18 signs you’re reading bad criticism of economics

Every mainstream science which touches on political or religious ideology attracts more than its fair share of deniers: the anti-vaccine crowd v mainstream medicine, GMO fearmongers v geneticists, creationists v biologists, global warming deniers v climatologists. Economics is no different, but economics cranks differ in that they typically make false claims about the content of economics itself, as opposed, or as a prelude, to false claims about the way the world works. That target sometimes making it hard for non-economists to differentiate crankery from solid criticism.
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Here, then, are some symptoms of bad critiques of economics:

  1. Treats macroeconomic forecasting as the major or only goal of economic analysis.
  2. Frames critique in terms of politics, most commonly the claim that economists are market fundamentalists.
  3. Uses “neoclassical” as if it refers to a political philosophy, set of policy prescriptions, or actual economies. Bonus: spells it “neo-classical” or “Neo-classical.”
  4. Refers to “the” neoclassical model or otherwise suggests all of economic thought is contained in Walras (1874).
  5. Uses “neoclassical economics” and “mainstream economics” interchangeably. Bonus: uses “neoliberal economics” interchangeably with either.
  6. Uses the word “neoliberal” for any reason.
  7. Refers to “corporate masters” or otherwise implies economists are shills for the wealthy or corporations.
  8. Claims economists think people are always rational.
  9. Claims financial crisis disproved mainstream economics.
  10. Explicitly claims that economics is not empirical, or does so implicitly by ignoring empirical economics.
  11. Treats all of economics as if it’s battling schools of macroeconomics.
  12. Misconstrues jargon: “rational.”
  13. Misconstrues jargon: “efficient” (financial sense) or “efficient” (Pareto sense).
  14. Misconstrues jargon: “externality“.
  15. Claims economists only care about money.
  16. Claims economists ignore the environment. Variant: claims economics falters on point that “infinite growth on a finite planet is impossible.”
  17. Goes out of its way to point out that the Economics Nobel is not a real Nobel.
  18. Cites Debunking Economics.
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  • “Uses “neoclassical economics” and “mainstream economics” interchangeably.”

    Mainstream economic theory is largely neoclassical, though. It is based on individuals ordering preferences and acting through a market to coordinate preferences and scarcity, usually in some form of equilibrium (whether time path DSGE or the basic stationary state). There are surely a few areas that don’t fit this definition, but to deny its prevalence is absurd.

    “Uses the word “neoliberal” for any reason.”

    How about “neoliberalism is based on an extreme interpretation of many neoclassical concepts” ?

    “Claims financial crisis disproved mainstream economics.”

    The financial crisis didn’t “disprove” an entire field, no, but it is a huge problem for financial and macroeconomists, and it is utterly laughable to claim otherwise. I’m not sure how you could – are you going to make some Cochrane-esque argument that these things can’t be predicted at all? Claim it was an external shock? Neither of those things are true, so I wouldn’t suggest it.

    “Explicitly claims that economics is not empirical, or does so implicitly by ignoring empirical economics.”

    It’s the interface between empiricism and theory, really. Can you give me one example of a neoclassical theory or framework that has been abandoned and never taught, referenced or used again due to empirical falsification?

    “Refers to “corporate masters” or otherwise implies economists are shills for the wealthy or corporations.”

    I don’t think all or most economists are shills. But there is a historical relationship between mainstream economics and wealth, dating back to John Bates Clark through the Chicago School and up to the more specific kind of stuff we saw in Inside Job. It’s historical ignorance to claim otherwise.

    “Cites Debunking Economics.”

    I think Keen makes some errors in his critiques, but that review is blithe and dismisses Keen’s own models without any real substantive content. Must try harder.

    “Goes out of its way to point out that the Economics Nobel is not a real Nobel.”

    It isn’t.

    Anyway, I at least partially agree with many of these, some fully. But you should really work on improving your discipline’s public image instead of engaging in such smug dismissals of people who are criticising your discipline for good reason (it fucked up, big time. Deal with it). Things like this are the reason students, employers, other disciplines and the public are taking economists less and less seriously. Try “hey, maybe I should show everyone the great work economists are doing” instead of “I’ll show these people how stupid they really are”.

    • Cameron

      +1

    • Mike Hall

      Well, yes, but I think Chris takes smugness to a whole new level.

      For the most part people using the terms above are usually talking in a political economy sense & terms like ‘neoliberal’ are completely valid.

      I think for any, yes, ‘mainstream’ macro economist to imply that their profession has not f**d up in an unprecedented fashion & writes such a pathetic attempt to deflect criticism is either callously self serving, blind or both.

      And it is patently obvious that heterodox schools like the post keynesians have been, and continue to be, shut out of mainstream discourse wherever possible. What passes for much mainstream ‘economics’, not just in the well funded ‘think tanks’, but academe as well, is completely politically infested toward – you guessed it – the interests of established wealth.

      For example, the Euro shared currency was criticised heavily by heterodox economists before it was introduced & is clearly failing in precisely the way they said it would. (Failing for the masses of course, not the top few or those running the ‘financialised’ economy.)

      Five years of mass unemployment later & is the mainstream even acknowledging the flaws in their thinking? No, except perhaps in barely whispered tones, while, yes, the ‘neoliberal’ mantra of ‘austerity’, ‘structural reform’ & all the other coded terms for screw the poor & reduce public services continue to cause devastation & increasing social unrest, including the rise of vicious far right political parties.

      But, of course, we’re not all in this together are we Chris? You and your mates in the top few percent are doing just fine & even enjoying the asset ‘firesales’.

      So, pardon me, for my ‘bad critiques’, but I do now know what a ‘fiat’ free floating currency is, and that twats like you flatly refuse +any+ serious academic or other engagement with people who advocate how it could be used to counter the waste & deprivation of chronic unemployment & falling real wages for ordinary citizens.

      • Chris Auld

        So, let me get this straight: I’m a macroeconomist who supports austerity and refuses to talk about free floating currencies because I’m trying to make even more gobs of cash in asset ‘firesales’ along with my friends in the finance industry and my goal is to cause devastation and social unrest and probably I’m a Nazi. Oh, and I’m a smug twat.

        Wow.

        • I think you are being a bit smug here, Chris. The above poster has a point: heterodox guys got a lot right that you likely didn’t. You should probably think on that.

          You may be able to shred Keen on some of his papers. You may even be right (I don’t know, I’m not interested). But you have to wonder: why did he get it right and you didn’t?

          • Chris Auld

            I want you guys to click on the “about” link. Am I a macroeconomist?

          • Em… then why on earth are you ENGAGING with macroeconomists, Chris? That would seem to fit under the “smug” heading…

          • Chris Auld

            I don’t know what you mean by “engaging with macroeconomists,” and I’m getting tired of the insults from you guys.

          • You wrote the above post. Was this aimed at critics of “microeconometrics, particularly as pertaining to issues in health and health care economics”? I doubt it. It was aimed at criticism against macroeconomics and financial economics that has sprung up on the internet and in popular media since 2008.

            You don’t like being lumped in with them. But unfortunately for you your own discipline is based on similar marginalist principles. I think those principles are wrong — and I think that some of the “crank” criticisms that you’ve laid out above are the beginning of valid criticisms of those principles.

            A lot of people have now begun to equate what you do with what microfounded macro and finance theorists do. Is this wrong? No, actually, I don’t think that it is. Because I think those critics are concerned with how these principles are being applied in our society at large — and that includes healthcare etc. It also seems to me that the problems with the theories are pretty much the same.

            To summarise: when you write a post like this you’re going to get people talking about macro etc. because that’s what people are talking about. Your discipline is founded on the same principles as contemporary macro. That is why you get what you think to be annoying criticisms. Because people have come to suspect the discipline — rightly so, in my opinion.

          • Chris Auld

            Folks in this thread have so far illustrated bad criticisms 1, 2, 3, 4, 5, 6, 7, 10, 17, and 18. Thanks.

          • It’s a shame so many other comments got attached to mine, because it gave you a chance to ignore/forget to reply to it.

          • Yes, Chris, because you have set up easy targets and strawman enemies. In fact, you’re just becoming what you claim to hate. You effectively say “Ugh… these heterodox idiots oversimplify everything…” and then you go on to massively oversimplify the criticisms.

            Some of your points have merit, as I noted in my response, and heterodox people need to stop making them. But you’re no better in this post. You’re just fueling the fire.

          • keats89

            unlearningecon, the claim that Chris Auld is refusing to reply to you because he is afraid to debate with you is simply absurd. If you want to fight the gladiator, you have to come in to the arena, which means, you first have to know, what the arena is and the way to get there, which currently you don’t. You can’t beat up your straw man in your own back yard and somehow claim that the gladiator is afraid of you. That is just unfair.

          • @keats89

            Sigh.

            Considering all your talk of “straw men”, you sure are great at constructing them yourself. I did not say Chris was “scared” of replying to me; I said that the shitstorm which followed my comment meant he felt he could ignore it, or that he forgot about it.

            And really, you should not learn the names of logical fallacies just to beat an opponent over the head with them as a substitute for debate. You should use them to break down the debate and explain where your opponent went wrong. Neither you or Auld have done this for me, and it doesn’t look like you’re going to, either.

            PS in my sort-of-response to Auld, I should have added “violently screams straw man at any criticism of the discipline, usually without pointing out where said straw man exists. Even if it does exist, it is usually insignificant but is used to avoid the larger point of the criticism”.

          • keats89

            I just wanted to make one thing clear: your comment wouldn’t have been ignored, for whatever reason anyone may claim, if it was worthy of a response. So by saying that Chris Auld wasn’t scared, I meant that he wasn’t purposely ignoring a comment that was worthy of a response because he did not have one. Unlike me, who was kind enough to respond and point out your stupidity. Regarding much of your other comments, you cannot blame the people around you for your own stupidity. Pull yourself out of the ignorant, masturbatory state you are in or else you will never be taken seriously.

