The question in the title of this post - What Are Academics Good For? - was
meant to be rhetorical. I took it for granted that as a collective academic
economists did know rather more about economic policy than business leaders or
city economists, and the point of my post was to ask why this often appeared
not to be recognised by some journalists or some politicians. I included some
quotes from a journalist suggesting otherwise because I found them rather
shocking.
It serves me right of course. What I got almost universally in
comments was a discussion of all things wrong with academic economists. Even
the estimable Chris Dillow joined in. So what I should have done first is
establish what academic economists are good for, and then complained about
those who do not recognise this. But better to do things in the wrong order
than not at all.
First a point on scope that I did make but is worth repeating.
When it comes to short term macro forecasting, you are no better off asking
academic economists. In fact you may be worse off, because most academics spend
very little time looking at the latest indicators. The best macro forecasts,
whoever makes them, are only marginally better than intelligent guesswork -
this is a well established fact.
One area where academics typically have expertise relative to
other people is on issues involving economic policy - for macroeconomics, for
example, on issues involving monetary and fiscal policy. Issues like whether
austerity is expansionary or contractionary. I took this for granted because
academics spend a large amount of their time doing research on these issues. Much of this research involves assessing evidence. They do this in a highly competitive environment, constantly subject to peer
review. In addition, they often compete for research grants, where the opinions
of end users (like the Bank of England) can matter a lot.
Of course there are things that could be improved within
academia, and as Chris notes I have not been shy of giving some of my own
opinions about where this might be. But since economics first started being
studied, we have accumulated a substantial body of knowledge which policymakers
have found useful. Policymakers should never take advice uncritically, but they
should and do treat academic advice as a bit more than just another opinion.
What evidence do I have for this claim? First, a lot of the
time politicians and their civil servants do seek out and make use of this
knowledge. Indeed I ventured that the previous UK government might
have represented a high point in the influence of academic economics generally,
including macro. I described the evaluation of the 5 tests over
whether the UK should join the Euro as an exemplar of how the interaction
between academics and policymakers should work.
You could also look at central banks. When it comes to issues
of how best to conduct monetary policy, central banks predominantly look to
academics (mainstream rather than heterodox) for ideas and analysis, rather
than city economists or business leaders. The analysis they use in house is
often based on techniques initially established by academics, and they hire new
PhDs to undertake that analysis.
If you are not convinced by any of that, have a look at the
simple test I described in that recent post. The assertion that the 2013 UK
recovery validates 2010 austerity is not a complex issue or a matter of
judgement – it’s a simple mistake. Most academics understood that, but only
half of city economists did.
So that is why I found those quotes from a well known
journalist shocking. As I suggested in that post, I think it reflects an
anti-intellectual theme that affects other subjects as well. You will find this
kind of thing on both sides of the political spectrum, although for whatever
reason it seems to be more influential on the right than the left
right now. I got sent today some correspondence about austerity involving an
MP, where the MP said this. “You may come at this from an academic viewpoint -
I come at it from a real world viewpoint and as someone who has worked in a
sector where you have to earn money before you can spend it.” That statement is
so wrong for many reasons, but it also illustrates a damaging contempt for
academic knowledge.
Simon,
ReplyDeleteThere may or may not be a strain of anti-intellectualism that runs through economic debate. But your labeling that well known journalist" as an example is not correct. What he has displayed was not anti-intellectualism. Indeed a few of his articles display a high degree of intellectual engagement (for an newspaper article). Rather, on far too many occasions recently, he has engaged in intellectual dishonesty. His attack on Piketty was just one occasion.
An use of academics - sparing the time as you do to rebut intellectual dishonesty? countering one casual lie can take a whole page, some of use have not the time. I am grateful for those who generously give theirs.
ps. he also asserted that Sweden was a more unequal society than the UK without consideration of the commons. I can just about forgive this had he not tried to undermine Piketty's data by this very same assertion with regard to the US data.
fancy taklying him on that?
pingirl
Actually I do not think the dishonesty charge is fair. The mistake on Piketty was to play the man rather than the ball, as I suggested here:
Deletehttp://mainlymacro.blogspot.com/2014/05/what-financial-times-got-very-wrong.html
I think you could also speculate that the episode showed just the lack of respect for an academic that I'm complaining about here.
