national debate. We’re trying to swing the debate the other way now, and it’s tough. Obama has been a bit of a pussy in this regard…

3rd P- I don’t see how your scenario exposes flaws in the illustrative power of the baby-sitting coop. Economics, being a social science, necessarily concerns itself with difficult to quantify factors like “expectations.” Negative expectations can put the kibosh on pretty much any attempts to revive economic activity. I don’t see where this discredits models in general.

505

mattski 12.10.14 at 6:48 pm

*For those with strong stomachs I recommend Jim Douglass’s, JFK and the Unspeakable. For it is probably more accurate to say the assault on the leftward progress of the US began in earnest with Allen Dulles’ skullduggery.

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Jerry Vinokurov 12.10.14 at 6:59 pm

I think you’re right. BUT, my view: we can’t even DO economics unless we make some abstractions. I think this is basically what Krugman would say. I think that if we follow your critique too rigorously we end up not having a discipline of economics. What would we have then? I’m curious what you think about this.

Oh, I think abstractions are very valuable. All models wrong, some models useful, all that jazz. I just think we shouldn’t fool ourselves into thinking that the abstraction represents something it doesn’t or that it obviates the need for figuring out just what it is we actually want to get out of them and for what reasons.

507

Thornton Hall 12.10.14 at 7:13 pm

@mattski and Jerry:
Steve Randy Waldman’s exhaustive examination of the impossibility of severing economics from moral choices:
http://www.interfluidity.com/v2/5537.html

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Thornton Hall 12.10.14 at 7:20 pm

1. Abstractions: somebody mentioned Scholastism? That’s what happens when your abstractions lead the way. Economics is the only field that hasn’t moved away from Aristotlian science.
2. The country moved rightward? There has never been a shred of evidence for this media narrative. Apart from public housing, there isn’t a single area of government expansion that hasn’t seen growing support over the 20th and 21st Centuries. Maybe ag subsidies.

509

William Timberman 12.10.14 at 7:28 pm

gianni @ 502

Yeah, I was trying not to make my comment personal — although I don’t suppose I succeeded very well — but rather to use it to show how even well-meant technical advice from experts often comes across to the interested but skeptical layman. De Long has probably forgotten more about economics than I have any hope of learning at my age, but politically I think he has — at best — a tin ear. He’s obviously good at games, so he delights in treating politics like a game, one he clearly believes himself well-equipped to win. He’s not so different in that respect from pundits who are, objectively, a lot farther down the evolutionary tree than he is. A pity….

Alas, politics isn’t a game, or if it is, it’s a desperate one, with real consequences for people without a sufficiently resilient, socially approved bomb shelter — like, say, a Harvard degree and a professorship at Berkeley. Which is not to say that De Long didn’t earn what he’s got, as much as anyone can be said to have earned what he’s got, or that he’s some kind of easily dismissible idiot savant. What I’m saying, I guess, is what both you and JV are saying, that until we get serious about how technology and power have cross-bred in the 21st century, how unassailable the resulting hybrid now seems to be, and how perilous a situation we’re in as a result, I don’t think it makes the slightest difference how smart someone is, or what he knows — not when it comes to who decides what.

510

The Temporary Name 12.10.14 at 7:49 pm

I’d like to “me too” Jerry at 496 on “efficiency”. Few people have it in them to oppose efficiency, so I suppose in the future one man will supply all products via robot labour. What’ll everyone else do? Maybe they’ll have lots of fun, right?

511

William Timberman 12.10.14 at 7:51 pm

Sorry about the spelling of DeLong above. I just recently turned on the automatic correction on my machine, and maybe relied a little too heavily on it. Damned if you do, damned if you don’t.

512

TM 12.10.14 at 8:06 pm

To DeLong, all I can say is he’s the guy who thinks he estimated “World GDP, One Million B.C. – Present”. If that doesn’t invite skepticism about everything else he ever said and did, I don’t know.

Brief comment on the baby-sitting co-op, which Krugman thinks is such a splendid illustration of deep economics. Since I read about it first, I have wondered whether the story is even verifiable. A bit of research (it has its own wikipedia page) shows that the co-op really existed (and still exists) but no actual data (or at least anecdotes) that I could find, apart from the original anecdote reported in 1977 by the Sweeneys. The story as they tell it sounds too good to be true. Why would the members have stuck with that co-op if it was so dysfunctional?