          • pilkingtonphil

            Okay, I’m going to go the distance and shoot. I’ll provide you people with a thought-through criticism from a trained and working economist. And I guarantee it won’t be easy to swallow.

            Here we go. The public at large think that the profession is a scam. Policymakers don’t take it seriously. Students flock to the business schools because they know it’s useless rubbish. Financiers have dropped most mainstream economics doctrine and begun to focus on alternative measures to get returns.

            Here’s the reality guys: you’re becoming irrelevant. You may not think so because you exist inside a bubble. But you are. You’re becoming a running joke in the media (Fama being given a Nobel is very funny to smart people…). You’re no longer listened to in policy circles. And your audience is drying up.

            There’s your criticism. You guys are dinosaurs. And you may well have destroyed the discipline. I hope you’re happy.

          • Chris Auld

            econ enrollment

            http://nymag.com/daily/intelligencer/2013/05/why-are-college-students-flocking-to-economics.html

            Also: http://noahpinionblog.blogspot.ca/2013/05/if-you-get-phd-get-economics-phd.html

            Phil, I have unapproved your following post. Try again with some content in addition to insults if you want.

          • pilkingtonphil

            Hahaha! Go on Chris. Delete away. Keep up the sham. It’s popular in THREE schools because they’re shooting for BS Wall Street jobs. It’s dying elsewhere and EVERYONE knows it.

            You’re only lying to yourself. Keep it up. Pathetic.

            You’re the reason the discipline is dying. And behind the scenes we all know it. Clone.

          • It’s quite clear all you have are insults and nothing to back them up, so I’ll repeat your last sentence back at you, and at the profession as a whole (or at least, guys like Auld). The only people who really take economists seriously are other economists; everyone else (business, the sciences, other social sciences) can see the profession is a joke

            And yes, Chris, people do economics degrees for two reasons:

            (1) To learn about the recent crisis (which inevitably results in disappointment)

            (2) To get a job in finance.

            This doesn’t say anything about the state of the discipline.

        • I think your post is excellent but I do think you went overboard in replying to Mike Hall. I didn’t see him calling you a Nazi.

          • Chris Auld

            Well, apparently the goals of mainstream economists include “causing devastation & increasing social unrest, including the rise of vicious far right political parties.”

          • worldcitizen55

            Didn’t say it was a ‘goal’ Chris. Score another ‘don’t-blame-me’ straw man for yourself.
            What +is+ obvious to me is the mainstream of your profession could care less. I think lots of other branches of the plutocracy’s comfortably remunerated (& well invested) ‘authority’ are similar. But when I see the kind of largely unchallenged revisionism from people like Greenspan & the BS of the fake-Nobel committee (bankers! who else), well you guys take the biscuit.
            As one of the newly long term unemployed, at an age I will probably not work again, may I offer you on behalf of my fellow unemployed (not voluntary, but I haven’t had the heart to tell them about NAIRU) our own fake-Nobel – lets call it Dole-Nobel. Consider yourself the recipient of a steaming pile of dog turd, and you may dip your biscuit in it. (Congrats)

      • nk42

        Wow. You do realize that this comment beautifully illustrates the point of the article. Don’t you?

      • You must have missed all those obscure mainstream economists, like Paul Krugman and Gary Becker, who have opposed the Euro since forever.
        (They both got Nobel prizes, but econ Nobels are fake so naturally you would not have noticed.)

        • Rubbish. Krugman had an awful theory of the euro. Back in the 90s he was pushing the Optimal Currency Area argument which utilises Robert Mundell’s work (Mundell used the argument to SUPPORT the single currency! flexible framework right!). Then when the crisis broke Krugman dropped that and basically robbed the MMT argument with accrediting it. Now he’s talking like Wynne Godley was back in 1993, as are many others. But his framework of predictions was watery and merely suggested that there would be increased unemployment in certain countries. He did not predict the actual nature of the crisis.

          This is obvious to anyone who actually reads Krugman’s work in the 90s (which was awful on just about EVERY front) rather than worshiping at the temple of Krugman which has become a habit of marginalists under the age of 40.

          • Krugman’s writing in the ’90s is actually part of what got me really interested in economics. ;D

            It’s pretty bizarre to accuse Krugman of plagiarizing MMT. As far as I am aware, basically no mainstream economists take it seriously. And Krugman very, very openly uses Keynesian models to inform his thinking. There isn’t any plausible reason to assume MMT here.

            The current problems with the Euro are consistent with optimal currency area thinking. Different regions of Europe need different monetary policies. The Euro is … not … optimal.

            http://krugman.blogs.nytimes.com/2012/06/24/revenge-of-the-optimum-currency-area/?_r=0

          • His criticisms in the 90s were vague criticisms that the EZ was not an OCA. Then after the crisis he moved to the “they don’t have a sovereign currency” argument. That was articulated by Kaldor in the 1970s and Godley and the MMTers in the 1990s. Did Krugman literally plagiarise? I don’t think so. He picked it up because it entered the ether on the net via MMT. Krugman does that a lot. He’s not a very original thinker. He just appears so because the rest of the mainstream are such bores.

            But back to the point: there is no paper of Krugman’s that I know of that lays out what will happen in the EZ because of the euro that dates before the actual crisis. The heterodox guys on the other hand, well…

            http://neweconomicperspectives.org/2012/07/mmt-the-euro-and-the-greatest-prediction-of-the-last-20-years.html

            Yeah, the results speak for themselves, to be honest. Read the past statements with a detached eye and you’ll see that Krugman is a bandwagoner. Very unoriginal thinker. I have no idea why he has the stature that he does.

          • I will give the MMTers credit for those good predictions.

            To my knowledge, Paul Krugman doesn’t usually bill himself as a ‘creative thinker’ (outside of his academic work). If anything, he usually emphasizes that his analyses rely on dull, mainstream, textbook economics. And then he writes very well and does an entertaining job of lampooning politicians who stupidly abuse economics and basic math.

  • Yes!
    I’d be tempted to add 19. Gratuitously refers to Reagan, Thatcher, or monetarism.

  • 3.1 Confuses classical with neoclassical. Bonus: accuses economists of physics envy.

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  • notsneaky

    19. Some kind of comparison is made between one’s pet theory and Copernicus on one hand and regular economics and Ptolemy.

    This one’s more general actually. There should be some kind of Godwin’s Law style injunction against invoking Copernicus/Ptolemy in any kind of internet discussion.

  • LOC

    20. Does nothing but offer over-generalized/simplified negative critiques without putting forth a viable alternative model; or worse, promoting an alternative model that performs demonstrably worse than the current models being used.

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  • Luis Enrique

    “Mainstream economic theory is largely neoclassical, though. ”

    well I am never clear exactly what neoclassical means, although I have read mainstream papers in which they claim to be departing from the neoclassical by, for example, introducing frictions so that markets do not clear. Would I be correct to say things like externalities, principal-agent problems, limited commitment, asymmetric information etc. are all departures from the neoclassical?

    in which case the claim “”Mainstream economic theory is largely neoclassical” is false

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  • Chris,

    You may like this post of mine, which goes in depth on your #8:

    http://marcfbellemare.com/wordpress/2012/06/the-rationality-straw-man/

    • Chris Auld

      Well put, and nice touch adding a link to Rabin 1998.

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  • Nick Rowe

    19. Says economics should return to its roots in political economy.

  • Evan

    Wow, if your plan was to give your blog a jump-start and boost traffic after your hiatus you have done a marvellous job, Chris!

  • Someone needs to put together the economics equivalent of RealClimate, where economists spend a lot of time defending economics from the crazies.

    http://www.realclimate.org/

    • Sadly, such extensive empirical investigation, in conjunction with application of the scientific method, would not end well for many economic theories.

      • Sara

        It’s funny when mainstream economists compare their critics with climate change deniers – as if only “crazies” would deny the validity of their outstandingly successful methodology.

        • Auld is just a mirror-image of what he criticises. He complains that they call him a Nazi. He calls them equivalent to climate change deniers. He complains they call him an Austerian. He likens them to conspiracy theorists.

          Welcome to the fantastic world of cross-paradigm economic discussion. It’s about as interesting as watching children calling each other names.

        • Chris Auld

          Hi Sara,

          I made a point of saying that I was differentiating between bad and good criticism of economics, so no, I wasn’t saying that “only crazies” criticize economics.

          But it is the case that there is a lot of very, very bad criticism of economics out there (and in these comments!), just like in the case of climatology and other mainstream sciences which in one way or another trespass on ideological positions.

      • keats89

        and for some reason you know this without ever conducting and extensive empirical investigation in conjunction with application of the scientific method. You seem to have the habit of claiming to know things you don’t know.

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  • Do we need to unlearn evolutionary biology, astrophysics, climatology, and geology too? They all use pretty similar methods.

    • No, they don’t:

      http://scienceblogs.com/mikethemadbiologist/2011/03/21/when-economists-misunderstand/

      Please refrain from making analogies to sciences you don’t understand, and stick to economics. Can you give me an example of a neoclassical theory that has been falsified?

      • Can you give me an example of Darwinism being falsified? (If the question doesn’t make a lot of sense, well, neither does yours.)

        What all counts as a ‘neoclassical theory’? What counts as ‘falsified’? I.e., if the assumptions are proved wrong, but it still makes more or less accurate predictions, is it falsified?

        Economists have modified the bujeezus out of all sorts of theories over the years. Simple models of the minimum wage and unemployment have been falsified at this point, in my judgment.

        • It does make sense in that there are obvious things that could falsify Darwinism: bunny rabbits in the Cambrian, an organ of irreducible complexity. These things have never been observed, but as Darwin himself noted, even one of the latter would tear his theory to shreds. I’ve yet to see an analogous suggestion from an economist.

