Can we move on?
from Peter Radford
I am hardly alone in ranting on about economics, but it never changes. How can it? The intellectual honesty required to make the sort of shift needed to recapture the discipline’s honor simply doesn’t exist. Its practitioners are too deeply embedded and ingrained. Its students are too intimidated by the burden of its closed social pressures.
Nowhere is there a leader willing to take on the mantle of righting the ship. So it continues to wallow low in the water, not sinking but adrift. It has become an aimless enterprise being more and more revealed as nothing but a combination of artless technique and ideological objective.
When we think of economics nowadays we think of applied mathematics. Applied to certain problems, in certain ways, within certain boundaries, and only against certain data.
Economics has become a small minded sub-discipline designed to produce analysis of small issues or problems that can be contained within the massive restrictions of the subject’s edifice.
This is why, perhaps, none of its younger tyros attack big problems anymore. All of them apply their undoubted intelligence against microeconomic targets in the vain hope that accumulating answers at the micro level will somehow aggregate into macro changes.
They have all, in other words, been cowed by the absurdity of the micro-foundations zealotry of the older generation. Apparently they are unaware of the hollow nature of the micro adventure. I have always thought that the micro-foundations project was foolhardy. After all garbage-in is garbage-out. Bedside it represents a stubborn refusal to take on board some of the more modern and exciting insights of evolution, complexity, and chaos thinking. Not least amongst which is the idea that reality is multi-layered with phenomena emerging at one level without cause from the effects of other layers.
In contrast to other fields of study that cover related territory: sociology, politics, and even business management, economics has the look of a tired fusty old attic full of well worn stuff that we no longer need in order to function. It has become a place to collect and continue to admire old ideas. It is a sort of living museum. A tribute, if you like, to the days when taking in simple ways about capital, land, and labor could be thought of as cutting edge. Or where oddities like a production function could be seen as something to explore and not simply to ridicule as a caricature of real life.
Economics has failed.
It has failed, for instance, to ‘explain’ the phenomenon of growth. For a discipline that has been in existence since our modern surge to prosperity began it has been almost silent on why that surge began. Or what it consists of. Or what drives it.
The old iconic model of Solow tells us that most of growth has causes outside of economics — it is a residual not a result of the attributes of the model. It took until the late 1980’s for economics to realize the technological change is an attribute within an economy and not something that occurs outside only to influence the economy subsequently.
Sure, there have been alternative voices to talk about real economies rather than the pretend ones that dominate economic theory, but those voices have been shouted down.
And on the results that matter: managing a real economy, economics has failed miserably. It still doesn’t understand growth: it has no unified theory capable of going back in time to cover both the pre-growth era and our modern surge. It still ignores the role of information or knowledge in the creation of wealth. It has nothing much to say about the environment or sustainability. It is a one-trick pony capable only of discussing problems that fall within the purview of its optimizing, individually based, and closed system perspective.
In other words it has little to say, or relevance, about the real world.
But it sure talks a lot. Proudly and even arrogantly. Perhaps a little too much. Perhaps because it is, at heart, a failed project that wants no one to realize that failure. Perhaps because our professors of economics just want to make a living and have nothing else they can do.
After all re-training an economist could prove difficult.
I read a few years ago that professors of mathematics were increasingly concerned that math has become so deeply specialized that in some areas there are too few people knowledgeable enough to judge whether what was being taught and written about was in anyway correct, valuable, or worthy in any way. Only those who taught it could judge. So they continued to award degrees to students, who then taught and awarded degrees to other students and so on.
The difference between economics and pure mathematics is that economics presumes to have practical knowledge. It argues that it understands how societies can accumulate and allocate wealth. It argues that it understands that mechanics of exchange. And it stands in judgement over policy making that affects hundreds of millions of lives. So we all care whether economics is valuable. Or, at least, we ought to care.
And what do we have?
An attic full of cobwebs, old ideas, outdated tools, incoherent junk that we have forgotten how to use, and faded memories of long ago issues that have little of no relevance to today.
No amount of ridicule or laughter can clear that attic or spruce up those ideas. It is a stubborn place all of its own. It is content within the comfort of the past.
So be it.
We move on.