513

J Thomas 12.10.14 at 8:47 pm

#474 Rakesh

The theoretical point here is–to use Hayek’s metaphor as noted by GR Steele–that the
continuous flow of the river of investment can vary independently of
the level of the tide (sales of final goods) at the mouth. The upper
reaches of the volume of water is affected by the immediate flow of
the tributaries to the mainstream (variations in new and replacement
technology). In any given period there is no obvious correspondence
bttween changes in the upper reaches and the sale of final goods; nor
between the sale of final goods and employment. Moreover, as Marx
first and Hayek later recognized, it is generally the case that in a
slump the revival of final demand is an effect rather than a cause of
revival in the upper reaches of the stream of production.

Heh. Hayek. Looks at a feedback cycle and tries to decide which part of the cycle is the cause.

I’ll tell the story my way — if there isn’t more demand, then there can be a bit more investment and it will dry up when demand isn’t there.

And if there isn’t enough investment to increase production, there can be a bit more demand and it will go unsatisfied because production isn’t there. If there’s enough excess capacity to soak up an increase in demand, then you might have to wait awhile before increased demand gives you increased investment. Or maybe not. Individual businessmen make their choices based on what they think will happen, and then they revise their opinions based on their continuing experience. They are not fully predictable, unless they have been carefully trained to be predictable.

Meanwhile, when poor people (workers, people on the dole, any poor people) get more money, they can be depended on to spend it and increase demand. Unless they used to be rich enough to have debts, and now prefer to pay them down. Or they are so scared of the future that they prefer to save. Or something else. Not even poor people are completely predictable.

Deciding which is the cause and which the effect is just another delusion. Investment has some effect on demand. Demand has some effect on investment. In either case the delay is variable. In any particular circumstance one or the other may be more a limiting factor, or maybe there will be some other limiting factor that isn’t either of them.

514

Mdc 12.10.14 at 10:17 pm

No gratuitous Scholasticism bashing, if you please. I learn things from the medievals all the time.

515

mattski 12.10.14 at 10:28 pm

Jerry 506

I just think we shouldn’t fool ourselves into thinking that the abstraction represents something it doesn’t or that it obviates the need for figuring out just what it is we actually want to get out of them and for what reasons.

I think you’re quite right, and consistent with my remarks in this thread. And I’d bet you $5 Krugman wouldn’t argue with you either.

516

mattski 12.10.14 at 10:39 pm

Thornton 508

If you’re talking about the size of the budget that doesn’t prove anything. And you should know better than that.

You’re denying that the liberalism of the 60’s hasn’t taken an enormous hit in terms of prestige? You’re denying the difference in GOP attitudes towards programs such as SS in the 50’s-60’s compared to today?

517

Thornton Hall 12.10.14 at 11:01 pm

@516 “Ideology” is an abstraction that causes no end of confusion. The loss of Mary Landrieu has spawned several good pieces about the change that was interpreted as the “rightward move” of the country. Historians explain it quite well. The Civil Rights Act and The Southern Strategy. It used to be the case that half the country’s racists voted Democrat, while half voted Republican. The parties (like Coke and Pepsi agreeing not to compete on price) did not compete on race. A fair number of black people (of the small sample allowed to vote) voted Republican.

We now are at the other end of the transformation. All the racists are in one party. Ross Perot gave Clinton a victory and that confused a lot of folks at the time, but in 2014, we should be clear-eyed about the way racism shapes out politics. If you ask people if they support Social Security, the yes answer keeps going up. Medicare, Medicaid, the 1933 and 34 Securities Acts, the EPA, public education, it goes on and on and on. The poll numbers go up.

So what about those studies you see about the shift in public opinion? Half of the “score” is often the answer to two questions: are you Republican or Democrat and are you liberal or conservative? People, unsurprisingly, don’t interrupt the pollster to say, “By conservative, I don’t mean I oppose any particular expansion of the Federal Government, by conservative I mean I don’t like the government giving things to Black people.”

518

Ogden Wernstrom 12.10.14 at 11:11 pm

TM 12.10.14 at 8:06 pm @512:

Brief comment on the baby-sitting co-op, which Krugman thinks is such a splendid illustration of deep economics.

Does he promote that one as splendid and deep? Somehow, I got the idea that the story illustrated a couple of things about money. It may say something about “hard” money, but it is mostly about illustrating the effects of liquidity preferences, I think. Far from deep, it illustrates a mechanism that has been stripped-down to fewer moving parts than an entire country’s economy.

Since I read about it first, I have wondered whether the story is even verifiable. A bit of research (it has its own wikipedia page) shows that the co-op really existed (and still exists) but no actual data (or at least anecdotes) that I could find, apart from the original anecdote reported in 1977 by the Sweeneys. The story as they tell it sounds too good to be true.