          However, evolution, though it has various iterations, is really one theory, whereas neoclassical economics is a collection of models characterised by a particular methodological approach (see Varoufakis article above). Hence, we would expect some of these models to have put put rigorously through the scientific method, and out of sheer probability we would see some of them abandoned, never used or taught again.

          But we don’t, and economists remain stubborn about, say, MC=MR even though firms don’t use it, utility even though neuroscience has shown how inaccurate it is, and many financial models despite the financial crisis (which is irrelevant right? Right!?). Hell, I bet most economists could never even dream of “falsifying” the demand-supply framework. Instead, we are met with special pleading about how the world behaves as if it is a model, or how it still serves as a “benchmark”, or other such ascientific wibble.

          So economic models are generally treated as a lens through which to view the world rather than put through the scientific method. The great irony is how much this has in common with a philosophy like historical materialism, despite economists insisting they are above such things.

          • Luis Enrique

            “But we don’t, and economists remain stubborn about, say, MC=MR even though firms don’t use it”

            I know! and don’t get me started on Biologists still teaching the Lotka–Volterra predatory prey model even after experiments have conclusively proved foxes cannot solve differential equations.

          • First of all, Luis, irony alert… The Lotka-Volterra model was taken over by… you guessed it… heterodox economists!

            http://en.wikipedia.org/wiki/Lotka%E2%80%93Volterra_equation#In_economics

            Secondly, dealing with parameters that involve animals eating or not eating each other is VERY different than dealing with parameters that involve humans making infinitely complex calculations every time they buy a bar of soap.

            If you don’t see the difference then, frankly, I fear for your capacity to reason in anything resembling a logical manner.

          • Skippy

            ^ #12 detected!

          • “It does make sense in that there are obvious things that could falsify Darwinism: bunny rabbits in the Cambrian, an organ of irreducible complexity. These things have never been observed, but as Darwin himself noted, even one of the latter would tear his theory to shreds. I’ve yet to see an analogous suggestion from an economist.”

            There have been many supposed examples of irreducible complexity over the years. But evolutionary biologists (rightly) ignored them, stayed with their original theory, and turned out to be right. And do you really believe they would change their minds if someone found a bunny in the Cambrian? It’d be dismissed as a hoax or put on the shelf as a bizarre mystery, until someone figures it out later.

            There are lots of things that could falsify simple models of supply and demand. For example, if prices go up, but everyone buys more anyway. Or outrageous price controls that don’t lead to shortages/surpluses.

            And actually, there are some examples of people buying more of things when the price goes up. It just so happens that the easiest way to account for these instances is to make the supply and demand model a bit more complicated, rather than throw it away. Veblen goods, Giffen goods. It doesn’t happen often enough to require a wholescale abandonment of supply and demand. You’d be throwing the baby out with the bathwater. It works pretty well 95% of the time.

            Same reason evolutionary biologists don’t throw away natural selection, even though there’s some inconsistent sexual selection too.

            Also, not true about the neuroscience (or misleading at least):
            Neural predictors of purchases
            http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1876732/
            “The findings are consistent with the hypothesis that the brain frames preference as a potential benefit and price as a potential cost, and lend credence to the notion that consumer purchasing reflects an anticipatory combination of preference and price considerations.”
            Utility seems to work just fine for these consumer decisions.

          • Hi Will,

            I think we had the evolution discussion on CT. I’m not saying that a single observation would mean biologists threw out evolution as a theory; however, there are established criteria for which the theory would not be tenable.

            To that end, I am willing to concede that a few examples, such as Veblen and Giffen goods (as well as financial assets) where demand doesn’t behave according to the theory are fine if we can establish alternative theories for them with a clear domain. However, what would you say to this?

            “Where reported … business enterprises stated that variations in their prices within practical limits, given the prices of their competitors, produced virtually no change in their sales, and that variations in the market price, especially downward, produced little if any changes in market sales in the short term. Moreover, when the price change is significant enough to result in a non-insignificant change in sales, the impact on profits has been sufficiently negative to persuade enterprises not to try the experiment again.”

            http://socialdemocracy21stcentury.blogspot.co.uk/2013/10/lees-post-keynesian-price-theory_26.html

            This seems like far more general evidence that there is something wrong with the demand-supply image of markets.

            That article on neuroeconomics is really interesting. But as I’m sure you know, there is conflicting evidence in this (it’s a relatively young field, after all). See, for example:

            http://www.theatlantic.com/business/archive/2013/01/the-irrational-consumer-why-economics-is-dead-wrong-about-how-we-make-choices/267255/

            As well as the well-known behavioural biases that I’m sure don’t need repeating.

          • Unlearningecon:
            http://socialdemocracy21stcentury.blogspot.co.uk/2013/10/lees-post-keynesian-price-theory_26.html

            That sounds true-ish to me. I did not think about industrial organization before saying simple supply and demand works ‘95%’ of the time. In retrospect, that should be a much lower number. There are definitely some markets, though, (gas prices, vegetable prices) where it works well.

            “This seems like far more general evidence that there is something wrong with the demand-supply image of markets.”

            I would say that it is a simplification and a jumping-off point for more sophisticated analyses. If you want to argue that that perspective is not emphasized enough in intro econ textbooks, I will have to agree with you. It took me a while to figure that out.

            “That article on neuroeconomics is really interesting. But as I’m sure you know, there is conflicting evidence in this (it’s a relatively young field, after all). See, for example: … As well as the well-known behavioural biases that I’m sure don’t need repeating.”

            You said utility in particular. There’s obviously not a utility section in our brain, but the assumption seems to be true enough, in those circumstances where consumers are buying things, to make the model useful.
            People aren’t really rational (or only very limitedly), but that assumption makes for tractable models, and it seems to be true enough to get ballpark correct answers from many models.

            Given increases in computer power, I expect that we’ll start seeing many more complicated models with more realistic assumptions sometime soon. Behavioral economists are certainly setting the stage for this. But until we have those, we’re stuck with rational agent models, hopefully applied with some common sense.

  • Actually, evolutionary biology has been a long-time interest of mine, so it’s pretty silly to claim I don’t understand it.

    The scienceblogs link falls prey to sign 1. Most economists aren’t working on macroeconomic forecasting, so it’s just plain crazy to paint this as a failure of the entire field. Mike the Mad Biologist should probably “refrain from making analogies to sciences [he doesn’t] understand”, rather than the other way around. Either that or clarify that he’s only talking about one group of macroeconomists.

    As for astrophysics, the difference is one of degree. They have a simpler field, so they’re better at making predictions. If it were possible to make the same quality of predictions in economics by boiling everything down to a few equations, I imagine someone would have done this already. But economics isn’t that simple, so the predictions aren’t as reliable, and there’s still a lot of work to be done to systematize all the complex interactions. (And, depending on the subfield you want to look at, like real business cycle macro, the predictions may not be reliable at all. But at that point, string theory is probably a better comparison.)

    • And if you really must have an example to match the prediction of antibiotic resistance, then let’s take the Euro, like Mike Hall brought up above.

      Decades ago, lots of economists were saying it was a bad idea. Lo and behold, it was.

    • Sara

      A previous comment said that mentioning physics envy was a sign of bad criticism. Clearly, that isn’t the problem here. Astrophysics is simple, compared to economics. And the real business cycle is like string theory, only different. Right …

      • Don’t forget that I’m also envious of evolutionary biology, climatology, and geology.

  • Charles Montgomery Burns

    Thanks Chris. I was reading ‘Monetary Economics’ by Godley and Lavoie, then I noticed they referred to “neo-classical” economics (not simply neoclassical but, neo dash classical), so thanks for saving me from reading bad criticisms of economics. You’ve done me a great service sir, I already feel marginally better. You’ve created a friction in my pants that has me all excited for your favorite brand of political economics.

    Well, I’m off to the auction. Thanks again, Chris.

    Goo goo g’joob

    • Chris Auld

      Hi Mr. Burns,

      I’m very happy that I’ve managed to get the dust in your veins flowing. Please do note, though, that asserting that X is a symptom of some disease is not to assert that whenever we observe X the disease is present, and some solid criticism of economics may nonetheless exhibit some of the symptoms of bad criticism, including spelling that word with a hyphen (I am not familiar with Godley and Lavoie).

      If you’re confused why I single out the word “neoclassical” in several points, I can do no better than to refer you to (noted mainstream critic) David Colander, who wrote the following 15 years ago, and it gets more true over time:

      The use of the term neoclassical to describe the economics that is practiced today is not only not useful, but it actually hinders understanding by students and lay people of what contemporary economics is. The term may still have a role in intertemporal comparisons, but if it is to do so, it is even more important to have the neoclassical era end at some point. Economics has changed enormously from 1870 to now, and is continually changing. To serve an intertemporal purpose, the term “neoclassical economic school” has to die.

      Let me be clear about what I see as the largest problem with the use of the term. The problem is its use by some heterodox economists, by many nonspecialists, and by historians of thought at unguarded moments, as a classiŽfier for the approach that the majority of economists take today. We all, me included, fall into the habit of calling modern economics neoclassical when we want to contrast modern mainstream economics with heterodox economics. When we like the alternative, the neoclassical term is often used as a slur, with our readers or listeners knowing what we mean. Of course, historians of thought are far better at avoiding this “slur” use than are others. The worst use, and the place one hears the term neoclassical most often, is in the discussions by lay people who object to some portion of modern economic thought. To them bad economics and neoclassical economics are synonymous terms.

