superbus: arrogant (Latin)
Yesterday I leveled a serious charge at the economics profession, especially that part of it that provides advice to policy makers. So you might think that I would eagerly respond to the question that the organizers posed to us, how do we reform the economics?
In fact, the opposite happened to me. As the meeting unfolded I became increasingly convinced that I personally have no interest in such a program. This doesn’t mean that the meeting was unproductive for me. I moderated one of the four subgroups, the one that focused on the evolution and dynamics of institutions. We had a great and very productive time. As a result, I personally (and I think our subgroup as a whole) made huge strides in understanding what institutions are, where they come from, how they change, what selection processes operate on them, how we can build a mathematical theory of institutions, and how we can test it empirically. So my primary concern was with advancing the science of institutions, and that worked very well.
But as I attended plenary discussions and discussions within other groups (the format of Strüngmann forums allows, indeed encourages it), I became increasingly convinced that the charge issued by organizers, which seemed to make sense when we plotted the Forum, is misguided.
Instead of trying to reform the economics, I feel we should simply do good science. There is no need for me to “bring” evolution and dynamics into the study of institutions; I do it automatically as a result of my training. So what we need to do is advance our understanding of how institutions evolve, and how we can help this process to produce ‘good’ institutions that result in greater political stability and better economic growth, and that increase people’s well-being. Then we need to communicate our results to the general public and policy makers.
Trying to persuade economists is a thankless and unnecessary task. Unnecessary, because if we do good science economists themselves will want to learn about it. Thankless, because the field of economics has a special status among other social sciences, which makes it quite resistant to incursions from outside.
Probably the best way for my readers to appreciate this second point is to read a new article by Marion Fourcade, Etienne Ollion, and Yann Algan, which just came out in Journal of Economic Perspectives this month. Somebody at the Forum helpfully provided a number of copies of the article, and I read it on the plane over the Atlantic Ocean.
The article is titled, in a typical French fashion, “The Superiority of Economists,” thus reflecting both how the economists see themselves, and the ironic view that the authors take of their conceit. Economists think of their discipline as the most advanced, rigorous, and sophisticated of all social sciences. The majority of them feel they have nothing to learn from other, less ‘superior’ disciplines. 57 percent of them disagree with the statement that “in general, interdisciplinary knowledge is better than knowledge obtained by a single discipline.” Only 25 percent of sociologists and 9 percent of psychologists hold such a view. Economists are also much less likely to cite political scientists and sociologists, than those other social scientists citing across disciplines.
I can personally attest that the economists have dug a symbolic moat between themselves and the rest of social sciences by developing a peculiar and idiosyncratic jargon. As a result of my research being very interdisciplinary, I give a lot of talks at a variety of social science departments. I find that communicating with sociologists, anthropologists, and political scientists is easy and transparent. In economics department, on the other hand, I constantly run into communication problems. Economists frequently use the same term, with which I am familiar, in a very different, and sometimes even opposite sense.
Adding to their feeling of superiority, economists earn much more than other social scientists, especially at the top of the profession. The mean salary of top 10 percent in Economics is $160,000, while for top 10 percent of sociologists it is $118,000. Top economists have recently started earning more than top engineers.
And this is just their regular salary. Top economists derive large additional income by advising governments and corporations. Characteristically, most economists believe that their high levels of remuneration reflect their intrinsic worth, because they are smarter, more skillful, and harder working.
Economics is also a much more hierarchically organized discipline than other social sciences. There is a clear Table of Ranks for all economics departments. A department will only hire a Ph.D. student who graduated from a similarly or higher-ranked department, while placing their graduates at similar or lower-ranked universities. Other social sciences also follow this “prestige principle,” but the correlation between prestige and placement is the strongest in Economics. Fourcade and co-authors also show that power to place articles in top economic journals is also strongly concentrated. In fact, the universities publishing top journals strongly favor their own faculty when making decisions to accept a manuscript.