Policymakers do not necessarily institute policy with the goal of advancing the greatest good for the greatest number or even the greatest good for the greatest number of their own party. In the US we have seen policies followed, and I am thinking here of the Big Bankster Bailout, ZIRP, QE, in particular, which do the most good for those who in turn do the most good for policymakers whether it be in the form of campaign support or well-paid jobs in finance that generally involve facilitating business done with government. Policymakers generally make policy based on satisfying multiple aims, not least the personal aims of policymakers as a class. Satisfying the aims of professors is generally low on the priority list for policymakers, though the professors' advice can provide useful political cover for policy decisions made contrary to the welfare of the bulk of the public. This is especially so since academia is hardly unanimous in its advice and many popular academicians are seen to express opinions supporting the same side in political disputes, seldom switching parties and often denying the applicability of economic principles when partisan politics require such denial.
ReplyDeleteYou are right that politicians can generally find one or two academics to back their policies whatever. That is why it is so important for the media to point out when this is in fact the view of just a small minority of academics.
DeleteI realise you have been a consistent, clear and correct critic of austerity, and this is the mainstream academic view but do you remember the academics in favour of austerity ? See below. Of course it's a nuanced letter, and that was then and this is now, but even so it is understandable that policymakers and voters might regard academic opinion as difficult to fathom.
DeleteSeven LSE academics were among a group of 20 eminent economists who signed a letter to the Sunday Times on February 14th [2010] calling for urgent action to reduce Britain's budget deficit.
'It is now clear that the UK economy entered the recession with a large structural budget deficit.
'As a result the UK's budget deficit is now the largest in our peacetime history and amongst the largest in the developed world.
'In these circumstances a credible medium-term fiscal consolidation plan would make a sustainable recovery more likely.
In the absence of a credible plan, there is a risk that a loss of confidence in the UK's economic policy framework will contribute to higher long-term interest rates and /or currency instability, which could undermine the recovery.
'In order to minimise this risk and support a sustainable recovery, the next Government should set out a detailed plan to reduce the structural budget deficit more quickly than set out in the 2009 Pre-Budget Report.
'The exact timing of measures should be sensitive to developments in the economy, particularly the fragility of the recovery. However, in order to be credible, the Government's goal should be to eliminate the structural current budget deficit over the course of a Parliament, and there is a compelling case, all else equal, for the first measures beginning to take effect in the 2010-11 fiscal year.
'The bulk of this fiscal consolidation should be borne by reductions in government spending, but that process should be mindful of its impact on society's more vulnerable groups. Tax increases should be broad-based and minimise damaging increases in marginal tax rates on employment and investment.
'In order to restore trust in the fiscal framework, the Government should also introduce more independence into the generation of fiscal forecasts and the scrutiny of the Government's performance against its stated fiscal goals.'
Signed: Orazio Attanasio, UCL; Tim Besley, LSE; Roger Bootle, Capital Economics; Sir Howard Davies, LSE; Lord Meghnad Desai, House of Lords and LSE; Charles Goodhart, LSE; Albert Marcet, LSE; Costas Meghir, UCL; John Muellbauer, Nuffield College, Oxford; David Newbery, Cambridge University; Hashem Pesaran, Cambridge University; Christopher Pissarides, LSE; Danny Quah, LSE; Ken Rogoff, Harvard University; Bridget Rosewell, GLA and Volterra Consulting; Thomas Sargent, New York University; Anne Sibert, Birkbeck College, University of London; Lord Andrew Turnbull, House of Lords; Sir John Vickers, Oxford University; Michael Wickens, University of York and Cardiff Business School.
End
15 January 2010
2 points. First, many more academics signed letters giving the opposite view. Second, most of the academics here at least partially backtracked later on: see
Deletehttp://www.newstatesman.com/blogs/politics/2012/08/exclusive-osbornes-supporters-turn-him
I think if you now asked academic macroeconomists was Osborne wrong to cut back on public investment, you would get almost universal agreement.
And you would thus get almost universal unscientific behaviour on the part of academic macroeconomists.
DeleteThe question "did Osborne's cutting back on public investment responsible for such and such consequences ?" can be answered scientifically. But the correct scientific answer to the question "was Osborne wrong to cut back on public investment ?" is "what's 'wrong' ?".