      There is much not to like in current economics; but slurring it, by calling it neoclassical economics, does not add to students’ understanding of the current failings of economics. Economists today are not neoclassical according to any reasonable deŽfinition of the term. They are far more eclectic, and concerned with different issues than were the economists of the early 1900s, whom the term was originally designed to describe. If we don’t like modern economics, we should say so, but we should not take the easy road, implicitly condemning modern economics by the terminology we choose.

      [ emphasis added ]

      http://www.econ.uba.ar/www/institutos/economia/Ceplad/HPE_Bibliografia_digital/Colander%20-%20The%20Death%20of%20Neoclassical%20Economics.pdf

      • perfectlyGoodInk

        That sounds a lot like the reasoning that Texas’s board of education used when it banned the use of the word “capitalism”.

    • Well – assuming your comment is not in jest, which is a possibility judging by your tone – I think you have missed out on an excellent exposition of alternative monetary economics due to some shallow issues you have with it. I would suggest picking up the book again.

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  • sleestack

    19) Uses the words “Chicago school” or “Chicago economics”

    20) Any reference to Chile

    • Because the former doesn’t exist and the latter didn’t happen?

    • Latter; definitely, former, no. The Chicago School was a real thing once upon a time.

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  • I’m glad I’m not an economist, a political economist, a macroeconomist, a micro-linguist, or even an accountant.

    Or a Nazi.

    • AlanDownunder

      Ah, but you’re still an intertemporal optimiser, Matt.

  • Jonas

    I think you have it backwards. Those are all signs you’re reading an honest criticism of economics!

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  • Jim Rose

    I wonder if the critics of the efficient markets hypothesis follow its advice for their own retirement savings.

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  • CB

    Chris, thanks for this post. It’s certainly helped me firm up the reasons why I get so annoyed at people just slagging off the study of economics – it’s these lazy assertions that just get repeated over and over again without any critical evaluation.

    I personally am vexed by the idea that economics just consists of two schools of thought – neoclassical / mainstream and heterodox.

    In fact from how I see it (having just finished an undergrad economics degree), economics doesn’t consist of any schools of thought at all. These labels are often applied retrospectively by non-specialists and such groupings are really only plausible within narrow specific areas.

    Rather, almost all areas of “mainstream” economic theory have competing ideas – is the cause of unemployment due to heterogenous productivity between workers, by search frictions or by adverse selection? Is the correct mechanism for the price function in a DGSE model of the economy that where firms can change price at whim, or at a regular intervals (eg monthly)?

    I suppose some of this has to do with the highly mathematical nature of many modern theories (a good thing I would argue – in moderation). It’s hard to classify people into schools of thought if all they’re arguing over is the nature of the central bank reaction function, or the value of alpha in the rational expectations model of inflation.

    I have very little time for “heterodox” economics. Because “mainstream” economics is so diverse, those that fall into the former category are either doing so to make themselves stand out (and hence appeal to people who think economics is BS) or those that are so lacking in acceptance that most teachers of economics think it would be intellectually dishonest to even present these ideas as a viable alternative (eg non-marginal theories of value).

    Many people do not teach “heterodox” economics for the same reason that climate scientists do not teach the theories of professed sceptics – they do not think them worthy of academic consideration.

    I have come to the conclusion that most of these criticisms of economics derive from two causes:

    a) Putting an ideological dogma ahead of an objective search for truth. Mostly this is left-wing criticism, (eg Energy Company CEOs are nasty evil moneygrabbers, therefore any economic theory which does not support fullscale nationalisation is wrong), but it comes from the right in the form of Austrian nonsense.

    b) Confusing economics, particularly ‘positive’ economics, with sociology, political science, politics, economic history or finance and criticising it for not covering areas outside its domain. (eg criticising economics for ignoring concerns of political power, when these are not chiefly economic phenomena)

    • Jim Rose

      On ignoring concentrayoons of political power, are you aware of the public choice literature

      • CB

        Yes am aware of public choice literature, I studied it as a module in my degree. Optimal constitutions, mathematics of voting systems etc

        I suppose the best way to firm up my point above is that economics has diverse views on the content of economic theory.

        Whereas there is one consensus on how to go about constructing a theory – mostly mathematical argument, clearly stating your assumptions.

        Heterodox economics seems to distinguish itself not by the content of its theories – there are many “mainstream” economic theories which have non neoliberal viewpoints – but by their approach, which in my mind appears to consist of wooly demagogic verbal reasoning.

        This is the key distinguishing point, and in my mind explains why heterodox economics is not worthy of consideration.

        • Jim Rose

          boulding, coase, hayek and marshall were critics of mathematical economics.

          Can anyone think of a mathematical economics proposition that was accepted that was not consistent with what Boulding called the literary vagueness of classical economics and economic sociology?

          If mathematical economics came up with a result that was not reproducible through intuition, did the result become popular or were they ignored?

          Until this barrier is passed, mathematics will be a shorthand language rather than an engine of enquiry, as Marshall argued long ago.

          According to Pigou, Marshall “saw that excessive reliance on this instrument [mathematics] might lead us astray in pursuit of intellectual toys, imaginary problems not conforming to the conditions of real life.”

          Beed and Kane has a nice paper on the history of the critique of mathematics in economics in Kyklos 2002, 44 (4).

  • Ben

    1 sign you’re reading a bad listicle:

    1. It claims “economics is no different” from genetics, biology, and climatology.

  • It is not a science. Science makes testable predictions. Various economists make a wide variety of predictions, so one is likely to be right, but economics as a whole has been a failure.

  • ezra abrams

    a, hard to take seriously a website that doesn’t understand how contrast between text and backrgound influences readability
    b, that we “misuse” words like efficient is the fault of economists; if you want precise special meanings, don’t take ordinary words and re shape them, and then expect us to learn your reshaping

    • Chris Auld

      Hi Ezra,

      I don’t claim any particular expertise in website design. Can you please email me to explain what you think is wrong with the layout here?

      While I agree with you that economics is saddled with some unfortunate jargon, I do not agree that it’s economists’ fault when people denounce the discipline without spending the effort to learn what the jargon means.

  • Olaf

    Putting people that are against genetically modified food (where the potential consequences haven’t been tested at all) in the same place as creationists totally disqualified the rest of the article for me. This guy is a servant to corporate mainstream and not even able to distinguish between good science (Theory of Evolution) and bad science (playing with something, that isn’t really understood and declaring the results safe, before tests have actually confirmed that it is safe).

  • I think you are being quite unfair. Most of the points you mention are genuine criticism not the realm of cranks or creationists. To dismiss them outright without explaining why is hardly constructive. You may not agree that Neo-Classical economics is a thing or that it should be spelt this way (personally neoclassical makes as much sense as spelling it neclassical).

    Most economic textbooks are neo-classical, talk about rationality and have serious problems explaining the financial crisis. You may disagree but that doesn’t make the people you disagree with cranks.

    Also you should really reply to the top comment from Unlearning Econ, I think he gives a fair response that could hardly be called a crank.

    • anon

      are you kidding? that guy is the textbook case of bad criticism. every other post he makes is just a bunch of blanket statements about what he thinks economics is, and then he says it’s really bad. and he makes sure to write on forever and insert a bunch of hyperlinks to other things he’s written so it gives the illusion of vast knowledge to internet rubes who don’t know enough to evaluate the truth of what he’s saying. he’s never demonstrated much knowledge of modern economics beyond a really poor reading of MWG and other textbooks and a parroting of the blogosphere.

      not that you’re much better, Robert.

    • Also Chris I agree that there are plenty of cranks out there, but you have spread the net so wide here that it is almost impossible to criticise neo-classical or mainstream economics without bumping into one of your points. See I even did it there. These points more or less shut down the debate.

      • Chris Auld

        Robert, I went to your blog, and in a few clicks found-

        http://robertnielsen21.wordpress.com/2013/10/06/guide-to-the-economic-schools-of-thought/

        http://robertnielsen21.wordpress.com/2012/11/18/what-economics-doesnt-talk-about/

        which are very good examples of exactly the sort of ill-informed criticism I’m highlighting. The first one lists seven “schools” of economic thought, of which four put together include less than one percent of research economists. Easily three-quarters of economic researchers don’t fit anywhere on your list (if you’re going to define “Neo-Classical” so narrowly). See point #11.

        I’m particularly stunned by this claim on the second link:

        Whenever I tell people that I’m studying economics they usually ask me how to solve the recession or what to do about the banks. Each time I’m embarrassed over the fact that we have never even mentioned these issues in lectures. In my course I have basically been taught that the free market is the most efficient and best system in the world and trouble always results when it is interfered with. In my textbooks recessions are not mentioned, they do not happen. There is no explanation of unemployment, the biggest issue of our times. There is no mention of profit, the heart of capitalism. Nor do they talk about banks or money or advertising or how systems are guided by power relations. No mention is made of poverty, in effect ignoring three-quarters of the world.

        Economics didn’t see the recession coming because in their world, recessions don’t happen. The free market is always right.

        You’ve started a Master’s degree in economics, and you say you haven’t encountered any of these concepts in your coursework: recessions, banks, money, profits, advertising, unemployment, or poverty. These are core topics (advertising to a lesser degree), most of which have entire courses devoted to them even at the undergrad level. Would you cite the textbooks you’re using, particularly in courses like macro, labor, development, IO, and money and banking, which somehow overlook all these issues? For that matter, which Econ 101 text did you use that doesn’t discuss these issues?

        Your claim that you’ve never been taught anything other than the idea that markets are always ideal and any and all government intervention is bad is also staggering (see sign #2). A 30 second skim of Mankiw’s 101 textbook, much less reading the contemporary research literature, would disavow any observer of the idea that that’s the message of modern economic thought. Which textbooks did you use that never make mention of theories which pivot on concepts like: externalities, public goods, asymmetric information and uncertainty, or monopoly and imperfect information, nor the multiple entire fields rooted in these ideas?