Much more so than for other social science disciplines, the American Economic Association is dominated by the top five departments. In fact, economists who don’t belong to the top 20 departments are entirely excluded from the leadership positions:
All these characteristics of Economics as a profession make economists an unlikely target of persuasion by outsiders. Economists should become more evolutionary and use more the methods of complexity science. But I now doubt that our Forum will make any impact on this proud and superior profession.
So what we need to do is advance our understanding of how institutions evolve, and how we can help this process to produce ‘good’ institutions that result in greater political stability and better economic growth, and that increase people’s well-being. Then we need to communicate our results to the general public and policy makers.
This is the right attitude. Don’t try to persuade. Just do it. If you have success, your work will have the honour of being stolen.
Turchin hits a home run with one exception: high pay means economists are clearly superior to others although only marginally better than engineers. 0.10 test is bull shit. As an economist, like my peers, I found 0.5 to be an acceptable result despite what statisticians claim. A pox on their house.
‘This narcissistic exceptionalism and dogmatic thought-policing not only severs cross-disciplinary connections to other social sciences but stifles debate within the profession itself. That’s the finding of the other recent study by Welsh researcher Joe Francis. Francis tracked the incidence of debate over a ninety-year period between scholars in the “big five” economic journals – two of which are American Economic Association publications. Using search terms such as “comment” “reply” or “rejoinder,” Francis found that the number of articles containing such terms declined dramatically since the 1960s – from over 20% in 1968 to just 2% in 2010. Unsurprisingly, Francis traces this decline to the marginalization Marxian and Keynesian thought by the mainstream during the neoclassical and neoliberal counterrevolution of the 1970s.’
Nicely done, Peter!
All the more reason to name the new field of complexity economics (informed by evolutionary studies) with its own title — Evonomics.
there is a relevent post just now about “whether economists have too much influence”. it’s at orgtheory blog, spinning off nyt discussion:
fyi, fwiw, since it might be pertinent here.
Reblogged this on syndax vuzz.
Once again Peter is right on target, and the Forcade et al. paper is first rate (it has great references, too). Two points:
First, economics has been strongly influenced by psychology through Kahneman et al., so the discipline is not closed to influence from outside. It has not yet been influenced by sociology, anthropology or other disciplines, although these are needed to systematize the findings of behavioral game theory.
Second, standard economic policy advice (e.g., as preached by The Economist, for instance, is very, very good. Most of the world’s woes are because this advice is not taken (e.g., labor markets remain ossified, domestic industries remain protected, corruption is not fought). I loved Colander and Kupers’ book on complexity approaches to policy, but standard policy is pretty good (by the way, economist have addressed European problems by urging structural reform, and have been quite split on “austerity,” although now no economist I have encountered thinks austerity has worked or should be continued).
Most of the payment powerful people get is because they can extract it through their power, not because they are giving something similar in value to the payment they get. The higher the inequality, the more this is the case.
What extraction power is this?
Sure Peter. Are we implying that the Forum was a waste of time, then? Why isn’t anyone telling us anything of the substance of what was accomplished there? Establishing that m/s economists are another highly empowered (though misguided) and comparatively very rich elite is one thing, figuring out how to lead in a different direction — even if we knew what that direction might be — is another.
I’m beginning to think that my hunch expressed indirectly in these pages earlier that the Forum has some kind of proprietary control over its results is probably true. Very unfortunate, imho. These are current issues that many, many people have a great interest in and the results of such an august body spending so much time focused on such important issues is big news, I should think. Yet: Black Hole. We are all condemned to wait for the 18 months or 2 years or whatever it might be to see the i’s dotted and t’s crossed perfect, exorbitantly priced (not accessible to anyone w/o a massive research grant to purchase) volume…welcome to the 18th century… Can’t blog about it, can’t talk about it ? Weird.
Too bad. Such promise squandered.
Best to all,
Thank you all for the comments! I am on my way to the airport, and will be away until the end of the week, but I’ll try to respond anyway.