Do you mean to say that you think people would not behave in the manner illustrated by the story? Or would that behaviour lead to a different result? If the truth of the details is an issue, it is just an anecdote.

Why would the members have stuck with that co-op if it was so dysfunctional?

What alternatives do you expect were available?

Which members do you expect would have abandoned the co-op:
1) the ones who had provided more babysitting – and held the wealth of coupons, or
2) the ones who had received more babysitting – and had some obligation to provide services, or
3) the ones who had received as much as provided – for whom the co-op had functioned?

Wouldn’t defecting eliminate co-op members from one’s pool of possible babysitters?

On another note: Everything else I want to say on this thread is already covered by Jerry Vinokurov.

519

Jerry Vinokurov 12.10.14 at 11:23 pm

Thornton, thanks for the link to Waldman’s series. It’s really well-written and informative.

520

Bruce Wilder 12.10.14 at 11:46 pm

Upthread, bob mcmanus recommended Minsky’s John Maynard Keynes as an introduction to Keynesian economics, and I would second that recommendation. Minsky’s interpretation is far more coherent than The General Theory.

Minsky purports to find a common thread running through the evolving argument of Keynes’ Treatise on Money and the later General Theory and he turns that thread back to tie the two together.

Minsky was a student, not of Keynes, but of Schumpeter and, in contrast to most economists, Minsky is not trying to submerge business cycles beneath a sea of stasis. The fundamental disequilibrium and instability is never far from Minsky’s consciousness. Minsky did a lot “field work” as an observer in banks and financial firms, trying to understand the economic implications of financial institution practice.

521

LFC 12.10.14 at 11:53 pm

Thorton Hall @517
Your story of the rise of the U.S. Right and changing party alignments — that it’s only about race — is too one-dimensional. You’re ignoring, for one thing, the importance of the ‘tax revolt’ that began in the late 70s w Howard Jarvis and Prop whatever-the-number-was in California. Sure, people say they support the major New Deal era govt programs (and no doubt do), but much of the electorate has been v reluctant to pay taxes, even when patently necessary to shore up crumbling infrastructure, schools, etc. The rise of the Right from Goldwater through 70s to Reagan era seems, in short, somewhat overdetermined. (And I’d be surprised if e.g. that’s not the conclusion of R. Perlstein, tho i haven’t read his books — have Nixonland on the shelf, but have only dipped into it.)

522

Bruce Wilder 12.11.14 at 12:32 am

re: abstraction in economics

I don’t object to abstraction, per se, in economics. I like analytic thinking, and I do not think anyone is likely to be able to understand basic mechanisms without theoretical analysis.

My objection is to the “handwaving”: trotting out a story or a model, proclaiming an insight and then, with little or no basis, waving one’s hands and asserting that the actual economy is “like that”.

It’s the pervasive handwaving that leaves economics in so much darkness, without a practical understanding of mechanisms and their limitations.

523

Bruce Wilder 12.11.14 at 12:38 am

Kevin Phillips was an early Republican advocate for a Southern Strategy for securing a Republican majority, publishing The Emerging Republican Majority in 1969 (I think).

His American Theocracy (2006) and Bad Money (2008) are well worth reading for analysis of the current shape of the Republican Party and American politics.

524

J Thomas 12.11.14 at 12:58 am

#522 Bruce Wilder

My objection is to the “handwaving”: trotting out a story or a model, proclaiming an insight and then, with little or no basis, waving one’s hands and asserting that the actual economy is “like that”.

It’s the pervasive handwaving that leaves economics in so much darkness, without a practical understanding of mechanisms and their limitations.

Yes!

Since collecting useful data is hard, and using available data to validate theories is hard, and I can hardly stop myself from coming up with brilliant theories that go beyond the available data, I recommend that we all keep in mind at least two contradictory models, neither of which has been proven wrong yet. Try to get them as dissimilar as you can without making either of them obviously wrong.

They serve as a continual reminder of how much you don’t know, and they also might help focus your mind on what sort of data could show one of them was wrong.

When you only have one model you lose those advantages.

525

Thornton Hall 12.11.14 at 1:14 am

@521 LFC (thanks for not correcting my spelling of the Senator from LA!) No doubt you’re right, it’s too one demonsional. But just like Econ starting with rationality and inch by inch getting less wrong about human behavior, I think political analysis that starts with ideology and later adds in race as a “possible second axis” is only getting less wrong, and not more right.

The biggest (sort of) non-racial change is the rise and fall of support for trade unionism, but I think that history is non-ideological as well. WWII gave unions enormous power here and in the UK. People stopped supporting them because management slowly won the peace. The lack of support was the effect of diminished union jobs, not the cause.

