The State Of Economics
I can’t let this go by. Today’s New York Times has the following article by Greg Mankiw: Economics View-But Have We Learned Enough? NYTimes.com
The article is fine. It’s the implication I want to bring to your attention. He concludes with some sobering words about the ability of the economics profession to understand … the economy. In fact he goes as far as to say don’t go looking to the profession for help in that regard.
Well what have they been doing these past eighty years?
The state of economic theorizing is appalling. It has become an overly mathematical exercise in navel gazing. The so-called ‘laws’ of economics are nothing but the properties of idealized and highly [some would say ‘bizzarely’] abstracted simplified models that bear no resemblance whatever to an actual, real, live economy.
Mankiw teaches this stuff at Harvard. He has made plenty of money with his popular text book. But apparently it’s of no use to anyone who wants to manage or direct a business or government.
Those kinds of folks will have to wait for economics to ‘get real’.
Given the intellectual backwater into which the profession has driven itself, courtesy of such lions of utopia as Walras, Samuelson, Arrow, Debreu, Friedman, Lucas, Solow et al the wait for reality could be long. Indeed such is their contempt for empirical content that the profession continues to warn us that their models are not to be taken as representative of anything real. Instead they are merely constructs from which interesting insights can be drawn.
Which makes the whole edifice sound a bit like genteel Edwardian teatime conversation rather than anything remotely scientific.
The fact that this lot of rogues persist in drawing salaries from gullible universities is itself an indictment of the efficiency of free markets: were there such a thing a a free market the economics profession would long ago have been forced to produce something vaguely useful by way of a description and theory of said market.
Instead we have a theory that argues that anything remotely real is a ‘market failure’.
But perhaps the irony here is that the market for economics professors is highly restricted. It is anything but free. Indeed the restrictions placed upon the market for economics teaching by the existence of such things as tenure may be exactly the reason that the profession has, according to Mankiw, produced not a jot of useful theorizing for the past eighty years.
To borrow a phrase: ‘teacher: teach thyself!’
How about a little competition? Getting rid of tenure for economics departments would be a good start: that way professors would be exposed to the same market forces that they advocate are good for the rest of us.
Those ‘gales of creative destruction’ could do wonders for economic theory.
So let me repeat: if you are looking for advice about what’s likely to happen in the economy, ask anyone but an economist. Mankiw says they haven’t a clue.
And he should know.
