Economists Deserve Respect – Honestly?

I haven’t had time to voice my opinion of Robert Litan’s post over at Brookings in which he argues economists deserve a little respect. Presumably he is trying to rehabilitate the economics discipline’s reputation, and, also presumably, this is in response to the general derision being heaped on it in the aftermath of its non-prediction of the events of 2007/2008. And, I ought to add, the profession’s general disarray and inability to plot a path out of the crisis.

Before I get to Litan’s reasoning, let’s be clear: the failure in economics is not all-inclusive. There were, and are, pockets in which useful stuff takes place that helps us all understand actual economic events, and outline a few cause and effect relationships that give insight into things like our recent crisis. The failure is thus not general. It is specific.

Unfortunately it is specific to the bulk of economics since that bulk is comprised of what we can call orthodox ideas. Moreover it is specific to that part of economics that deals with large scale phenomena. That would include the economy itself. The public perception that economists aren’t very good at economics, where the definition of economics has something to do with actual economies, is close to the mark.

Back to Litan:

He responds to the derision by pointing out a few achievements in applied mathematics. Auction design. Cost minimization. Statistics in sports. Techniques in online dating services. And, of course, the development of a blizzard of financial “products”.

That’s it.

Now most people outside of economics wouldn’t necessarily consider any of those achievements as being economics. They are the kind of applied math that was in vogue a few decades ago when operations researchers were a hot commodity and linear programming was the hot topic. Well, they aren’t exactly the same, but they are a derivative of that older generation. They fall into the same category: applications of technique. Applied math is applied math even if you call it economics sometimes.

Economists are always in high demand for this kind of stuff. After all they are mathematical types. They know how to model. They know how to apply complicated mathematics. They are good with neatly segmented and contained problems.

They just aren’t very good with the economy. Which is why they wander off to apply their hard won techniques elsewhere.

Anyone trained in applied math could do those jobs. It’s just that economics produces a flood of such folk. So attributing advances such as those Litan lists to economics is a stretch, but understandable nonetheless. Yes that work was done by economists. Well done them. It just doesn’t seem like economics. Not to most people.

I do wonder, though, why they went off to tackle this issues. Why didn’t they stay and tackle the economy?

Perhaps they have been taught the economy is already tackled. In which case they were taught in error. Perhaps tackling the economy is beyond them. In which case those other achievements are the fruits of an earlier failure. Or perhaps tackling the economy is beyond the capacity of the math they have been taught. Now I think we are onto something. Maybe, just maybe, economists have struck out into other areas to use their skills because those skills are inappropriate for dealing with actual economic issues.

You know, the actual issues that most outsiders think economists ought to be tackling.

So Litan’s list, far from bolstering the economics profession’s reputation, merely highlights its continued failure.

Besides it’s a bit rich that Litan thinks economics has contributed mightily to business. That would the business performed by firms. And firms are untidy beasts quite unlike the production functions and representative agents that prowl neatly inside the imagined world orthodox economics plays in.

Nope. Litan will have to do better if he wants to generate the respect he thinks economics deserves.