        Can you post links to the syllabi of your current courses, so that we may all verify that you are receiving no education other than a distorted interpretation of Walras (1874)?

        I’ll also note the following: when I search for the word “econometrics” on your blog, I get “Nothing Found.” See sign #10.

        • I’m not sure what the problem with acknowledging schools of thought is. Different economists have different views on economic issues and the world in general. Sure the mainstream is dominated by two schools which have more or less merged but that doesn’t mean that is the only way things must be.

          First of all the second link was written when I was an undergraduate. when students begin economics, the concepts of perfect competition and equilibrium are hammered into our heads. If there is time some exceptions to these situations are added at the end but they are treated very briefly and it is implied that perfect competition where supply curves equal demand curves are the normal state of affairs.

          It is true that issues such as why the recession occurred was never discussed and unemployment was also assumed to be voluntary. I spent an entire module of Labour Economics listening to nonsense about how there is a trade off between labour and leisure that every individual can choose.

          You mention how these issues are discussed in economic research but the point is that undergraduates do not read this. While a masters programme may be realistic only a tiny proportion of students go that far. The rest leave economics with a vague feeling that all problems can be addressed by drawing lines on graphs.

          My econ101 textbook was “Principles Of Economics” by Frank, Bernanke, McDowell and Thom. Deviations from perfect competition were briefly mentioned by quickly dismissed as rare exceptions that almost never happen. For example monopolies were mentioned but we were assured that in a free market monopolies never form. Likewise it was acknowledged that in extreme cases distortions could occur but the market could always fix it and the government always made it worse.

          I posted a blog this morning on econometrics, though I doubt you’ll like it.

          • It’s weird – most of the replies to critics from economists basically concede that undergraduate economics is ridiculously incomplete and insufficient for understanding the economy.

          • Evan

            I wish I still had my copy of Frank and Bernanke with me, so I could check this, but from memory I’m pretty sure you have misrepresented the book badly, particularly with respect to monopolies. I’m pretty sure that they discuss natural monopolies, for example.

          • Chris Auld

            The table of contents can be viewed on amazon. Some relevant chapters-

            9. Monopoly and other forms of imperfect competition
            10. Thinking strategically (cartels)
            11. Externalities
            12. The economics of information.
            13. Labor markets, poverty, and income distribution
            14. The environment, health, and safety
            15. Public goods and tax policy

            That’s from the micro half, I didn’t go look at the macro half but I’m going to go way out on a limb and guess that it includes discussion of topics like business cycles, unemployment, and the benefits of well-chosen macroeconomic interventions.

            Robert, you were exposed to all of the ideas that you claim you never encountered throughout your undergrad degree in Econ 101. Unless UCD has the world’s weirdest undergrad program, you would have also been exposed to all of these issues (possibly except, again, advertising, which is important but not a core issue in economics) repeatedly and at great length in your other undergrad courses. If you want to try to maintain your claim to the contrary, I ask you again to provide the syllabi for your courses.

            Your claims are particularly weird in light of which Econ 101 textbook you had, too: you might want to look up who Robert Frank and Ben Bernanke are and try to reconcile their CVs with your claim that they wrote a textbook entirely omitting any form of market failure, denying government interventions of any sort can be helpful, and insisting recessions don’t exist.

            If your instructors told you that the free market is always perfect, then you had outright incompetent instructors who were basing their lectures on neither the textbooks nor the content of the contemporary literature. But, frankly, I just don’t believe you.

            Your blog post. Just: wow.

            Anyways, good luck with your studies, and do try to keep an open mind.

  • Agree wholeheartedly with points 2,3,4,5,6,7,11,12,13,16, and 18.

    Disagree somewhat with points 1,8,9,10,15,17. Brief comments:

    1: Forecasting isn’t everything but it’s a more important indicator of model misspecification than most macro people give it credit for.

    8. “Rational” is a way overused word in econ.

    9. Financial crisis didn’t disprove econ but it should have shaken the beliefs of certain macroeconomists more than it seems to have. It certainly shook the beliefs of most financial economists.

    10. Economics was way too theoretical back in the 80s. The problem is being corrected now but it was real.

    15. A LOT of econ models do assume complete markets.

    17. All Nobel prizes are silly, so insulting one of them is all to the good…

    🙂

    – N

    • Chris Auld

      Hi Noah,

      I don’t disagree that there is a germ of truth to some of the points I identify as symptomatic of bad criticism. On the other hand, there is also a germ of truth of in some crank criticism of other mainstream disciplines.

      A few responses:

      1. I’m referring to sweeping denouncements of the discipline which hinge on our inability to unconditionally forecast future states of the macroeconomy. It seems to me that most of these critiques are analogous to walking into an oceanographer’s office and screaming at them for failing to forecast Fukishima.

      10. I’m not sure how the lower proportion of empirical work thirty years ago justifies the claim that modern economics is purely theoretical, and I think you may be extrapolating from the state of macro in the 80s to the rest of the discipline. Many fields were pretty empirical back then too.

      15. Not sure what complete markets has to do with the all too common claim that economists think money is the only end in life. The linked piece in the Huff Post for example begins: “Greed is good” — a maxim that is boldly branded on the forehead of many neoclassical economists. Consumption and production are regarded as the sole ends of life. Sacrifice, self-reflection and all that is sacred is [sic] looked upon with disdain.”

      • 1. The post you linked to doesn’t even use the word “forecast”, the word “conditional”, or the word “unconditional”. You may be reading too much into these critiques. “Prediction” doesn’t necessarily equal “unconditional forecast”; it can mean “conditional forecast”, “conditional policy prescription”, or even just “encompassing a possible scenario”.

        10. Well, yeah, I don’t have a good idea of what the whole econ literature was like back in the 80s; I only know a few fields, like macro, urban, and finance. Finance was certainly very empirical back in the 80s.

        15. With complete markets you can calculate money-metric utility.

        • Chris Auld

          1. Just look at the cartoon, the gist of the post to which I linked is economics is good for next to nothing because we can’t forecast (if you don’t like that example just toss a stone at the internet, it’ll bounce off four more before it hits the ground). There are lots of types of forecasts; my point is that bad criticism often takes it for granted that the goal of economic analysis is to make unconditional forecasts of the macroeconomy and/or stock markets.

          15. Sure, but these are just modeling assumptions. The vast majority of economists think it’s very useful in many contexts to consider models in which people only care about material gain. Bad critics infer that we think material gain is all that matters in life, often taking it one step further by confusing models of choices with models of emotional states and insisting that we love greed and hate empathy. And puppies.

          • 1. I think my main point still stands. Unconditional forecasts are a more important barometer of model misspecification than most economists commonly assume. If a model has no unconditional forecasting power, then the structural effects it does capture – i.e. the effects upon which all of its policy recommendations will be based – must be small in size relative to the effects that are left unmodeled, so that even a small interaction between the two causes the structural model to be badly misspecified and hence give poor policy advice. This fact is ignored by nearly every macro paper I’ve ever seen.

            2. I’m not sure I see the difference between “caring only about money” and “caring only about those things whose value can be measured in money”…

          • Chris Auld

            1. “Forecasts are a more important barometer of [macro] model misspecification than most economists commonly assume” doesn’t rescue the claims along the lines “Treats macroeconomic forecasting as the major or only goal of economic analysis.”

            2. You wouldn’t say there’s a difference between models in which people trade off material well-being and other goals and models in which people only care about material well-being? Those other goals include: health, hewing to social norms or peer effects, the well-being of family, friends and strangers, leisure, fairness, spite, and so on, things we’re often accused of not caring about. It’s true that there are many aspects of life which are captured either not at all or poorly by economic models, including emotional states. But economics and psychology are different disciplines, and the fact that economists do not typically attempt to model these phenomena does not imply we think they don’t matter in life. Do you personally hold “sacrifice, self-reflection and all that is sacred” with “disdain” because they are not “consumption and production”? I don’t, I kinda doubt you do, and I don’t think many (any, for that matter) of our colleagues do, either.

  • Sara

    This is really a list of “things mainstream economists don’t like to hear so please don’t mention them”. Don’t make fun of the Bank of Sweden prize (sorry, economics Nobel). Don’t read that nasty debunking book. Don’t actually call us out on any of that rationality stuff. And how could anyone question our love for the environment?

    • Seriously, how could they? There’s an entire subfield devoted to it, and countries around the world are using ideas from economists to curb CO2 emissions.

  • Sara

    Seriously, anyone who questions their approach is a crank? That would be a lot of people.

    Auld compares critics to climate change deniers. But who are the ones in denial here? Who are the ones with their hands over their ears?

  • Jim Rose

    Oddly enough, most central bankers follow old keynesian macroeconomics. Read their autobiographies, as mankiw suggested. Apart from inflation targeting, modern macroeconomics passed them by as mankiw noted.

  • perfectlyGoodInk

    1. It isn’t the only goal, but I think it ought to be one of the top priority goals, given how badly our macroeconomic models perform right now at forecasting and the cost to society for this underperformance.

    2 & 3. Seeing as all the macroeconomic schools of thought weigh in very strongly upon the question of whether there should be more or less government intervention in markets (and leans right-of-center in general) and how often economists prominently take sides in political debates, I think these are self-inflicted to a certain degree.

    I think Barbara Bergmann was astute to point out that the large degree of political hiring of economists creates strong incentives upon them to fit into one of two camps, each producing research that politicians in one of the two parties can use as ammunition. Note, you don’t see this degree of political polarization even in political science.

    5. Er… what? I read neoclassical as shorthand for the Neoclassical Keynesian synthesis. If this is not the mainstream, what is? Post-Keynesianism? The Austrian School? The supply-siders?

    9. I think the crisis should have provoked a reckoning and post-mortem resulting in significant changes in macroeconomist modeling and how it is taught. I haven’t really seen much change, just a lot of hand-wringing.

