The Economist, as a story teller...
Published : Wednesday, 12 May, 2021 at 12:00 AM Count : 519
We have arrived at the threshold, where we need to understand and classify Economics, in terms our fast changing,global, modern day pursuits. Is this a Science, we had once studied in school or an ideology that students in greater numbers are taking to heart? This is a dilemma that needs to be solved, in our own best interests.
Many years ago, I had started my serious engagement with the theories, perceptions, realities and facts on the subject of Economics-only to be amazed why the institutions in Pakistan (and Bangladesh) were leagues and decades behind-even if one started to study the concepts, somewhere in the 1960s and 1970s.
However, I didn't have any formal instruction either in my undergraduate or my graduate program in the subject economics. Institutions in Pakistan and Bangladesh and the centers of excellence have continued to thrive, although we've remained on the periphery of conversations at universities as well as in public policy circles.
In the last maybe ten to twenty years, there's been a real shift in mainstream economics-both micro and macro-away from theory and toward what you might call a theoretical inductive empirical work. There are lots of different facets to this movement. Some of it is about statistical inference, but there is also this idea that we shouldn't impose our preconceived notions about relationships or mechanism on the data.
We have to let the data speak for themselves. I've written a few pieces about this problem.One of the recent Nobel laureates, Esther Duflo, wrote a famous article a few years ago called "The Economist as Plumber." Her view was that economists are not tasked with deep thinking. They're not grand theorists, they're not supposed to provide a big-picture perspective on how the world works. They're supposed to solve little minor mundane issues just like a plumber does, to fix plumbing leaks.
But there's no systematic thinking, there's nothing tying all these different little plumbing exercises together. The economist is a public policy problem solver using purely inductive data-driven methods. I think this is a big problem for the economics profession.
Yes and no. I think certainly what we're seeing now is part of a longer-term trend that, I don't know, started in the 1930s, 1940s, as economics became transformed into a more quantitative mathematical and statistical kind of profession, you know, favoring those approaches. You had the Econometric Society thriving in the '20s and '30s.
I remember that our Class had Paul Samuelson's textbook in the late sixties-to convey the idea that social science, economics in particular, needs to aid the methods of the natural sciences. That has been a long-term trend that we've seen since the middle of the twentieth century. I think what we're seeing now is related to that but is distinct at the same time.
Again, there is a political element to it because economic theory, what Bangladeshis would call price theory, a theory of value, price exchange, and so forth, is about studying the workings of the market economy. We also apply those theories to studying socialism and interventionism.
There was an interesting tweet by Krugman a few weeks ago: a friend of mine, Alex Salter, who is a professor at Texas Tech, wrote a piece in the Wall Street Journal in defense of Chicago-style price theory, which is not exactly the same as price theory the way we understood this in Bangladesh (and even in Pakistan) understand it, but you might call it a close cousin.
And he made the point that price theory is good at illustrating tradeoff s and it gives people who want to intervene in the economy a humility about what is possible because we see, as Henry Hazlitt famously emphasized, the secondary effects, the unintended consequences, the limits to what government officials can do. And Krugman said something like, Well, of course these right-wing fanatics, they like price theory because it's right-wing.
They don't like the fact that the data, that reality, has a liberal bent. The data shows, the data favors, interventionism. That's why these crazy right-wing kooks don't like a data-driven approach. So I think there's an opportunistic element to this, that you can make the data say lots of different things and you can use the data to justify all kinds of interventions one might choose to pursue, and so the Krugman types are certainly taking advantage of this methodological trend.
Beyond a doubt, economists have themselves to blame for this after tasting the sweet nectar of political influence and political power. The US government doesn't have a council of sociology advisors or a council of anthropology advisors; it has a council of economic advisors. This actually causes some tension, I think, among social scientists.
Anyone who suggests this absolutely right because it really has not helped. It has given economists a kind of standing, or it formerly gave them a kind of standing, like scientists in a white lab coat in the 1950s, or even today, look at somebody like Dr. Fauci (the White House expert on Pandemics caused by virus). The fact that he's Dr.Fauci, he allegedly has the scientific credentials, it gives him a certain kind of authority.
Economists have been craving that kind of status and again, compared to some of their fellow academics, they have had it at least to some degree, but you're right, they may be losing it partly because of the democratization of information that the internet has brought about. People can look things up and study things for themselves. They don't have to rely on some talking heads speaking what looks like mumbo jumbo, complicated mathematical equations and formulas.
Remember our old friend Alan Greenspan, the head of Federal Reserve institution who in many ways was ahead of his time in being a completely a theoretical numbers guy. They used to say, "Oh, Greenspan is such a maestro because he has this intuitive familiarity with the data. He buries himself in reams of numbers and he can somehow intuit how to steer the economy from that."
It was all nonsense, of course, it was all smoke and mirrors. He and his colleagues were making it up as they went along, but what Hayek called the scientism embedded in this mainstream economic approach lends itself to that kind of misinterpretation. You deal with data, you're quantitative, you must be more rigorous, you must be more scientific, and people hear, they deal you know, merely in words.
Obviously, this is pretty intense. Quite Interestingly, I think the elites of the profession recognize things have gone too far in that direction. The famous economist Paul Romer wrote a piece a few years ago complaining about what he called mathiness, so your term was in existence before. He either coined or popularized the term mathiness to complain that a lot of these economists were using math not to reach some kind of conclusion.
My old schoolmate T A Khan, PhD remained a passionate and scrutinizing student throughout his career, and managed to collect valuable input and off record stories from migratory people, living in the margins of a crippled economy after the Liberation War. His approach was mathematical, analytical and he also touched the hearts of the poverty ridden people he came across. It makes a relevant illustration and point, but he really did this, just to demonstrate his own virtuosity, his own exclusive skill with the technique.
Having a lot of math in the argument has become an end in itself rather than a means to come up with ideas and communicate some ideas. So, I think there's some recognition that economics may have become too math oriented.
The writer is a former educator
based in Chicago, USA