My current theory is that economists are not paid to figure out the economy; they are paid to justify a certain set of policies. In other words, they are not like scientists, they are like lawyers. The conclusion comes first, then figure out the best argument to support that conclusion that you can come up with. This would explain why their conclusions change much less often than their analysis. It also explains why their salary does not seem to suffer from a lack of accuracy; accuracy is not what they are being paid for. Defense lawyers don’t get their salary docked for defending someone who was guilty; they get paid for making the best argument possible for a certain conclusion.
Economists are (for the most part) paid to come to certain conclusions in favor of the class of people who donate money to endowed chairs, etc. They are doing their job quite well, it’s just not the job most people think they’re doing.
Do you have some evidence for this theory?
It depends on what you call evidence; I haven’t done any kind of study to prove it. Since it relates to internal motivation, it would be hard to measure. However, it explains why the explanations given for the policies, change more often than the policy recommendations.
The best way to test it would be whether or not the ability to make successful predictions correlates to success in the field (measured in $$, citations, or something like that). Given that the economics profession generally does a pretty bad job of predicting recessions, etc., I can guess at the answer, but I don’t have proof of it, that’s true.
There are two separate issues here. One is of economic methodology and one is the structure/culture of the profession. One may of course influence the other but they are distinct. And just because one may be flawed does not automatically mean the other one is too (or vice versa). What the Fourcade et. al paper shows is that economics is a very hierarchical discipline. This is probably true not just relative to other social sciences which economics looks down upon, but also relative to physical sciences that economics envies. It’s not rare that you hear of some chemist or physicist or even a mathematician at some public state university making an important, even key, discovery in their discipline. In economics, for “big ideas” this is pretty much unheard of – you more or less got to be at a top ten school for this to happen (which isn’t to say that even in other disciplines some positive correlation isn’t present, as it should be). In cases where it does occur, it’s usually years later and indirectly, and only because an economist from one of the top ten schools rediscovered an idea from an economist not from one of the top ten schools and gave credit where credit was due (I’m thinking John Muth (though Carnegie Mellon is top 20) and Robert Lucas (U of Chicago) on rational expectations, or Thomas Reitz (U of Iowa, ranked about 40) and Robert Barro (Harvard) on the Equity Premium Puzzle – there are probably better examples).
So one can criticize the “market structure” of economics – which is what the Fourcade paper does, sort of – while at the same time believe that the fundamental methodology is more or less correct (and has nothing to do with supporting rich people or anything like that). Perhaps with better culture, scientific progress in the discipline would come faster and this is probably true in some sub-fields (again, “fluctuations macro”).
One natural experiment that I don’t think anyone’s ever analyzed occurred pretty recently, about four years ago when American Economic Review dropped double-blind reviews. If I had a few grad students at my disposal I’d have them collect data on the distribution of articles by department rank and see if there was any structural break there. Anyway… free paper topic out there for someone who does have those kind of resources.
Underlying assumption of Economics is so wrong that it can’t recover no matter what.
While Science using maths is trying to model the world after certain level of complexity it gives up and starts using statistics (randomness) to start waving hands.
At superficial you could say Economics is just like that except major assumption
is that negative number are forbidden and It is assumed that there is infinite growth
and resources. Debt can grow for ever. Even bubbles can’t really be deflated except for waving of hands.
It is not really modeling anything but some agreed upon goals.
Very few economist can truthfully describe what give 19 trillion dollars to Americans bank
did to the world economy and what is happening now that it is being withdrawn.
All without a hint of inflation in American economy. In order to tell the truth they would have
to describe the state of the world first.
Sorry but you are so far away from know what Evolution is that it is not even funny.
I would suggest reviewing Dr. E. O. Wilson’s work which is not even taught in school
even though it came out in 70s because it is so opposite of the placement of Human superiority.
Economics has already tried Quants. What more complex can it do.