Why Are Economists So Small-Minded?
Brian Taylor for The Chronicle ReviewAfter reading through a policy speech prepared by John Kenneth Galbraith, President Lyndon Johnson addressed the economist. "You know, Ken," he said, "the trouble with economics is it's like peeing in your pants. It feels hot to you but leaves everyone else cold." One only has to go to an economics seminar to know that Johnson was right.
Yet in an era in which markets have become the method of justifying and adjudicating all things, we cannot afford to have economics leaving us feeling cold and wet. Economics has become the benchmark for other intellectual endeavors; its practitioners rule policy debates; and, sadly, its mathematical modeling has become a closet form of anti-intellectualism — mathematically abstracted, as it tends to be, from real-world problems — that is creeping into other disciplines. While fewer people care that much of the lit-crit crowd stopped talking humanities to humans, economics is too central to political life for such shenanigans. It is time for the "queen of the social sciences" to get off her throne and start speaking to some of the lesser subjects in the kingdom of academe.
My "J'accuse" is this: The field of economics practices the very sin it preaches against — protectionism. That is to say, economists are protectionists of the intellectual sort at a time when the need for trade in the market of ideas has never been more pressing.
In a recent article, "The Superiority of Economists," in the Journal of Economic Perspectives, we learn a number of things that are truly impressive about the field: Its graduates have higher standardized-test scores than political scientists and sociologists; they tend to find places higher up in policy and advisory circles; they are the best at math; and they earn more money and tend to have better career prospects than other graduates do. It's no surprise that economists also seem to have more intellectual self-confidence than those in other fields. Economics, after all, is the only social science to have its own Nobel prize. Grounded in the present, they look toward the future and only rarely to the past.
As that survey of economic training shows, economics demonstrates more internal control over its own labor market, hiring only those who follow the prescribed formulas. The study of economics appears to be an exercise in the affirmation of orthodoxy.
Economists also have less regard — or perhaps greater disdain? — for other disciplines, as well as much more tightly wound methods, unified frameworks, and core principles that appear unchallengeable from within or outside the field. All of this condemns economists to a distinct epistemological insularity, a unified worldview that demarcates them from the rest of the academy. The more economists agree among themselves, the further they drift from everyone else.
As for that Nobel prize? Perhaps it is an example of the problem. It was created not by Alfred Nobel himself, as part of his project to recognize those who have created "the greatest benefit to mankind," but was endowed some 70 years later by the Swedish national bank in an act of propaganda — what one wag called "a marketing ploy to celebrate the Bank of Sweden's 300th anniversary."
The insularity of economics prompts an enormous irony: Rather than a market, economics borders on a command economy. From inside its fenced-in monocultural landscape, students are taught that they have arrived at the land of objectivity, that they have passed beyond the ideological and into the scientific. Not only is this protectionism, but it creates a rub with democratic theory and practice. It is, essentially, an invitation to opt out of the greater intellectual struggles in which the rest of us are engaged. By protecting itself from the contagion of outside ideas, economics offers up a more extreme version of the Balkanization and creeping anti-intellectualism that are apparent elsewhere in the academy. Its hegemonic role, however, makes all the more important the need for the field to open up and transcend its preoccupation with the blackboard fictions of economic modeling.
As the Keynes scholar Robert Skidelsky has put it, the methodological presumption of economics is that "a good car [called economic modeling] has been built: Students must learn how to drive it." But economics should not be a course in driver's ed; it should empower students to think critically and creatively about the whole system of transportation. We should be inculcating curiosity, a sense of adventure, a greater range of ideas, not shutting them down. After all, it's not as if economists are simply correct. When the queen asked the faculty members of the London School of Economics and Political Science why they did not foresee the 2008 financial crisis, they said they would get back to her. They later admitted in a letter that they had no answer and that their promise to provide one was an example of "wishful thinking combined with hubris."
The training of an economist encourages a sense of difference from others. The economist Robert Frank joined in performing a telling experiment involving the prisoner's-dilemma game with undergraduates at Cornell University, in which two players had to decide whether to work together or advance their own interest at the expense of their partner's. Economics students, the study found, behave less cooperatively than others do. Economics students were 42 percent more likely to predict that their partners would defect rather than cooperate in the game.
As students in general wind their way through four years of college, they tend to become more cooperative. But as economics students move toward graduation, Frank and his colleagues found the trend toward cooperation to be "conspicuously absent." In short, undergraduates who went through economics training became less cooperative and more suspicious of the cooperative impulses of others. Perhaps the principle of self-interest is taught as much as it is intrinsic to human nature. The final irony is that such behavior prepares aspiring economists for the very world they are seeking to create.
People are shaped by history and social experience. And the market changes people. To quote Alan Greenspan on recent social changes: The problem is "not that humans have become any more greedy than in generations past," but rather that "the avenues to express greed had grown so enormously." Even Greenspan thinks that context matters, that change over time matters, and that political culture shapes economic behavior.
His remark leads us to the vast and varied terrain of economic history. History is valuable, and, if the education of economists were more of an intellectual endeavor than a pipeline to careers in finance, it could be one intellectual component in a basket of approaches to get students to think more widely. Unfortunately, economic historians tend to be busy reducing history to the application of contemporary models to old data sets. And they don't like to talk with people in the history department very much.