Hume's Law in action ... again.
Show me the social welfare function where wasting resources improves welfare.
DeleteRecently, I have been trying to learn more about economics, in particular the possible benefits of stimulus, to help me to decide what to advocate in online policy discussions. As a layman, it is difficult to weigh the merits of the two sides of the argument (Krugman vs austrians).
ReplyDeleteOne test of beliefs is to look at who is prepared to make a wager, like on the future value of GDP. Those truly convinced will bet but those doubtful will not.
An economist who kept losing hundreds of pounds would quickly find himself abstaining, it seems to me.
You are frustrated with the doubts of the media. I would like to suggest to you that this could be a way to clearly indicate that not all schools of thought have the same validity.
Often those who are wrong are absolutely convinced they are right, while those who are right can see why they could be wrong. Would you trust the person with no doubts?
DeleteI think you have two alternatives. 1) you invest the time in deciding yourself which side is right. In this case not very difficult - just look at the data, particularly within the Eurozone. 2) You decide that it is rather unlikely that 36 academic economists with strong reputations are wrong and the 1 who disagrees is right.
I think I would need to have a better grasp of economic principles and the various schools since the data is often interpreted differently by different people. If I were to start studying the field, is there some site you would recommend where I can find out what books to read and pose beginner questions?
DeleteTim Harford's book is a good place to start:
Deletehttp://timharford.com/books/undercovereconomist-strikes-back/
I am not an economist but have become interested in economics after the start of this crisis. I read your blog sometimes, and I was very interested by your book advice here. So I looked at the book reviews on Amazon. In a very negative review (one star, by "helpful reviewer"), I read this argument:
Delete"Most damningly though he seems to have missed the latest research into money creation and continues the myth that central banks and governments control the money supply rather than private banks which create the vast majority of money in the economy. He admits that mainstream economics may have failed to properly consider the role of banking in their models but goes no further than that."
Isn't this talking about the "money multiplier" theory which you have been critical about? Is that topic a weakness of Tim Harford's book, or am I totally confused ?
I have also tried to read Wikipedia on such topics as the "money multiplier", but couldn't trust it, or understand it, or both. It would be great if academic economists could maintain a wiki site which would record their agreements and disagreements on all questions of interest to politicians and citizens alike.
Such a Wiki, or a kind of IPCC report for economics describing what economists agree upon and what not, would be a great way for outsiders to understand the state of the art in economics.
DeleteDid an MP actually say that in the real world one must earn money before one can spend it? Wow. What kind of an MP thinks that there is no need for bankers, underwriters or venture capitalists? Was this an unreconstructed communist?
ReplyDeleteYour argument that economics produces good policy is to point to a time when economics produced policy.
ReplyDeleteNo one cares whether academics produce a product that is used by governments. Alcohol influences the driving skills of millions of people, that doesn't mean it makes them better drivers.
How is it that economists don't know what evidence is?
PK makes a version of this argument when he tries to say that "textbook Econ" has performed well since the crisis. But he makes explicit what is here implied: getting policy right is not a matter of good theory. All the work is done by ad hoc modifications.
ReplyDeleteWhat SWL and PK relentlessly ignore is the obvious implication of their oft-repeated defense: there is good Econ and bad Econ, but there is no principle that distinguishes them.
The good Econ is good because it is right and it is right because it was good, and because it was right and good, more economists were opposed to austerity than were for it.
The policy recommendation generated by this comment thread is literally: count the signatories in the letters and pick the one with more.
Academia does have it’s weaknesses which haven’t gone unnoticed by plebs like me. E.g., 1, academics disagree with each other a fair bit, which means that at least some of them must be talking nonsense. 2, academics often use unnecessarily convoluted or pseudo-scientific language. That makes the plebs suspicious of academics. 3, academics have an interest in getting stuff published so as to further their careers. Where the latter is the main motive, the published material is waffle, almost by definition.
ReplyDeleteBut when deciding between reading something written by an academic as opposed to a journalist, politician or anyone else, I’d always choose the academic.
I agree with every word of this. But I worry: are academic economists as a whole doing enough to fight this anti-intellectualism? My concern is that you are unusual in doing so.