Perlstein (I started the Goldwater book, but barely) has in interviews pointed to the professionalization of the press as a factor. Certainly the idea that a cabal of Harvard Boys could represent a “public trust” as has been asserted by alums of The New Republic suggests simple class ignorance as a factor.

To me, though, Watergate is the watershed. Four government lawyers, Mark Felt, John Dean, Sam Dash and Sam Ervin successfully purged the government of a near-psychopath who had tamed the press with a speech about his dog. Somehow, this has turned into the story of how America needs a free press to expose how terrible government is. That’s not ideology. That’s just the naked self interest of people who sell newspapers for a living. We were far better off when they were far too drunk after work to fight for the glory of the First Amendment.

526

LFC 12.11.14 at 1:33 am

THall @525
I don’t really agree w your remarks about the press and Watergate, but as it has nothing to do w economics, I won’t go into it. Don’t entirely agree w yr 2nd paragraph either, but that’s also pretty much OT.

527

TM 12.11.14 at 3:27 am

Ogden 518:

This is how Krugman described the impact of the co-op story:

“Twenty years ago I read a story that changed my life. I think about that story often; it helps me to stay calm in the face of crisis, to remain hopeful in times of depression, and to resist the pull of fatalism and pessimism. At this gloomy moment, when Asia’s woes seem to threaten the world economy as a whole, the lessons of that inspirational tale are more important than ever.”

My discomfort with the story is best expressed by BW 522: “My objection is to the “handwaving”: trotting out a story or a model, proclaiming an insight and then, with little or no basis, waving one’s hands and asserting that the actual economy is “like that”. “

528

mattski 12.11.14 at 4:05 am

Bruce 522

A map of the world which includes every detail of the world… would be useless.

But you complain about economists maps because they’re imperfect, they’re not comprehensive. And yet, you have no better map. AFAICT you have no prospect of a better map…

529

gianni 12.11.14 at 4:12 am

i will note that i participate in an online marketplace for collectors items which has its own internal ‘currency’, which it uses to facilitate trades between the users. this market suffers a bit from the same sorts of problems – big time players horde points, trading activity can periodically fall into a bug lull due to a dearth of available points as people stockpile for specific seasons, etc etc. The solution pursued by the site was to give free points to all users and bonus points for new users. It still needs, every once and a while, an injection of currency to keep the trading velocity up there, but naturally this does not always happen.

whether or not this has any relation to the international macro economy, i will plead the 5th. but on the micro level, the story of the co-op rings very true to me

530

J Thomas 12.11.14 at 9:18 am

#527 TM

My discomfort with the story is best expressed by BW 522: “My objection is to the “handwaving”: trotting out a story or a model, proclaiming an insight and then, with little or no basis, waving one’s hands and asserting that the actual economy is “like that”. “

The value is that the actual economy *could be* “like that”. The story opens your mind to the possibility of results that otherwise don’t come naturally to your mind.

The baby-sitting story illustrates that symbolic money, poorly handled, can get in the way of trade. If you instinctively think that gold-standard money cannot ever cause any problems, this implies that it can.

The solution they worked out is not necessarily the only solution, or the best solution. You might disagree that the result they liked better is actually better than the problem they started with. But it’s hard to deny that there’s something real there.

So, one of the problems was that the coupons created a false equivalence. One hour babysitting now is worth one hour babysitting later. So of course people preferred to sell babysitting when it was most convenient to them, and to buy babysitting when it was most convenient to them. Because there weren’t enough countercyclical babysitters, there were shortages and gluts.

There are lots of ways to change that.

You could issue coupons that are good for only, say, one month after you get them and then they expire. If you *can’t* save them then you are likely to spend them.

You could have an online market where people bid for babysitting or coupons at whatever fractional rate they choose. If you are desperate for a babysitter you will pay more than an hour for an hour of babysitting. If you are desperate for points you will accept less than an hour per hour.

You could have an online market where people offer anything they want to offer in exchange for babysitting. Cash. Canned goods. Sex. The chance to proselytize your children to their religion. Anything.

You could set up lesser currencies. Issue some coupons that are good only on weekdays, and some that are good only in winter, etc. People who hoard summer coupons will still spend winter coupons. Then you probably want an online currency exchange, and so it goes.

The system could be administered by a “banker” who lends coupons at interest. He prints more coupons whenever he needs them, and so of course he doesn’t need to do any baby-sitting himself — his job is to run the system. Thrifty people who work hard and save their coupons can stay out of debt, everybody else is permanently in debt to him. Life is sweet if you are a banker.