Perhaps Thomas Piketty's immodestly thick compendium of theory, data, and narrative, Capital in the Twenty-First Century, promises a comeback for a broader range of ideas. Piketty is a rare voice willing to call out economists for their protectionist methods. As he boldly states in one of the most intellectually liberating passages in the book:
The book is more important, of course, for its argument about how the economy works. Piketty's basic premise is as heroic as it is succinct: The rate of return on capital outstrips economic growth, making capitalism an engine for inequality unless there are countervailing forces.
As powerful and persuasive as Piketty's work is, truth be told, he is not much of a historian. As much as I admire his data — and use it myself — the American history in his book, where it exists, is often just wrong in both fact and interpretation. He wields history like a chef with a heavy hand on the salt — it's there every time you taste the dish but it doesn't really help things. Balzac keeps popping up in Piketty's book, but there are no unions, the New Deal is not especially significant, and there is not much labor-market policy at all. Taxation and war seem to be the only levers of change and, by association, the only solution to problems. Social history — the history from below — seems like an unknown land.
In the past several years, there has been a resurgence of interest in the history of capitalism. What once might have been called the study of "political economy" is an emerging intellectual framework combining an array of methods and questions with a return to putting capital at the center of the historical narrative. The hope of those engaged in the history of capitalism is to challenge the clinical modeling of social life. There is not one thing we can call "capitalism," after all, but a contingent historical assemblage of work, investment, production, politics, and trade from the 15th-century spice trade through slave cotton to today's digital labor.
The new historians of capitalism tend to be more consciously ecumenical in their research and interpretive methods. Their strength is the opposite of mainstream economics. As the historian Louis Hyman has put it:
"When the story calls for linear regression, they use linear regression. When the story calls for the backstory of the commodity, they de-fetishize and figure out the story. When gender is the dominant force in the archive, they use feminist theory. Leveraging the ease of data analysis, the historians of capitalism display a return to numbers that has been lacking in historical scholarship of late. While math is widely used, its models are not lionized. Data does not displace the human element in history, but complements it. It is used to clarify and explain, but not be so complex that it can't be conveyed to normal humans."
For the most part, the historians of capitalism are engaged in the subjectivity of the matter rather than the objectivity of the model. They privilege facts over theory, the personal over the impersonal forces, the specific over the universalist claim, the implicative rather than the explicative, the narrative over the analytical, and the thick description over the compression, precision, and mathematical parsimony of the economist. What could be a better complement (I'm not looking to overthrow the discipline) to the insularity of economics than the subjectivity of real people?
To historians, it is clear that markets are less natural or specific than temporally, spatially, and culturally specific. They operate in a given moment created by social actors. It is difficult to look at the historical record and see the past as shaped by perfect competition, perfect information, and minimal interference by the government, let alone to see that markets always provide "fair" outcomes. Moreover, people trained in history, sociology, or anthropology would never believe that you could remove "market distortions" like unions or regulations without both affecting the course of democracy and strengthening the power of already dominant groups.
A 2014 study by Martin Gilens and Benjamin Page shows that regulatory capture has actually become regime capture, the power of wealth enjoying its near-complete conquest of the political process. The researchers conclude that the rich and powerful control the country, not the majority of its voters. In contrast, "mass-based interest groups and average citizens have little or no independent influence." How then can the study of economics become divorced from the study of politics?
In chiseling their intellectual enterprise down to its narrowest terrain, economists ironically reflect the fate of the hapless workers in Adam Smith's Lectures on Justice, Police, Revenue and Arms. He argued that the "commercial spirit" "confines the views of men." "Where the division of labour is brought to perfection," Smith argued, "every man has only a simple operation to perform. To this his whole attention is confined, and few ideas pass in his mind but what have an immediate connection with it." By separating economics from the rest of the intellectual world, by posing models that few understand or accept, economists' part in the intellectual division of labor has become more refined and less useful as a way to understand the world. Confined, indeed.
The textbook fundamentals of economics are important to us all — and important for people in all disciplines to be familiar with. Many economists are among the smartest people on campus, and I enjoy listening to them reason. But the fetishization of mathematical modeling, wrapped around the assumption of perfect markets and rational behavior, ends up being little more than a barrier to keep out the competition rather than an opening to the intellectual cooperation and collaboration that are sorely needed.
Here we must hail the rise of behavioral economics, with its creative experimentation, connection to sociology and psychology, and, to paraphrase Dan Ariely, its investigations into the predictability of the irrational. What economists can learn from other corners of the campus is that people live subjective, historically contingent lives, and that many of their core values and pursuits lie outside the tyranny of the cash nexus.
If we break down protectionist barriers, perhaps we can replace the study of Homo economicus with that of Homo sapiens. Let's not forget that paradigmatic breakthroughs don't come from supersmart parrots with the best math skills. Education is not technical training. New ideas come from energetic, youthful, rebellious intellectuals like John Maynard Keynes, who, with his protégé Hubert Henderson, wrote that we should feel "free to be bold, to be open, to experiment, to take action, to try the possibility of things. And over against us, standing in the path, there is nothing but a few old gentlemen tightly buttoned up in their frock coats, who only need to be treated with a little friendly disrespect and bowled over like ninepins." While the target of their impatience was politicians, perhaps the same might be said of what needs to happen in his profession today.
Come on, economists, the rest of us really need you.
Jefferson Cowie is a professor of history at Vanderbilt University. His latest book, The Great Exception: The New Deal and the Limits of American Politics (Princeton University Press), was released in January.
| Evernote helps you remember everything and get organized effortlessly. Download Evernote. |
No comments:
Post a Comment