ReplyDeleteOxford and Bristol universities have professors for the public understanding of science. There is, as far as I can tell, no equivalent in economics. Yes, gibes about "Ivory towers" are anti-intellectual. But don't they also contain an element of recognition that some academics have retreated from the real world? (A bit of me doesn't blame them!)
Granted, some/many academics do try to influence policy makers, especially at central banks. but are they really doing enough to try to influence the public? Sure, the fault here lies also in the media and perhaps in institutional/cultural pressures on academics - perhaps even mainly so - but are academics themselves (yourself excepted) really wholly blameless?
I think this raising some interesting points. It is, as any economist would say, all about incentives. The overwhelming incentive for UK (and US) academics is to publish in top journals. In the UK that may be changing with the introduction of 'impact' into the latest research assessment, but its far too early to tell what impact that might have (and the market for academic economists is quite international). Your idea of creating posts in the public understanding of social science is interesting.
DeleteI think blogs are playing an important role in economics today. Lars Syll and David Glasner are effective counterweight to groupthink, the deification of the "greats" like Sargent, Prescott and Lucas and do a good job of exposing general silliness in the profession
DeleteSimon responded to your question and the MP consensus on your original what are academics good for blog.
ReplyDeleteYou may have asked “what are academics good for” as a rhetorical question. However, you also asked it because insufficient people support the arguments of yourself and other economists for your recommended policies to be implemented.
ReplyDeleteHere is Nick Rowe quoting Paul Krugman:
Paul says: "The more important point is that the neomonetarists are deluded in imagining that there is any constituency for their ideas in the modern [US] conservative movement."
And here is Nick’s response:
OK. Let's ask the parallel question about the neofiscalists. Is there any constituency for their ideas in the modern (US?) left-of-centre movement? Well, if we look at actual existing fiscal policy by an actual existing modern US left-of-centre government, I think the answer is "no".
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/07/neofiscalist-delusions.html
What of the UK? The current Government is not listening to either neomonetarists or neofiscalists. What of Labour? Here is Ed Balls:
“While Mr Balls’s opponents portray him as the overlord of profligacy, he is at pains to emphasise his frugal vision for the future. Events elsewhere in the world have, he suggests, eclipsed a significant moment when Labour’s recent policy forum voted for a fiscal settlement including sticking to government spending plans in 2015-16, bringing in a surplus on the current budget and reducing the national debt in the next parliament”
http://www.telegraph.co.uk/news/politics/labour/11007301/Ed-Balls-defends-Miliband-Anyone-who-rises-up-gets-knocked-down.html
So no-one who matters appears to be listening.
When you paint a picture of large parts of the economics profession as corrupt and willing to say whatever their paymasters require; when the tone of argument leads to entrenched positions; and when you are not prepared to engage with non-economists who want to learn about economics then you should not be surprised if non-economists go elsewhere to learn. The Internet will take care of inefficient suppliers of economic education in the same way that it takes care of many other industries.
Note, again, I am in favour of stimulus policies. This is not about a specific policy. You are currently losing the argument in the real world. You are right in theory but you have no strategy to be right in practice.
I won’t post again. I suspect that our perspectives are too far apart for useful debate.
"when you are not prepared to engage with non-economists who want to learn about economics"
DeleteWhat did I do to deserve that?
"I won't post again. I suspect that our perspectives are too far apart for useful debate."
DeleteI love this - exactly what academics are criticized for doing when they supposedly retreat into their ivory towers.
Anonymous: “I love this - exactly what academics are criticized for doing when they supposedly retreat into their ivory towers”
DeleteI can’t win! My comment about not posting further relates both to the title of this post “Anti-intellectualism” and “It serves me right of course. What I got almost universally in comments was a discussion of all things wrong with academic economists. Even the estimable Chris Dillow joined in”. I have no desire to post where my comments are unwanted but would happily debate if I thought my views were welcome.
I suspect that economists and non-economists want to ask and answer different questions. I deliberately read a range of blogs by economists who have different views. Many of my questions are about the differences between economists and how to determine who has the better argument.
Economist A will say “only monetary policy will work – fiscal policy will fail” while economist B will say “only fiscal policy will work – monetary policy will fail”. At least one of them is wrong but how do I decide which?