There are lots of ways to do it.

531

Bruce Wilder 12.11.14 at 10:47 am

J Thomas @ 522: . . . I can hardly stop myself from coming up with brilliant theories that go beyond the available data

Yes. I’ve noticed. There are medications that can help with that. Just kidding. I think.

mattski @ 528

No doubt I have been unclear, and I apologize for that. My complaints, as I understand them, are quite different from what you appear to imagine.

The anodyne observation that the map is not the territory misses the larger point that analytical theory is not a map. No one, I hope, would mistake Euclid’s Geometry for a map. Geometry is a theory, laying out conceptual relationships. It can be useful in surveying a territory and drawing an actual map. But, surveying and map making are activities distinctly separate from the study of geometry, per se.

Economists, it seems to me, are often seriously confused on this essential point: they imagine analytical theory — their analytical theory of economics — constitutes in itself a sufficient analogue to the actual economy to work well as a map for intuition to follow in describing and interpreting economic activity. I think economists who hold that view — including Krugman — are wrong about that. I think economists ought to engage in the study of actual institutions and their operations, before pronouncing prophecy on policy.

When I complain of “handwaving”, I am saying that I think the theory is not a sufficient analogue to the operation of institutions, and the “handwaving” constitutes an intellectually fatal neglect of method and mechanism, with fundamental implications. This is not a matter of incidental detail.

Theoretical macroeconomics is obsessed with intertemporal optimization and general equilibrium of a system of markets. That the actual economy consists of relatively few actual institutional markets, that most prices are administered in circumstances that suggest that the associated (metaphoric) market is not structured to clear, that the financial system operates nothing even faintly resembling a flow of funds regulated by an interest rate, and that radical uncertainty obtains would seem to imply that any operational model of the institutional economy — or “map” of the territory of our political economy — would present sharp contrasts of character to the ideal picture presented by theory.

These shortcomings are not trivial matters of insufficient comprehensiveness or detail. They are evidence of a basic failure of professional competence. No one would imagine the theory of aerodynamics would constitute, by itself, a sufficient model to test an airfoil design, let alone supply the intuition to fly a airplane.

Constructing operational models to observe, describe and measure the world as it is, is a normal activity in science. That it is possible to observe and make critical sense of the operational, institutional economy should not be disputed. People used to do it, and were called economists. Economists still do it, though they risk professional marginalization. Minsky was doing it in the work I cited earlier. People do it still, and are given the names of other professions. That economists labor in ignorance of the economy and are proud of their incompetence has frequently tragic consequences.

532

J Thomas 12.11.14 at 11:59 am

#531 Bruce Wilder

“J Thomas @ 522: . . . I can hardly stop myself from coming up with brilliant theories that go beyond the available data”

Yes. I’ve noticed. There are medications that can help with that. Just kidding. I think.

It isn’t just me. Pretty much everybody does it. Faced with inadequate data, the other obvious alternative is to accept that you don’t know the hell what’s going on and you can’t figure it out, and take pot luck.

But most people quit when they have *one* explanation that goes way beyond the data, and they believe it’s true. This is a bad thing.

If you keep multiple incompatible approaches going at the same time, it’s easier to remember how much you don’t know, even while you try to figure things out.

533

js. 12.11.14 at 4:58 pm

BW — @531 is really helpful (esp. the map/analytical construct distinction). Thanks!

534

mattski 12.11.14 at 5:46 pm

Bruce,

OK. You’re right about the difference between maps & theories. And I apologize also for dashing off what was basically a grumpy and lazy post.

It sounds to me like you’re unhappy with the profession for not paying enough attention to, basically, politics. Maybe I have that wrong, but in either case I think the best economists do pay sufficient attention to the unseemly nitty-gritty, although it isn’t their bailiwick and I don’t know why it should be. It isn’t the responsibility of economists to clean up the political arena. That is really OUR responsibility as citizens.

Now, take your example of interest rates. (Again, not pretending to expertise here but) isn’t it a commonplace observation that the Fed can cause recessions by hiking rates? Isn’t there an empirical record we can refer to? For example.

Economists, it seems to me, are often seriously confused on this essential point: they imagine analytical theory — their analytical theory of economics — constitutes in itself a sufficient analogue to the actual economy to work well as a map for intuition to follow in describing and interpreting economic activity.

You’re a good man, Bruce, but this looks like vanity to me.