    I think Unlearningecon and Noah Smith captured most else of my reactions.

    • Jim Rose

      you say that each camp of economsist produce research that politicians in one of the two parties can use as ammunition.

      Dan Klein has enough trouble finding republicans, much less libertarians, in the U.S. economics profession. In Is There a Free-Market Economist in the House? The Policy Views of American Economic Association Members he found that
      – about 8 per cent of American Economic Association members support free-market principles, and less than 3 per cent may be called strong supporters; and
      – By voting behaviour, even the average Republican American Economic Association member is middle-of-the-road, not free-market; 7 of his 264 American Economic Association survey respondents were libertarians.

      Fortunate for you the voter registrations of U.S. researchers can be cross-checked with faculty web pages to exposure their dastardly politics.

      See http://www.aei.org/files/2005/02/14/200502141_klein.pdf showing that in the hard sciences, there were 159 democrats and 16 republicans at Berkley. Similar at Stanford. No registered republicans in the sociology department and one each in the history and music departments. For UC-Berkeley, an overall Democrat: Republican ratio of 9.9:1. For Stanford, an overall D:R ratio of 7.6:1.

      This left-wing bias of academics is no surprise in light of Hayek’s analysis of the occupational choices of intellectuals in light of the opportunities available to people of varying talents:
      • intelligent people who favour the market tend to find opportunities for professional and financial success in the business or professional world; and
      • Those who are intelligent but ill-disposed toward the market are more likely to choose an academic career.

      • perfectlyGoodInk

        Classical School: less government intervention. Keynesian School: more government intervention. Chicago School: less government intervention. Institutionalists: more government intervention. Austrian School: less government intervention. New Keynesian School: more government intervention. Supply Side: less government intervention. New Classical School: less government intervention. New Institutionalists: more government intervention. Market Monetarists: less government intervention. Post Keynesian: more government intervention.

        • anon

          that is far more ‘schools’ than actually exist in even fringe economic discourse. this is the unfortunate part about bad economics criticism–it perpetuates this crazy idea of battling ‘schools.’ the only time I ever am forced to be reminded that “post-Keynesians” actually exist are when professional rubes like Phil Pilkington and his ilk invade websites I read.

          • perfectlyGoodInk

            Yeah, when I learned about this in my (admittedly sucky) graduate program, I thought it was crazy, too. Read _Modern Macroeconomics_ by Brian Snowdon and Howard Vane or _A History of Economic Theory and Method_ by Robert Ekelund, Jr. and Robert Hebert. Alternately, try _New Ideas from Dead Economists_ by Todd Buchholz, which is a much easier read.

            Sadly, these schools are very real. Oh, and I left out Marxism: more government intervention and Public Choice: less government intervention.

            What is most telling is that the New Keynesian argument with the New Classical school used to be over methodology. When that argument was settled in favor of the New Classical school, you would have expected in a scientific field for a completely different disagreement to break out over something completely unrelated with different sets of people. But no, the New Keynesians essentially put sticky prices into New Classical DSGE models and continued the exact same argument.

      • perfectlyGoodInk

        Dan Klein at GMU? Hayek? Gee, I wonder what school of thought you and he belong to? The one that argues that the business cycle is caused by government manipulation of interest rates? I’m not so sure he’s an unbiased observer.

        At the principles level, the textbooks universally argue against price controls and tariffs, and they illustrate the deadweight loss of taxes. The ones that cover externalities almost always argue against regulation and in favor of Pigouvian taxes or tradable emissions permits. I don’t know how you can categorize this (including Krugman’s text) as anything other than right-of-center.

        The differences in macro are even more telling. Some stress that, in the long run, any change to AD always show up in the price level with no change in output. One stresses that the SRAS curve is curved. One very prominent one leaves out the income-expenditure model altogether. A few model government budget deficits as being part of the supply curve of the loanable funds model instead of demand. Some don’t talk about crowding out. They hardly ever disclose to the student that these decisions were even made, let alone the reasoning behind them.

        Hayek’s right for most fields, but given the high degree of government, think tank, and also private firm hiring of Ph.D. economists, I think the incentives upon them are a little bit different than for fields where the Ph.D. is mostly useful for obtaining an academic position.

        • Jim Rose

          I forgot to mention that Klein’s results are consistent with 30-years of research

          Klein’s innovation was using the internet to link voter registration data with the home pages of academics across all sciences. this was an improvement on surveys at annual meetings and mail-outs..

          Academic discipline makes a tremendous difference: the humanities averaging a 10:1 D:R ratio and business schools averaging 1.3:1 with departments ranging from sociology (44:1) to management (1.5:1).

          do these differences allow use to conclude that sociologists are biased?

          Karl Popper argued that who made an argument is of little value. What matters is critical discussion of what they said. Knowledge grows through critical discussion.

          Peter Drucker made similar points about people with great strengths also come with great flaws.

          Biography sales would be 1/10th of theri current market size if the great were not flawed.

          • perfectlyGoodInk

            Given that markets and firms do not behave merely as sums of individuals, but have different characteristics, the field of economics is not merely the sum of academic economists. After all, the body of knowledge built up by past economists is also part of it, as I pointed out in regards to the content of what economic educators (including Krugman) teach principles students.

            Whether or not the field is center-right or not is irrelevant to my point that the field is overly politically polarized. Indeed, Klein’s finding regarding Berkeley and Stanford is not so surprising since those are both saltwater schools. I would expect far different results at Chicago or Minnesota or the aforementioned GMU. That departments are not that heterogeneous seems to me as more evidence of the political polarization of the field.

            Just look at the debate between adaptive and rational expectations, totally an argument about whether the government can counteract the business cycle, and totally ignoring the issue that both assume that expectations cannot be socially influenced.

          • Jim Rose

            Why is sociology so politically polarised?

          • perfectlyGoodInk

            As far as I can tell, having only taken a couple of sociology classes, the big disagreements in sociology do not line up so neatly behind the Democratic or Republican parties as the macroeconomic schools of thought.

            Where do you characterize Structural Functionalism? The emphasis on society over the individual kinda goes along with what social conservatives believe but squarely against the individualism in libertarian and free-market conservatives. I can see Durkheim as being conservative, but have a harder time figuring out where I would put Talcott Parsons. Merton is clearly liberal.

            Conflict Theory is associated with Marx, so you can make a case for this school being liberal, but I don’t think Simmel fits very neatly anywhere. The school also doesn’t fit very well behind the Democratic Party. It strikes me as a school that tries to describe how change occurs through conflict rather than advocating what kind of change ought to occur.

            And in which of the two parties does Symbolic Interactionism fit? General System Theory?

            Say what you will about sociological methods, and it’s certainly a field that skews left overall, but I think the variety of sociological disagreements and arguments and, more importantly, the substance of what they are arguing over, are exactly the kinds you would expect from scientific inquiry into a subject.

            In contrast, as I said before, every macroeconomic school of thought weighs in very strongly upon the question of whether there should be more or less government intervention in markets.

          • Jim Rose

            In contrast, as I said before, every macroeconomic school of thought weighs in very strongly upon the question of whether there should be more or less government intervention in markets

            perfectlyGoodInk. most issues about whether there should be more or less government intervention in markets are questions for microeconomics and applied welfare economics.

            in this regard, Milton Friedman argued that people agree on most objectives, but differ on the predicted outcomes of different policies and institutions.

            Then there is Christopher Robert and Richard Zeckhauser‘s taxonomy of disagreement:

            Positive disagreements can be over questions of:
            1. Scope: what elements of the world one is trying to understand
            2. Model: what mechanisms explain the behaviour of the world
            3. Estimate: what estimates of the model’s parameters are thought to obtain in particular contexts

            Values disagreements can be over questions of:
            1. Standing: who counts
            2. Criteria: what counts
            3. Weights: how much different individuals and criteria count

            Any positive analysis will tend to include elements of scope, model, and estimation, though often these elements intertwine; they frequently feature in an implicit or undifferentiated manner. Likewise, normative analysis will also include elements of standing, criteria, and weights, whether or not these distinctions are recognized.

          • It makes sense that macroeconomists would weigh in on political debates. After all, they are largely researching Federal Reserve policy and governments’ fiscal policy.
            There isn’t really a corresponding sociological branch of government for sociologists to study.
            (Though maybe that should make you worry a bit more about economists offering politicized advice — it does seem to happen. Then again, sociologists say some crazy things too.)

          • perfectlyGoodInk

            Jim Rose: “most issues about whether there should be more or less government intervention in markets are questions for microeconomics and applied welfare economics.”

            You would think so, but the New Classical school at its core argues that government intervention is both ineffective (due to rational expectations and the classical dichotomy) as well as unnecessary (RBC goes so far as to model unemployment as purely voluntary). Quite strikingly, this is pretty much the same argument as was made by the Classical school, just using fancier modeling.

            Orthodox Keynesians, on the other hand, is at its heart an argument that government intervention is both effective (the multiplier effect) and sometimes necessary (liquidity trap). New Keynesians make essentially the same arguments as Keynesians, just incorporating responses to the critiques of Monetarists (thus advocating monetary policy rather than fiscal) and New Classical school (using DSGE models with rational adaptations), but putting in sticky wages to show unemployment.

          • perfectlyGoodInk

            Will May: “It makes sense that macroeconomists would weigh in on political debates. After all, they are largely researching Federal Reserve policy and governments’ fiscal policy.”

            Yes, but one would expect objective scientific research and researchers to be nonpartisan, at least occasionally saying things that neither party likes. One would also expect schools of thought to form over issues that only students of the field would even care about and most politicians are indifferent to (which is what you see in sociology and political science).