Economist A will say that New Keynesianism is the heir to Keynes while economist B will say that Post Keynesianism is heir to Keynes. However, they are very different and the associated economists have very low opinions of each other. I remember a specific very bad tempered debate between Paul Krugman and Steve Keen. It generated much heat and no light. Afterwards, by reading the two economists’ blogs, I found that not only do they both cite Keynes as an influence but also Hyman Minsky and James Tobin. For a non-economist there are some obvious questions. What is going on here? Why did the two strands of Keynesianism split? Why is it so bitter? Does it matter from a policy perspective?
When you read a range of blogs you also realise that economists have different definitions of even the most basic concepts such as money and banks. Which definitions should a non-economist use? Does it matter? How does a non-economist know which definitions an economist is using when he doesn’t make it clear? It is also obvious that economists use different mental models. However, these mental models are never articulated clearly. Hence, the non-economist has to try to work out what these mental models might be to attempt to reconcile opposing views.
Another set of questions arises from the different perspectives of economists and non-economists relating to aspects of the economy with which the non-economist is familiar. I spent 30 years in business and government. On no occasion in that time did anyone talk about the demand and supply curves which appear to form the basis of economics textbooks. Why is this? I have a view. However, it is impossible to discuss this with an economist as the economist assumes that only his perspective is valid.
I see that Chris Dillow has a post suggesting a role of “professor for the public understanding of economics”. My feeling is that the Internet will fill this gap more effectively than an academic as it will provide much greater choice. However, Chris’s heart is in the right place in suggesting the role.
No matter how often I ask, how does a layperson or policy maker identify the good econ and ignore the bad, no one answers. They general ignore the question, even though it is the only one that matters at all.
Deletewhat kind of answer could you hope for here?
Deletein practise you have to judge which answers sound most plausible, where the evidence looks stronger, and canvas opinion widely to get an idea of the reputation of the economist giving the answer.
it's not reliable, but what else could you hope for? A light shining down from heaven?
we are talking about a field of endeavour where even the best economists disagree and get things wrong, so hoping for somebody to reliably point to the truth is asking too much.
If you can't answer this question, then you can't even claim to be a "social science" let alone science.
DeletePK is actually creeping up on realizing this. When he quotes Colbert saying "Reality has a well known liberal bias" he's actually telling you why his macro advice tends to be correct.
who says the phrase "social science" cannot be applied to fields where it is difficult to choose between competing explanations?
DeleteI'd like to chime in here. The simple, albeit difficult, method of identification is to: 1) Learn economic principles (SWL suggested a book; there are several others) and the canonical examples that clarify their application; 2) use other sources of theory to learn the various widely-held positions on given issues and theories (e. g., the theory of marginal productivity, the notion of a perfectly competitive market, information asymmetry, looting, market rigging, monetary theory - of current interest is the notion of the Zero Lower Bound/Liquidity Trap - among them); 3) find reliable, free sources of data to compare with the data cited by economists or to confirm or disconfirm theory claims by economists, politicians, institutions (the CBO, say, or Cato Institute or Brookings Institution) and journalists; 4) develop at least an outline or overview of the histories of economics and markets in your country, at least, and, possible, other parts of the world; and 5) take the time to think things through for yourself - a good technique is "the five whys". When someone offers an opinion, ask why they believe it's true or applies to the case in question (or both); then, ask why that explanation appears true to them, and so on. In many instances, the second why stumps us; in most instances, the third why stumps us. If you are reading rather than conversing, ask yourself why (or how) claim _______ could be accurate or recommendation _______ should be fruitful. Then ask why (or how) your explanations of that claim could support it. Don't restrict your "whys" to data, evidence or theory. Look at other motives for making that claim (religion, some sort of self interest that might trump an interest in truth, accuracy or efficacy?). This process will help you make your initial ideas specific and will lead to other questions, other evidence, other data, other opinions and, perhaps to a resolution of your doubts.
