Home > Uncategorized > The price of economics

The price of economics

from Peter Radford

Thank you Mariano Torras.

You said the following in a letter to the Financial Times:

“I would venture that there is a professional motive for perpetuating — through the use of elegant and abstract models — the fantasy that economics is a science.  The prestige, the stature and influence that such a myth permits is undeniable.  Yet, far more perniciously, the ostensible neutrality of “economic science” provides seemingly unshakeable ideological cover against critics who (more realistically) accentuate power, inequality, and politics.”

That about sums it up.

Economists do not study economies.  They study economics.  They study their own models and other stylized facts in ever more detail and abstraction.  They have substituted technical wizardry for contemplation.  They privilege mathematics over other kinds of analysis.  And they scrupulously avoid entanglement with history which might drag them into a conversation about just how they arrived atop Mount Economics far above the plains of reality below.

Professor Torras inspired me to dig out the following:

“More generally, how does a scholarly community determine that a proof is valid, especially when the proof is highly complex and when there are few people in the community with the technical skill to understand the proof? And what might “understanding a proof” entail?”

That’s Roy Weintraub speaking in his excellent book ”How Economics Became a Mathematical Science”.  Go read the book.  It’s highly instructive.

But it isn’t my intention to poke too much at the mathematicians we now call economists.  It isn’t for me to say whether economics has progressed as a consequence of restricting itself to the confines of applied mathematics.  The profession seems comfortable to be so restricted.  It wallows in its arcane nook and appears content to portray itself as a repository of analytical capability rather than of economic insight.  That’s all we need to know.

A broader question is worth delving into though.

How do people outside of the profession know that what economists state as knowledge is actually worth knowing?  How does anyone not within the hallowed halls and not grounded in the accepted or iconic modeling know that the knowledge professed to be possessed by economists is actually worth anything?  Anything at all?

They can’t.

They have to take it on faith.

This is an inevitable and dangerous consequence of the relentless division of labor that Adam Smith so capably foretold was the future of society.  Endless and ever finer slicing of activities in order to open up slivers to be monetized or brought within the sphere of a marketplace has produced a great deal of ignorance.  For everyone of us not an expert in something must be ignorant of it.  And there are ever more things to be ignorant of.  Our modern prosperity rests squarely on such slicing.  Nowadays we monetize just about everything.  We prosper because of our individual ignorance.

None of us has the expertise to judge whether what we are told has validity or worth.  We find ourselves at the mercy of countless so-called experts.  We live in an era of technocracy.  

Many years ago I came across an excellent book by Philip Davis and Reuben Hersh.  It is called “The Mathematical Experience”.  I think it was published in 1980.  One of its chapters deals with exactly the problem I have identified above.  Only in this case the profession in question is mathematics itself.

The chapter revolves around a fictional professor of mathematics who, we are told, is a world expert in something called non-Riemannian hypersquares.  The community of other experts in his field is very small.  They hold all the usual conferences.  They publish all the usual papers.  They confer all the usual PhDs.  They delve deeply into their specialized topic with all the zeal that we expect from our seekers of truth.  And they make comments, so we are told, like this:

“If you apply a tangential mollifier to the left quasi-martingale, you get an estimate better than the quadratic, so the convergence in the Bergstein theorem turns out to be off the same order as the degree of approximation in the Steinberg theorem”.

This, of course, is a spoof.  Or, I think it is.  How would a layman like myself know?  How would you know?  

The more important point is that within our complex society, with its arcane nooks and crannies of so-called expertise, how is the population at large to trust anyone who talks like that?  It is an evident attempt at avoiding making something intelligible to the non-cognoscenti.  

Worse, quite often the denizens of such nooks and crannies go to great lengths both to hype their apparent knowledge and to prevent invasion into their worlds by those outside.  They act like the guilds of yore.  Setting the rules.  Policing the required curriculum.  Protecting their value by placing restraints on who can or can’t be thought of as an expert.  And by using every trick in the book to be perceived as valuable, at least to those “in the know”.  Peer review is supposed to act as a quality control.  But who are the peers?  

Milton Friedman was fond of arguing that the medical profession was a restraint on trade.  The marketplace, he argued, would sort out what advice and treatments had value.  I wonder what he thought of his own trade?

One of the great ironies of economics is that it, too, acts as a guild.  It decides what economic knowledge is good and which is bad.  It selects only certain parts of its own history to create the “right” narrative.  It tells its own stories of what it wants outsiders to know.  And it defies, quite often, its own teaching by so doing.  After all, economics tells us that restraints on trade are harmful to the great fulfillment of the harmonic perfection of market efficiency.  So why are there tenured professors of economics?  Tenure is a restraint on trade.  Where are the market forces determining what economics is or is not?  Ought those professors  not step down from tenure and expose themselves to a proper market for whatever it is they are selling?  Isn’t that, then, the method we ought employ to determine the value of economics?  

The discipline of economics is no different from any other pool of expertise.  Those on the outside must judge it by its contribution to the well-being of society at large.  In this case its ability to predict economic activity.  Or its ability to foretell the beginning and end of cycles of growth.  Or its ability to describe the sources of growth and the distribution of wealth in society and to predict …  

Well, no.  I am told that’s unfair and that I don’t understand the purpose of economics.  It isn’t to predict.  It is to explicate.  It is to look backward and not forward.

So here we are with economists littered throughout the policy-making world employing their hard-won technical expertise and affecting the lives of millions upon millions of other people.  Those other people trust that the economists know what they’re doing.  Just like we trust doctors.  Or dentists.  Or psychiatrists.  Or any other profession with a code of ethics to ensure the efficacy of the knowledge society has come to rely upon.

No code of ethics?

No problem.  Economics teaches us that the market for ideas will weed out the quacks.  How convenient.  So economists don’t need a code of ethics.  See how useful it is to think like an economist?

How do we put a price on economics?  Or anything come to think about it.

  1. October 5, 2022 at 1:46 am

    Like the rich, they cost too much.

  2. Hepion
    October 5, 2022 at 10:50 pm

    I am astonished as I grow older and discover how many ‘fake experts’ there are and not just in the field of economics…

    But these self-styled economic experts don’t even understand basics of economics, like Krugman does not know how banks operate.

    World is lead by fools.

  3. October 6, 2022 at 1:00 am

    How do outsiders know the “economist’s” claims are rubbish? Easy. Look at the assumptions (flow of time suspended, no economies of scale, no social interactions, no debt, no money(!) …).

    Look at the main conclusion: equilibrium. So there can be no such thing as a financial crash.

    (The bizarre assumptions are a desperate attempt to keep instability out of their abstract little world.)

    As I’ve said here before, too much flogging the dead horse. Go and learn how to do proper science. Have a look at my book in the column to the right.

  4. Kulin László
    October 7, 2022 at 6:57 am

    This article is very true. Today, the most important science is economics. Society does not want to accept the knowledge gained in books. People have no respect for books and work with books. I believe that your work is the most important in the world today. I am just a simple social person.

    Laszlo Kulin
    social expert Hungary

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