            As long as you understand that incentives matter — including incentives upon researchers — none of this should be surprising. There are quite a few economists who receive political appointments to the Treasury, the Fed, the Council of Econ Advisors, etc. Not so many sociologists or political scientists. In medicine, they take measures to counteract researcher bias in the form of double-blind studies. I’m not aware of any similar practices within economics.

          • “Yes, but one would expect objective scientific research and researchers to be nonpartisan, at least occasionally saying things that neither party likes.”

            It’s very common for economists to pride themselves on saying things that anger (or just really confuse) people on both sides of the spectrum.

            For example-
            – inflation actually isn’t very important
            – ‘price-gouging’ laws are a bad idea
            – national wealth is determined by productivity, not by a country’s ‘competitiveness’, first-world ‘exploitation’, or whatever
            – a free market in kidneys is probably a good idea

            Greg Mankiw, former adviser to GW Bush, is openly Keynesian, likes Ben Bernanke, and supports a carbon tax.
            Paul Krugman is a staunch defender of free trade (he wrote an entire book about popular liberal trade misconceptions in the ’90s), has defended sweatshops, and criticised European countries for too much government intervention in their labor markets.

            Just read Freakonomics, or almost any popular economics book. You can’t miss it.

            “One would also expect schools of thought to form over issues that only students of the field would even care about and most politicians are indifferent to (which is what you see in sociology and political science).”

            You mean like microfoundations? Sticky prices? Rational expectations? Does aggregate supply ever cause recessions? Rule-based versus judgment-based Fed policy? Can you explain the difference between real business cycle theorists and monetarists, and why everyone abandoned monetarism in the ’80s?

            “There are quite a few economists who receive political appointments to the Treasury, the Fed, the Council of Econ Advisors, etc. Not so many sociologists or political scientists.”

            Outside of some wide limits, ideology is not an issue at the fed. Who was Bernanke before he was Fed chair? A well-regarded researcher who no one outside of economics had heard of, who has no political leanings that I’ve ever seen. And, until recently, their appointments were political non-events.

            A lot of economists take the stance that they are basically too good, as academic economic researchers, to get involved in real political positions, and really look down on those who do (fed doesn’t count, it’s run by economists).

            Seriously, your entire comment is pretty much 180 degrees wrong, and not because I’m being argumentative.

          • perfectlyGoodInk

            I agree with some of that, but I think some of it actually argues in favor of what I’ve been saying.

            As I understand it, Monetarism was primarily an argument against Keynesianism, that fiscal policy had long and variable lags and caused crowding out. It was abandoned largely because they succeeded in convincing the Keynesians that the money supply mattered (and also because velocity’s stability broke down, but I would say that Monetarism, like Keynesianism, evolved with criticisms and now continues to advocate less government intervention in market, now via rule-based monetary policy, similar in spirit to Friedman’s original proposal).

            But obviously, Monetarism was a conservative movement in response to liberal Keynesianism, which in turn was a response to the conservative Classical School.

            Will May: “It’s very common for economists to pride themselves on saying things that anger (or just really confuse) people on both sides of the spectrum.

            For example-

            – inflation actually isn’t very important”

            I characterize this as a liberal argument, where they prioritize fighting unemployment over fighting inflation in the Fed’s dual mandate.

            “- ‘price-gouging’ laws are a bad idea”

            Conservative argument. Many liberals support price controls. Liberal economists may agree with this, but they don’t seem to stress it nearly as much as conservative economists (again, look at the wide variance in emphasis on this in introductory textbooks).

            “- national wealth is determined by productivity, not by a country’s ‘competitiveness’, first-world ‘exploitation’, or whatever”

            This doesn’t anger either side. It’s just not useful to win elections.

            “- a free market in kidneys is probably a good idea”

            Yeah, that one’s a good example. I don’t mean to claim political appointment is the only incentive upon research. As you see with this and with Freakonomics (particularly Levitt’s infamous abortion study), there is also an incentive to court controversy to gain attention. But this incentive exists for all research fields.

            Will May: “You mean like microfoundations? Sticky prices? Rational expectations? Does aggregate supply ever cause recessions? Rule-based versus judgment-based Fed policy”

            These only seem non-political until you look more closely. The Lucas critique was a conservative argument clearly aimed specifically at liberal New Keynesian models. Sticky prices was, as I’ve mentioned before, the method how the liberal New Keynesians continued their existing political argument with the New Classical school after they lost the methodology debate. Rational expectations was a conservative argument against New Keynesians. The reason liberals want to keep the focus on aggregate demand is because government taxing and spending can influence it. As I already mentioned, rules-based monetary policy is an outgrowth of Friedman’s original conservative idea.

            You’re right about Bernanke being fairly non-political, but I don’t think you can say the same of Greenspan or Yellen, and I think my point about the polarization in the schools of macro thought still holds.

          • perfectlyGoodInk

            Remember, I’m talking specifically about incentives upon macroeconomic research. I don’t have a beef with micro or the supply and demand model or other areas of econ which do not show the same kind of political polarization (and from which come the arguments for free trade and Pigouvian taxes).

          • perfectlyGoodInk

            Sorry, I was mistaken. The Lucas critique was actually against the Keynesian models, not New Keynesian.

            Still, it’s essentially an argument that government policies will not be as effective as Keynesians expect because the policy change will affect people’s behavior. So this clearly falls within what I said before about the New Classical school making the conservative argument that government intervention is both ineffective and unnecessary.

          • “One would also expect schools of thought to form over issues that only students of the field would even care about and most politicians are indifferent to”

            This statement is still totally true of economics, regardless. Naturally, the different approaches tend to align with different political beliefs, but that’s unavoidable due to the implications of those different approaches, and it doesn’t negate the fact that most people neither understand nor care about this stuff.

            As for incentives — there are only so many political positions available. And even those who do get political appointments usually only stay in those positions for a short amount of time. (Something about being with their families again, etc.) For the majority of economists, it doesn’t define their careers and they don’t want it to. I’d also be surprised if they made a lot of money from this kind of thing.

            Given that academic economists spend most of their time in academia, it would make more sense that that’s where the relevant incentives are. Many also advise corporations, and those provide a whole separate set of incentives, which might be incompatible with political incentives. If people think you’re a politicized hack, corporations won’t want your advice.

          • perfectlyGoodInk

            My previous comment seems to have been deleted, but I suppose that’s because it largely repeated a previous one. Fair enough.

            I understand that the incentives affect every economist, but note that it doesn’t take many open slots to create competition. Indeed, scarcity can increase the level of competition. Note that there can only be one World Series or Superbowl Champion team per year, but I don’t think economists would suggest that more championships should be awarded to foster more competition.

            Also, recall the 13 schools of macroeconomic thought that I listed previously on October 25, 2013 at 7:52 pm and 8:40 pm (I wish this site had comment permalinks). If economists were nonpartisan scientists interested primarily in the truth, one would expect at least one of these schools to not take a strong stance at all on whether there should be more or less government intervention in the markets, and instead be purely about how their particular modeling technique of the macroeconomy explains it better and/or makes more accurate predictions.

            Indeed, given how poorly macro makes predictions (even after the financial crisis), one would expect a myriad of modeling approaches in healthy competition with each other, and not domination by a single poorly-performing one in DSGE. Economists believe that market competition increases quality, right?

            Also, assuming that Klein slideshow on faculty ideology that Jim Rose linked to is based upon Christopher Cardiff and Dan Klein’s “Faculty partisan affiliations in all disciplines: A voter-registration study” (2008) in Critical Review, the sample they used was of 11 California universities. I don’t think anybody would consider this a random or representative sample of the field, particularly given the saltwater-freshwater divide I mentioned earlier.

            Note that San Jose State and George Mason are both associated with the Austrian School, a rather conservative school of thought that argues that the Fed causes business cycles by creating malinvestment when it influences interest rates.

        • perfectlyGoodInk

          Sorry, that should have started, “I understand that these incentives do NOT affect every economist.”

          • I got your deleted comment in my email, so it’s all good.

            If we’re sticking to macro, then let’s stick to macro schools. And since we’re talking about mainstream macro, let’s ignore the heterodox guys for now. And since we’re not talking about economic history, let’s narrow it down to the guys who are influential today.

            So out of your list, we’re left with the New Keynesians and the new classical / real business cycle types.

            They do seem to be ideologically divided (albeit not perfectly). I don’t accept your logic here, though.

            “If economists were nonpartisan scientists interested primarily in the truth, one would expect at least one of these schools to not take a strong stance at all on whether there should be more or less government intervention in the markets”

            There are only really two, so that’s not obvious at all. Plus, they are modeling public policy. It would be very unusual if they didn’t have policy prescriptions based on their models.

            Economists who study public policies for reducing CO2 emissions have strong stances on those public policies too. It makes sense that they would.

            Criminologists have stances on crime policy, climatologists have stances on climate policy, education researchers have stances on education policy, and macroeconomists have stances on monetary and fiscal policy.

            “one would expect a myriad of modeling approaches in healthy competition with each other, and not domination by a single poorly-performing one in DSGE”

            Like IS-LM, you can get a lot of different results from DSGE depending on the assumptions you put into it. But there are also a lot of alternative models around, too. I was just recently reading about the Bank of England’s new economic modeling approach. They use DSGE as their main model, but emphasize using many different alternative models to look at things that DSGE may miss.
            http://www.bankofengland.co.uk/publications/Documents/workingpapers/wp471full.pdf

            I don’t know about the Dan Klein study, however, I’ve never seen anyone claim that Republicans outnumber Democrats among academic economists. Business economists, maybe. If you limit it to just macroeconomists, that may also change the balance. But among academic economists overall, the left-leaning people seem to very clearly outnumber the right-leaning people.

            [Sidenote- George Mason is known for its very libertarian econ department, but ‘Austrian school’ is mostly inaccurate. It’s a very eclectic mix, not dominated by Austrians at all, but with maybe a few of them. I used to be a libertarian, so I’m familiar with many of the econ profs there.]