DeleteTwo more places to start: online courses given free through Coursera.org and EdX.org. In these courses, you determine the extent of your participation - they make no demands, yet offer good opportunities to take courses from first-rate teachers employed by first-rate universities and colleges (Harvard, Princeton, UC Berkeley, UT Austin, Duke, Penn, Cornell, U Wisconsin, Ecole Normal in Paris, other European and Asian schools). The Penn course in single variable calculus on Coursera is among the best first-second-year courses I've ever seen (for engineers and applied mathematicians, not for those interested in pure maths). Antonio Rangel's "Econ for Scientists" via EdX and Robert Schiller's "Financial Markets" and "Principles of Economics are excellent (for a different point of view, John Taylor teaches a "principles" course on Stanford Online, too; there's even a course on "evaluating macro policy" on Coursera, which actually would a great place to start when it's next offered), as are several other econ courses and econ history courses on both "channels". Many of the lectures are available on YouTube and through iTunes University (iTunes store).
For me, this process takes some time and effort. I have read in excess of 10,000 pages of economics, excluding blogs, during the previous 4 years and have learned to use Eurostat, the St. Louis Fed Economic Database (FRED) in Excel (they have a 'way cool add-in), the OECD and the High Incomes database among others. Before these databases were available freely, I subscribed to the Economy.com service until they were acquired by Standard & Poors (the price went up beyond what I could justify).
I'm a little obsessive. You don't have to go this far to understand current economic issues well enough to vote or correspond/converse with representatives, friends, bloggers, etc. thoughtfully. But, opportunities for growth are plentiful. Time, effort and desire are the only prerequisites.
Jamie, no you can't, if your standards of resolution are too high for or don't apply to the particular domain of discourse. Economics (political science, sociology, too) is not a lab science. The standards of evidence, theory or hypothesis confirmation and disconfirmation and theory formation are different from those in, say, Physics or Chemistry. There are core similarities, for example, the behavior of aggregates differs from the behaviors of individuals (cats don't behave like cells, cells don't behave like electrons, and a stock's price may decrease as the market averages increase).
DeleteI have never encountered "bitter" disputes between or among economists with differing points of view or policy recommendations. Yes, the field is competitive and this competition is fierce. But, it isn't ferocious. This competitiveness is healthy. Agreed, there are economic and career status consequences that are factors in its ferocity, but, for the most part, the debates - among academics - appear collegial.
Now, the debates/discussions conducted in other forums - editorial pages of newspapers, magazines, blogs, speeches, the floor of the House or the Senate, a fundraiser, a private meeting, for example - may become bitter, personal or vicious, especially when a cultural or religious issue is introduced by one of the participants. However, in academic circles, one economist may charge another with being a "Market Monetarist", but no economist charges another with being a "fool" or "idiot".
Degree of difficulty of determining the "correct" view of the world (or adjudicating among competing views) is unrelated to whether a field of study is "scientific". The evolution of physics from the Newtonian view to the Einsteinian view of the world took 200 years, during which period there were fiercely competitive views about many critical details of that theory. There are still competing views of gravity, black holes, the shape of space, the nature of atomic binding and other areas of physics. Mathematicians disagree, sometimes vehemently, about whether a claim is true and why. Determining the existence of the Higgs boson required the expenditure of several billion dollars and building one of the largest and probably the most sophisticated structures ever built. I'd say that the degree of difficulty of adjudicating between theories that predicted its existence and theories that did not or denied it was pretty difficult. Likewise, the struggle to adjudicate between Darwin's theory of evolution and Lamarck's theory was fierce, extended and, at the lay level, continues.
DeleteDetermining whether to blame the Great Depression, high unemployment and depressed wages on central bank policy or bad fiscal policy or some combination thereof may be difficult, but, it's not impossible and it can be scientific.
Your last point is completely incoherent because it describes the (sometimes expensive, sometimes slow) process by which science decides between right and wrong. Such a process cannot be described for econ. Hence my objection.
DeleteThis really shouldn't take all these words, Thoughtful. In science, you start with observations. Enough generate a pattern. You express that pattern in more general terms that generate conclusions that are not in the original data. You look for ways to check those conclusions and if they match the data, then you have a valid theory, for the time being. If not, you reject the theory. That's Popper in a nutshell, not the end of all debate, but a great basic outline.
DeleteThere is exactly one example of this process playing out in econ that I have seen mentioned in the bloggosphere: auction theory. It's as if all of physics amounted to a half decent theory of why objects fall instead of rise due to the Earth's gravity.
