Home > Uncategorized > Going rogue: economic practice and hitting the orthodox wall

Going rogue: economic practice and hitting the orthodox wall

from Andrew Vonnegut and WEA Commentaries

My work over almost 20 years would have pegged me as a pretty mainstream economist. I worked in company and market due diligence and risk analysis in emerging markets finance, then for two large international consulting firms in emerging markets policy advisory. A regular, mainstream, practicing economist.

Then I returned to the United States, started teaching a global economics class, and looked for a text. Like my texts 25 years ago, materials were largely locked into a Samuelson definition and optimization framework, with full chapters devoted to expositions of and extensions on the Heckscher-Ohlin and Rybczynski theorems. The skirmish between mainstream and heterodox economics might have another dog in the fight, or at least one quietly lurking nearby: practitioners in need of useful information and frameworks. Unrepentant Laffer disciples aside, are practitioners driven outside the mainstream in a quest for actionable insight?

Learning the traditional optimization based foundations of the discipline can be beneficial, in particular for students continuing in economics. But, lots of people taking classes are not on an academic track, whether students in undergrad economics programs, business schools, global studies or public policy programs, or as journalists or just curious people. The latter are my students. They need to learn what the global economy looks like, start asking the right questions, and develop a basic, but broad framework for deriving and understanding the merits of different answers. They don’t need to graph the HO theorem. I did that, and it never helped me solve any problems.

So, like many other members of the WEA, I developed my own class materials (then turned them into a book). The themes that I hope will give students a useful background don’t seem anything but mainstream in the practitioner’s world, but many are left out of a traditional economics education. Here are some examples.  read more

  1. September 14, 2017 at 10:30 pm

    I don’t think I’ve enjoyed an author’s review of their own forthcoming book. This excellent essay is an exception. I look forward to more in the book. If I needed two pages to distribute to show lay people what’s wrong, I would use this essay.

  2. September 15, 2017 at 2:00 pm

    A beginning at showing economics for what it is. But doesn’t go nearly far enough. Some issues. First, “actionable insights” come from looking outside not inside. In other words, economist observe and attempt to describe that part of culture people create that deals with resources for living – their acquisition and distribution. If people don’t do such things then economists have nothing to study. So, economists are not the masters, but the students. They merely follow, as best they can what people, all kinds of people create. This should be humbling and leave economists with a sense of awe. I see neither in economists today. Second, economists should not look to behavior. Behavior is a social science theoretical construct invented in the 19th century. Going behavioral means economists are following social scientists, not the inventors of economies. Rather, economics ought to be cultural – look to culture. This is the ways of doing and saying who and what we are and what our lives mean. And, to use an old term from “Chicago” sociology, economists need to look first at “everyday” culture, not the culture of science or extraordinary ways of life. Mathematics is a part of culture, and should be considered again from the everyday perspective of mathematics invented by ordinary people doing everyday jobs. Finally, I’ve attached a famous cartoon from mathematics. It sums up how mathematics works outside of tightly controlled situations. Every equation is strewn with unacknowledged or even unknown conventions and shortcuts that allow its use – a miracle occurs. Optimization is even worse since equations that show it assume that it’s possible to optimize. Mathematically speaking, it’s not. As a friend who runs nuclear explosion models (can’t explode real bombs anymore, except in N. Korea) at Sandia Laboratory puts the point – fart the wrong direction and optimization possibility is gone. And as is well known, people fart a lot.

  3. September 15, 2017 at 2:05 pm

    Sorry, for poor quality of cartoon.

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