535

William Timberman 12.11.14 at 6:48 pm

mattski @534

Perhaps this (thanks for the reference to J.W. Mason) would help you see what Krugman et al. either don’t see, or don’t want to see, or if they do see it, don’t think is worth pursuing. When you denounce BW’s insights as mere vanity, these are the mechanisms that you’re overlooking, and that he, fortunately, is not — mechanisms which are very much at issue when discussing the obtuseness of certain famous academic economists. A closer look at them explains, at least in part, why studies of the political part of political economy have gone the way they have, and why people, both with credentials and without, have gradually developed the temerity to criticize famous economists.

536

J Thomas 12.11.14 at 7:07 pm

When you denounce BW’s insights as mere vanity,

He was denouncing Bruce’s insights as vanity? I thought he was denouncing the economic confusion between analytic theory and real economies as vanity.

It makes more sense that way.

537

gianni 12.11.14 at 7:18 pm

@534
if i may be so bold-
i think what BW objects to is less the lack of attention paid to politics, which they both do care about and can be convincingly argued to lie beyond their purview, and more the lack of attention to the internal organization of and incentives within the economic institutions that make up ‘the economy’ that they claim to study. by treating firms as sort of ‘black boxes’, they can end up developing theories which have little relation to the world they claim to studying, as they mis-understand the motivations and behaviors of the game’s biggest players

so for something like prices and wages – there is a lot of discussion over how external market conditions shape these elements, with a deficit of analysis from the other direction starting within the firm itself. now it can be a lot harder to get a single, elegant, theoretical model out of this institutional analysis, but the preference for an elegant model is about aesthetics, not economics

538

William Timberman 12.11.14 at 7:52 pm

J Thomas @ 536

On closer reading, I believe you’re right, JT, in which case apologies all around. The piece I linked to is still useful in context, though, in that it’s a good case study — or at least I think it is — of the way capitalism’s political priorities in the aggregate come to be defined. The madness in it comes not from willfulness, or a lack of logic, but from what I suppose Marx would call internal contradictions, and Bruce often talks about in terms of managing indeterminate processes. Minsky rather than Marx, you might say, although I still think that the jury is out on whether or not capitalism can ever behave itself well enough to be trusted with our collective destiny.

539

Bruce Wilder 12.11.14 at 9:15 pm

mattski @ 534

I think interest rates are an excellent example of how economists go wrong. (I apologize in advance for the ranting tone in some of what follows, but I had to write quickly, and a lot of my prime examples are packed in boxes marked, “this pisses me off”)

Yes, in the post-WWII period, in the U.S., the Federal Reserve has, historically, induced recessions for policy reasons by inverting the yield curve, with primary and immediate effect on the rate of activity in the housing and auto sectors.

That’s the kind of short-hand language I would have economists use: institutionally and operationally specific.

I object to what economists actually do, which is something more like: “the central bank raises the interest rate.” Or, a slight improvement, “the central bank raises the policy rate”.

Krugman, when it suits his fancy, will happily trot out a hoary old theoretical model, known as loanable funds, where “the interest rate” is a singular rate — a price of loanable funds — that acts as a valve, regulating the semi-hydraulic flow of funds from savers to investors. That model, often attributed to Wicksell to give it an extra fillip of scholarly hoariness, is operationally wrong. The actual financial system doesn’t work that way and thinking about it as if it does can be seriously misleading in a variety of ways. Money is not an hydraulic fluid exerting pressure or having viscosity, banks are not mediating flows between savers and investors, using an interest rate, and investors/investments are not normally constrained by the rate of interest. But, in the Economics as we know it, nothing is ever wrong, so these zombie theories never get permanently discarded. Theorists operate in a narcissistic fantasy-land, where they can pull the appropriate theoretical model out of their quiver instinctively, rather than in science-land, where objective measurement of observable aspects of actual processes is primary.

I would have economists think and talk in terms of the yield curve, because there are always a vast array of interest rates and what primarily drives behavior — as is always the case in economics — is not any singular or absolute price, but relative prices, or in this case, relative rates. (And, as I will explain, I would have economists take far more account of the pervasive reality of administered pricing.)

So, yes, I would have economists speak in specific country and institutional context. The post-WWII U.S. macroeconomy isn’t like that of any European or East Asia economy. International trade was not a large part of the U.S. economy thru most of the post-WWII period; the U.S. dollar was the reserve currency in one respect or another throughout the period; the U.S. financed a high rate of housing ownership primarily with 30-year, fixed-rate mortgages (which is different from most other countries) and the U.S. throughout the period had a huge car park, where new car sales were a small percentage of used car sales and U.S. car companies made all their profit financing car sales or leases.

