Trust Me, I’m an Economist

LittleLizEconNoah Smith, an associate professor of Finance at Stony Break University has recently called into question the entire discipline of Economics. He equates asking economists for a economy advice to asking two 14th century English physicians for a medical treatment; each believes strongly in their own method (be it leeching or bleeding) though there is no way to prove either one and, in the end, neither is actually right.

Brutal.

And in a way, leeching and blood letting are to 14th century England what austerity is to the EU. But while the English were trying to find the best way to get blood out of people, in China, doctors had been using acupuncture since the 14th century BCE you guys which, despite varying conclusions regarding its efficacy, definitely does not kill people.

Likewise, while proponents of Mainstream Economics bend the ears of policy makers with their mystical models, economists doing good and different work go largely unnoticed to the powers that be. And no, I’m not just talking about the marginalized and incessant battling of Joseph Stiglitz and Paul Krugman.

Unfortuantely, the economists in the spotlight seem to be ruining it for all of us. Smith cites a study that finds that people often disagree with economists. However, the economists surveyed were from “eminent” departments which likely get their prestige from subscribing to the standard method of economics. And, anyway, anything the majority of economists believe is, unfortunately, not the nuanced and realistic economics of the hidden sphere.

My bet is that people don’t jive with economists because, like an undergraduate in Mankiw’s Introduction to Economics course, people are led to believe that (internal arguments withstanding) there is one set of Economic Principles and that Economics as a science is positive–that is, it seeks only to describe the world as it is, not how it ought to be.

Obviously, this is hogwash. Instead, of describing the world as it is, mainstream Economics describes a world where each individual makes choices to get the most utility (something like happiness) out of their money and time. Seems intuitive, right? But in this brand of Economics, people don’t like things like family or creativity unless they bring wealth and they never do something for someone else just to be nice. Okay, maybe… but even if everyone in the world is that disconnected from the people around them, this brand of Economics also draws from assumptions like: No company can ever make more profits than another because if that were so, obviously everyone would totally be doing what that company does since it doesn’t cost anything to break into any specific market. Or labor standards (like weekends and not-death) are worse for employment unless they cut costs to producers. And as long as GDP increases, everyone is definitely better off, no matter what kind of resource extraction or labor exploitation was used to generate this new wealth.

But beyond the world of wonky models based on problematic and unrealistic assumptions, many economists base models around–get this–facts! Some economists believe not only in regular fluctuations around a business cycle, but that continued sustained growth is impossible AND that recessions and expansions are inherent to a global capitalist structure!

Finally, some economists are not primarily concerned with GDP alone. Some economists recognize that life is lived and enjoyed with respect to many things: the government we live in, how safe we feel, the super or subculture we belong to, and some of these things may conflict with the desires of free-range capital. These folks study economics not in order to continually inflate already inflated financial markets but because they understand that the movement of money is not just dictated by entrepreneurship or the puritan work ethic but also by things like power dynamics and history.

Ultimately, though, Smith is right. The economics that has the ear of policy makers and the public is full of individuals who think that people procreate exclusively as a form of retirement insurance and that when I get my tax rebate, I carefully portion it out over the remaining fiscal year.

And he gives good advice: don’t trust an economist any more than you would a politician. No matter what we try to tell you, our assumptions and methods reflect some kind of ideology. While mainstream economists like to consider themselves the scienciest of the social sciences, we ultimately belong to a social science. So please, public, before you give up on all of Economics, please consider the diversity of ways it is conducted.

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Categories: State of the Field, The Dismal Discipline

Tags: ,

1 reply

  1. ..and thus we repeat after Joan:

    “The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.”

    ― Joan Robinson

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