A response to Robert Locke

From Peter Radford

Robert:

I read with interest your comments. I agree in many ways, and with JC Spender’s follow-up.

Economics is intensely introspective. It exists within its own world, and were that all no one would care much about its oddities. But that is not the case. Economics plays a crucial role in shaping our lives via its impact on public policy and it is that social role that engenders so much despair amongst those of us who try to take it seriously and yet are on the outside looking in. Given that allow me to offer up what I have learned since I re-engaged with the discipline a few years back.

• Economics does not exist. Instead there are a series of vaguely related sub-disciplines the practitioners of which fiercely protect and delineate in order to preserve territory and to propagate ideas. This is why we see so many “gotcha” moments as economists yell back and forth about their ideas. Worse, it also means that each sub-discipline can police itself, leaving us without any idea about the value of what’s being taught/learned/written within each.
• These sub-disciplines are  intensely path dependent and thus not easily diverted by empirical evidence. They continue regardless. I have come to think that Kuhn had economics in mind when he wrote his book.
• There are many useful – more useful?- things to learn about the economy by studying sociology, history, politics, organization, and other disciplines, all of which are less arrogant about their knowledge and, perhaps, thus more open to learning. Indeed I advise young people wanting to study the economy to avoid economics and enter one of those fields instead.
• The line between politics and economics has melted entirely which is why I refer – snidely I admit – to “right wing” and “left wing” economics nowadays. There is an economist to support any and each view no matter how contradictory those views may be.
• This ability to appear on all side in any argument devalues economics as a “science”, but it encourages a divergence of opinion that can be mistaken for “pluralism”.
• Pluralism is only useful when the participants can agree on the facts and artifacts to apply their plurality of views/methods on. Economics has no such agreement, thus pluralism engenders and sustains discord rather than opening doors to resolution and progress.
• Nonetheless there is a dominant form of economics here in the US – and presumably in the UK, although I cannot vouch for that – which is the loosely defined thing called neoclassical economics. I think this is what you mean by “Anglo-Saxonia”, although I think that’s unfair because it ignores the contribution of people like Walras who managed to push the subject into its general equilibrium fantasy.
• As far as I can tell neoclassical economics is not about the economy, but about itself – its core beliefs are absurd but make amenable the use of lots of fancy analytical techniques that attract attention.
• This leads me to suspect that technique is more highly valued than substance. A view confirmed by the constant inflow of graduate economists into analytically intense jobs in industry – they are there not to talk about the economy but to run numbers in very sophisticated ways. They are kind of “hyper accountants”.
• Economists are dangerously ignorant of the economy. My background is business and not academic, and the comments I see coming from economists about what actually goes on out there are often alarmingly simple. I understand, of course, that economics and business are not the same, but they ought to intersect, business is, after all, surely part of the economy. My current favorite instance of this ignorance is Ronald Coase and his 1937 paper. He asked vital questions that have not yet been answered because – in my opinion – they cannot be answered from within economics as it now exists. Coase himself gave an unsatisfactory answer perhaps because he didn’t want to part company with the discipline. Another example would be the great “capital debates” where the clear winning argument has been consigned to history because it would require a root and branch re-thinking of some topics – as acknowledged by the losers.
• Yet economics is taught faithfully in all the big business schools and forms the intellectual basis for modern finance etc. There can be nothing more odd than a class of classic micro being given to a bunch of business people who know that they have no clue – and no hope of one -of what the marginal costs are that they are supposed to be matching with marginal revenue. But, as the economists say: we teach that stuff because we assume people behave “as if” it were true, and thus it becomes legitimate to analyze the fiction “as if it were truth”.
• No one cares. I say this because, as far as I can tell, the constant uprising and moaning about the apparent nonsense of mainstream economics results in precisely no change. There are studies going way back, and complaints decades old, describing what you are reacting to. The teaching remains the same. No one acts. I mean really acts, not simply writes another paper. When good people devote their lives to alchemy they come to accept it just as those before did. Plus, of course, there is the comfort of the sub-disciplines into which to retreat.
• I joined forces with Edward Fullbrook and others to start the World Economic Association in order to act and, more to the point, provide a rallying point for others far more learned and experienced than me to act. I hope you are a member and an active member.
• This drumbeat is old. It is time to move on with the creation of the new, no matter what the current practitioners argue or say.
• Yet they own the process of education. Hence the frustration and resignation.

None of this is new. None unique. All subjective. A little overdrawn. In general I see economics as a mess, of dubious value, hidebound by academic niceties, unethical – in that it has no sense of social responsibility as a whole – and in need of overthrow. It is the alchemy of our age.

Your reference to Ping Chen is highly pertinent. I recommend his book “Economic Complexity and Equilibrium Illusion”.

My conclusion: Economics needs to become a non-equilibrium social science that embraces importance of institutions, culture [rhetoric?], networks, endogenous technology, structure, as well as the individual. It is an information science where the relevance of complexity is central. Time must be acknowledged not masked by fantastic tricks, and where asymmetries of all sorts are the norm not the exception. An economy changes itself as surely as the people within it adapt to their ever changing environment. They shape and are shaped by that environment, so feedback keeps the whole thing moving along. It is a learning device where we both discover and create solutions to everyday problems. It is driven by both competition and cooperation. It sits within, not without, society as a whole. It is melange of energy, resources, and knowledge that we configure and re-configure to satisfy our needs. And it is a process whereby we explore the potential of that melange and translate potential into possible, and then into actual, ways to satisfy those needs, whilst recognizing we are creating needs as we go along. It is thus open ended, procedural, dynamic, and intensely human. In other words it is evolutionary.

But enough of my simple minded rant.

Regards, and with hope for change,

Peter