In a European country like Sweden with its own respectable currency, for example, where, historically, wages were set in a centralized trade union negotiation on a regular schedule and international trade accounts for a huge portion of activity and drives real incomes, central bank policy operates in a completely different context and with completely different constraints and considerations. Canada, with five national banks, four major urban areas each more tied to the U.S. than to each other, 7 year mortgages and a large auto sector integrated with the U.S. is four large boats and some dinghies riding the tide of the U.S. business cycle.

I think it would be good for economics, for economists and for democratic politics, if economists talked a good deal less abstractly about macro-policy. There has been a movement in economics, sometimes referred to under the rubric of Mesoeconomics, which has argued, not successfully so far, for bringing policy down out of the clouds. So far, the profession seems to think rational expectations at the infinite horizon is just fine and dandy — which is how we get idiot savants babbling incoherently about Ricardian equivalence and the confidence fairy.

I think if economists had regularly talked about U.S. macro-policy with concrete reference to the housing sector as the channel of effectiveness for interest rate policy, and an awareness that many bank rates are administered prices, a giant housing bubble could not have taken place with almost no one in the economics profession noticing or caring.

Moreover, I think the theoretical abstract focus on “central bank” policy rates and reaction functions (the Taylor Rule), while neglecting the operational aspects of bank lending and bank regulation is something akin to criminal malpractice in macroeconomics.

A awful lot goes wrong in economics because many economists remain fixated on the idea of markets allocating resources by price, and no where is that more true than in monetary policy, where economists talk in theoretical terms as if interest rates were valves. In real life, most prices are administered. Every economist should know what that means, but most apparently do not have the first clue. (And, yes, Oliver Williamson has a faux Nobel, so it’s not like no one has ever made this point.)

New Keynesians will talk abstractly about menu costs, but whether those notions of “sticky prices” have any relationship to an awareness of the pervasive reality of administered pricing seems dubious. Alan Blinder published a book, where he documented actual business pricing practice, but few seemed interested. Michael Woodford’s footnotes sketching the efficiency implications of sticky prices reveal an abysmal ignorance. But, I digress.

Banks administer rates and credit — that’s their economic function and will expand credit as long as they can profitably “borrow short and lend long” [see this is where the yield curve comes in: squeeze the yield curve and bank lending (or any carry trade that looks vaguely like bank lending) will contract, and induce financial de-leveraging]. And, the administration of mortgage rates is regulated by the government in a variety of ways, including direct inspection and audit.

When I say a price is administered, what I mean, generally, is that the price is set as part of a system of administrative control, in which other factors are varied strategically to control outcomes. The price might be varied according to some schedule, but it is not the primary means of allocation. The price of a movie ticket is fixed, so that movie studios and movie theatres can coordinate other activities, like advertising and promotion and allocate screens. In bank lending, the administrative activity is focused on ascertaining things like credit-worthiness or the appraised value of collateral.

This is where I think “hand-waving” by economists becomes hopelessly pernicious. There’s a view popular among economists that “market” prices are set by magical processes. Sometimes this is dressed up with handwaving references to the Efficient Markets Hypothesis. The Efficient Markets Hypothesis is specifically about price formation in an actual institutional market for financial securities, which are not goods and have no utility and no cost of production, which, if anyone were paying attention, would clearly rule out its application to, say, the housing market. The housing “market”, of course, is one of those metaphoric markets, not an actual and institutional market. And, houses have utility, land earns a rent, and buildings have a cost of construction.

So, the hand-waving economists say that “markets” magically determine the price of houses and it is not for mere mortals to question the divine wisdom of the market god. Therefore, no one can know whether a housing bubble exists. EMH! If you think I’m kidding in this characterization — check out Scott Sumner’s TheMoneyIllusion blog; I couldn’t parody it if I tried. (Here’s a one quick link from Google to his nonsensical babbling: http://www.themoneyillusion.com/?p=8063)

If economists were paying attention to and grounding their analysis in operational and institutional details, I think you get something more like the Calculated Risk blog. A housing bubble is a consequence of fraudulent strategies undermining the integrity of the administrative lending processes. Without the handwaving, price formation in the housing markets is governed by banks administratively checking out whether a borrower has the income necessary to afford a house, the professional assessments of appraisers, etc. Look at Calculated Risk blog archives for 2006 and ask how any one could be surprised. Also, why are economists so absurdly nonchalant about fraud in finance?