Notice that data comes first:http://feedproxy.google.com/~r/Understandingsociety/~3/ukJHC5yLc5I/what-is-methodology.html
Delete"When it comes to issues of how best to conduct monetary policy, central banks predominantly look to academics (mainstream rather than heterodox) for ideas and analysis, rather than city economists or business leaders. "
ReplyDeleteDo you think this lack of diversity in recruitment may have been behind some bad decisions - especially during the Great Moderation?
It would not be a problem if macro-economic education was sufficiently critical and pluralistic.
On your first question, I hardly think city economists or business leaders would have been arguing against financial deregulation. What might have made a difference in terms of education was a greater focus on economic history, and thereby financial crises in the past.
DeleteAgreed. You can generalize this point to any sphere of discourse. I am amused at how short memories are.
DeleteI do have a bit of a problem with this - academic economist complains that academic economists aren't sufficiently respected. Well, you would say that, wouldn't you?
ReplyDeleteAnd your remark that an MP noting that “You may come at this from an academic viewpoint - I come at it from a real world viewpoint"..."illustrates a damaging contempt for academic knowledge" surely in itself illustrates an equally damaging contempt on your part for political realities.
I think your reaction illustrates exactly the point I am making. If we were talking about an established physical science, would you take this point of view? If not, why do you value 100+ years of research on some physical science, but think that 100+ years of research on economics counts for nothing?
DeleteNo, I don't think that 100+ years of research on economics counts for nothing. I didn't say that - why do you pretend I did? But by the same token you seem to think that 100+ years of accumulated experience of parliamentary democracy count for nothing, at least as far as the MP you cite is concerned.
DeleteThe MP did not say these academics fail to take account of political realities. Instead they implied that academic research was somehow unrealistic or impractical. They then followed it up with a statement - "as someone who has worked in a sector where you have to earn money before you can spend it." - which makes no sense on any level. This has absolutely nothing to do with parliamentary democracy, and everything to do with wanting to ignore what academic economists say.
DeleteWould you equally defend MPs who ignore evidence of climate change, or who advocate using astrology in healthcare?
Simon, I'd like to pick you up on one point (though this debate is probably over). You say:
ReplyDeleteOne area where academics typically have expertise relative to other people is on issues involving economic policy - for macroeconomics, for example, on issues involving monetary and fiscal policy. Issues like whether austerity is expansionary or contractionary. I took this for granted because academics spend a large amount of their time doing research on these issues. Much of this research involves assessing evidence. They do this in a highly competitive environment, constantly subject to peer review. In addition, they often compete for research grants, where the opinions of end users (like the Bank of England) can matter a lot.
But some of your recent posts on microfoundations, which I understand you to endorse as an approach, seem to say clearly that the value of a paper, at least within the profession, is nothing to do with the empirical realities and everything to do with the internal consistency of the argument. This worries me a lot because microfoundations (developed after my day, although we were beginning to talk about rational expectations) seems under these conditions to be well on the way to a hermetic branch of mathmatical logic.
And it leaves economists having very little useful to say ("Says Law: all savings MUST be invested or spent; Price level depends on money supply - ignoring velocity - and so on. If economists justify their work on the purity of its foundations and not on its relevance to the real world, why should anyone - journalists, politicians, even central bankers - take any notice?
Microfoundations research at its best is just resolving how models based on well establish microeconomic behaviour work out when you put all the pieces together. Having worked during my younger days on models which were much more data based, I know how much nonsense you can generate when you fail to do this. However I agree that there are big dangers with this approach, which is what I have written many posts discussing e.g.
Deletehttp://mainlymacro.blogspot.co.uk/2012/08/arguments-for-ending-microfoundations.html
I love the latest post quoting Cabellero on Lars Syll's blog.
DeleteIf you think that the micro-foundations of macro and REH are a realistic depiction of human behaviour and a good foundation for understanding how the world works, you need to be able to defend it in front of a psychologist and others who may have a very different explanation of how people behave and probably based on a lot of years of building up evidence and accumulated knowledge to get there.
DeleteYou must be open to criticism to people with different views. There must be a diversity of views in a subject like economics. There is no point in having a coherent model or standardised model if it is wrong or indefensible. It is the wrong starting point for analysis. The right starting point is to tread carefully and consider as much evidence (including from people in other fields) and different ways of looking at a problem as is possible.