There’s some dim recognition that too abstract and theoretical an approach to macroeconomics — too much handwaving where observed mechanisms should be — has not served either economics or our politics well. Mark Thoma wrote this thoughtful piece; link from Lars Syll: http://www.thefiscaltimes.com/Columns/2014/12/02/Why-Next-Recession-Will-Be-Different

I’m not holding out much hope for Thoma’s conversion, but it illustrates my point about the hazards of too much analytical theory and too little operational and institutional modeling, too few specifics.

540

Thornton Hall 12.11.14 at 9:41 pm

@539 and mattski

I don’t understand any of this stuff to the extent Bruce does. I think there’s a reason why: when you’ve invested as much time, effort and money to get that understanding, you develop a bias against seeing the obvious.

But it is very, very important to see that THE PROBLEM IS OBVIOUS. Terrible things happen when we let our betters get away with obvious mistakes. (See, e.g., the press and W. and Iraq.)

As I said above. Brad DeLong starts Econ 101 with a story about the market for apples and how it clears at equilibrium. Bruce can explain in great detail how this goes wrong. There’s a whole world of knowledge out there about how prices actually do get set. Or you could just smell the garbage behind a supermarket: rotting produce, not clear markets, is what our theory needs to explain. Stop deferring to your betters and believe your nose. The whole thing smells. The problems really are obvious.

541

Thornton Hall 12.11.14 at 9:42 pm

That’s the reason why there are too few like Bruce. (Is what I meant.)

542

GSTalbert 12.12.14 at 1:11 am

I hate economists.

543

AB 12.12.14 at 1:31 am

@Bruce
As a (mostly) lurker, just want to say thanks for a pair of fascinating posts!

544

mattski 12.12.14 at 4:35 am

William 535

When you denounce BW’s insights as mere vanity, these are the mechanisms that you’re overlooking

What mechanisms are you referring to, William? (Did you read the paper?)

I think you’re overstating to say I “denounced” Bruce’s ideas. However, I do think a lot of what motivates BW is a desire to show he ‘has something’ on mainstream economists like Krugman. And that is what I’m calling vanity.

Thanks for directing my attention to JW Mason’s blog, though.

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mattski 12.12.14 at 4:59 am

Bruce,

I have to make this short. I wish I had the time to pursue all the leads this discussion brings up. I certainly appreciate the “this pisses me off” sentiment. What I find very aggravating about your perspective is that it’s unrelentingly negative. I think you pick at nits as a way of expressing a generalized frustration that the economics profession isn’t living up to your expectations.

Well, the profession isn’t living up to my expectations either, that is, as a whole. But I see the work done by [insert litany of awesome left-leaning economists here] as proof that economics can be and is done in an exemplary fashion. So, in my view, the problems with economics are primarily cultural and political. The technical problems are inherent to most sciences- an example I mentioned recently, try getting a coherent definition of “entropy” out of a physicist. It is damn near impossible.

Did you watch the video JW Mason posted on his blog of the EPI event earlier this week? If you listen to Krugman’s talk you see he is extremely humble about what is known and what isn’t. What he does do, which I rarely see you do, is make affirmative suggestions for policy in the here and now. And he backs up his suggestions with a fairly exhaustive knowledge of relevant data.

You have a tendency to use hyperbolic language that serves no purpose. Example,

There’s a view popular among economists that “market” prices are set by magical processes.

And this one,

Michael Woodford’s footnotes sketching the efficiency implications of sticky prices reveal an abysmal ignorance.

I’d like to see JW Mason’s reaction, for example.

546

mattski 12.12.14 at 5:02 am

*should have been, “economics can be and is done in an exemplary fashion in some quarters.”

547

William Timberman 12.12.14 at 6:24 am

mattski @ 544

So my first, instinctive reading of your 534 was correct…J Thomas, kindly soul that he is, will be disappointed. In any event, it seem to me that the one most guilty of egregious misreading here is you. Whatever is motivating Bruce’s patient tutelage in these exchanges, it certainly isn’t vanity. Not to put too fine a point on it, his reply to you was a classic — and classy — bit of exposition, as AB @ 543 noted. No need for me to say anything else, except that I believe you’ve got it wrong.

Which mechanisms was I referring to? Those which, according to Beggs, define liquidity as a social relation, chief among them Minsky’s survival constraint as actors in the real economy conceive of it, and respond to it in varying circumstances. As Beggs puts it, Liquidity is not inherent in particular assets or institutions; it depends on the network of market relationships which tie them together. I’m sure Paul Krugman knows all this, and knew it before I’d ever heard of it, but Bruce Wilder, in my opinion, has a much richer understanding of what it means. Either that or Krugman has been keeping secrets from us ;-)

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