          • perfectlyGoodInk

            Your link gets me a 401 error, but I think I was able to find it elsewhere. Are you referring to “Report on modelling and forecasting at the Bank of England” by Adrian Pagan?

            Note, much of my earlier comments were written hastily, as I have a 2-year-old. I think the tone of the discussion suffered as a result. If you don’t mind waiting, I’d like to take time to read the paper (assuming this is the right one).

            My impression so far is that the author believes academia produces models that emphasize theoretical coherence too much over empirical coherence, which is why they make use of older models, like the hybrid models from the 80s, but maybe I’m reading a different paper than you are.

          • Well that’s embarrassing. I really was reading this just last week:
            http://www.bankofengland.co.uk/research/Documents/workingpapers/2013/wp471.pdf
            This one should work.

            Different paper than you found (though that one looks like it could be interesting). It just gives a detailed description of the models the Bank of England is now using. Apparently they set up a new modelling system recently. I was curious.

            That does seem to be a regular argument from some economists, that there’s a tradeoff between theoretical coherence/microfoundations and real-world usefulness.

            No problem about the tone. I’m pleasantly surprised to be having serious discussions in these comments.

          • perfectlyGoodInk

            My previous comment has been stuck in moderation for about 17 hours now, so I’m reposting it without the links.

            Anyway, narrowing down the schools to two seems like asking for the same problem as Klein’s study: shrinking your sample size merely to try and make a specific point. Why should heterodox be ignored? Part of my claim is that the market of macroeconomic models resembles monopoly/oligopoly far more than perfect competition. That the mainstream journals marginalize heterodox research seems to me like part of the mechanism by which DSGE’s market power is exercised.

            Why should mainstream history be ignored? It indicates how long political polarization has been occurring (since macro’s inception, really). This would, of course, include Classical (conservative), Keynesian (liberal), Monetarism (conservative), New Classical (conservative), New Keynesian (liberal).

            What is most striking is that even you trimmed down the sample according to arbitrary reasons that you haven’t even specified, 100% of the schools in the remaining sample still take a strong stance on whether there should be more/less government intervention in markets. So I’m not sure how this furthers your point.

            I also disagree with your claim that this polarization must necessarily occur given the subject matter. Both schools’ models could make predictions that have conservative implications half the time and liberal implications half the time. When New Keynesians lost the methodological debate with New Classical, a completely orthogonal rift could have began instead of the same argument continuing with DSGE models.

            And as I mentioned earlier, there is a sharp contrast between these schools of thought with those found in sociology. As I go back and review Ritzer’s _Contemporary Sociological Theory and its Classical Roots_, their schools seem even less political.

            Even Durkheim defies political classification. He describes society transitioning from mechanical solidarity towards modern organic solidarity due to an increase in dynamic density that results from division of labor. As a result, law transitions from repressive to restitutive, and people are more likely to experience anomie, or a sense of not knowing what to do.

            As far as I can tell, this was not a condemnation of what was going on (and even if it were, that might be considered conservative from a social standpoint, but would clearly go against conservative from an economic/fiscal standpoint), but an attempt to describe and explain it such that it would be clearer what social problems may arise due to this transition.

            And I’ll ask again, behind which political party would Symbolic Interactionism fit? It argues that the meanings driving people’s actions are derived from social interactions. Where do you put Weber? His political economy work does feature methodological individualism, associated with Austrians and libertarians, but within sociology, he’s known for describing society’s increasing rationalisation while withholding a value judgment about whether this trend is good or bad. Talcott Parsons’s main contribution is AGIL, breaking down society’s main functions into four main areas – Adaption, Goal Attainment, Integration, and Latency.

            All of this strikes me as a much, much more positive endeavor — seeking to observe and describe — than macroeconomics, which appears far more normative in making prescriptions and policy advice (I’m not even talking about Reinhart and Rogoff).

            Regarding the Bank of England paper (and eh, links move and break all the time), I have not finished it yet, but from what I can tell so far, they are drawing primarily from a New Keynesian DSGE model, supplementing it with a number of older models. They are not drawing widely from a number of schools of thought. Indeed, it seemed like a number of models were not from academia at all, and a number of them were VAR models, which I believe are not macroeconomic models at all but statistical ones similar to what econometricians use. I see that is a huge vote of no-confidence in modern macro modeling techniques.

            More strikingly, but not surprisingly, they don’t even have a very high degree of confidence in the models ability to forecast. Repeatedly pointing out that their philosophy is that “all models are wrong, some are useful,” but more importantly, “models play a supporting, rather than a starring role.” They are used only to provide insights to the people actually making policy decisions using their own judgment.

            It’s very interesting reading, though. Very insightful. I should link the ones I’ve been alluding to. I mentioned Bergmann before, but the article I am specifically referring to is “The Current State of Economics: Needs Lots of Work” (2005).

            She is very liberal, but it wasn’t until I read this essay that the mess I learned about macro history in grad school made any sense. Also, I really should not have bad-mouthed my school. It’s low-ranked, but I did learn a lot, and I wouldn’t have my job now if not for the degree.

            However, my education was notably lacking. I got my master’s degree without ever being taught the monopolistic competition model (not even the principles course version). And in my intermediate macro class, I was not taught IS/LM. The professor (who I still regard very highly), drew the basic curves on the board and then crossed them out because he didn’t like it.

            I had to learn both of these things on the job. I doubt my experience is typical, but I deal a lot with principles textbooks in my job, and as I mentioned earlier on October 25, 2013 at 8:57 pm, the wide variance in how they cover macro is very telling.

          • perfectlyGoodInk

            I already recounted Bergmann’s best point, that there are incentives on research, and this seems to have had an effect of politicizing the field (she doesn’t go through the macro schools, that was my conclusion after reading her). But if you are curious (assuming this makes it through moderation) the link is here:

            http://www.jstor.org/stable/25046110

            Thanks for the correction on GMU. I still consider myself libertarian (although on the pragmatic moderate side), and so I’ve been to some events where folks like Caplan, Cowen, and Boettke have spoken, and several GMU grads ended up teaching at my school, so my apologies for drawing the incorrect conclusion (although I think my point still stands, as both Cardiff and Klein disclose in the paper that they are libertarian, and that this was the motivation for the piece).

            That Cardiff & Klein study is here:

            http://dx.doi.org/10.1080/08913810508443639

            I think it is a good example of the problems that result from not having standards, norms, or rules to prevent researcher bias from affecting research. There is no literature review, and their methodology to reach balance involved including “less-Democratic regions of California,” which seems to ignore that academic placement is a rather different process than how folks in the private sector decide where to live. Also no explanation for why they didn’t include San Jose State’s conservative department, where Cardiff was teaching.

          • I did not shrink the sample size ‘merely to try and make a specific point’. I shrunk it for exactly the reason I stated — staying on topic. This is a discussion about the current scientific status of economics — and earlier on, YOU said that we were narrowing the discussion to macro. So I limited the schools to current mainstream macro.

            “Why should mainstream history be ignored? It indicates how long political polarization has been occurring (since macro’s inception, really).”

            Point taken.

            “And I’ll ask again, behind which political party would Symbolic Interactionism fit?”

            I have not claimed to have an answer to this. I have no disagreement with you here.

            “I see that is a huge vote of no-confidence in modern macro modeling techniques.”

            Which is really common sense at this point.

            –“However, my education was notably lacking. I got my master’s degree without ever being taught the monopolistic competition model (not even the principles course version). And in my intermediate macro class, I was not taught IS/LM. The professor (who I still regard very highly), drew the basic curves on the board and then crossed them out because he didn’t like it.

            I had to learn both of these things on the job. I doubt my experience is typical, but I deal a lot with principles textbooks in my job, and as I mentioned earlier on October 25, 2013 at 8:57 pm, the wide variance in how they cover macro is very telling.”–

            That’s a lot different than my experience. Did you pick your school based on libertarianism? I would be less surprised in that case.

            Unfortunately, I have no JSTOR account. But I will see if I can get a hold of it.

            I’m not defending the Klein and Cardiff study. I actually don’t remember why we are talking about it.

          • perfectlyGoodInk

            Yes, I did pick my school for that reason, as I originally wanted to work at a think tank — before I realized that the incentives upon research at those institutions were even worse than those upon academia. But note, learning those models would still have been extremely useful in that career, as it would have involved engaging with those who believed in them and used them. Also, recall my point regarding Mankiw’s principles textbook, and note that Mankiw’s book is, by far, the market leader.

            Yes, Jim Rose brought up the Klein study, not you. However, it argues that more academic economists are registered Democrats than Republican (but looking at 11 California schools hand-picked by the authors), so you appeared to be alluding to it elsewhere on this thread.

            perfectlyGoodInk “I see that is a huge vote of no-confidence in modern macro modeling techniques.”
            Will May: “Which is really common sense at this point.”

            Well, I believe that schools of thought that have an underlying goal of arguing about politics are far less likely to achieve accurate modeling techniques. Note the big argument over rational and adaptive expectations between New Classical and New Keynesians. Both assumptions assume expectations are independently formed and thus cannot be socially influenced.

            Not only is this a very peculiar assumption to be making in a social science, I believe it’s a major reason mainstream economics dismissed the possibility of asset bubbles even after the tech stock bubble (nevermind Tulip Bulbs), even after Gladwell’s _The Tipping Point_ became a bestseller (which itself was based upon a sociology study by Mark Granovetter way back in 1978).

            So I think politicization is a problem the field needs to think deeply about.

            Anyway, I can e-mail the papers to you.

          • –“Yes, Jim Rose brought up the Klein study, not you. However, it argues that more academic economists are registered Democrats than Republican (but looking at 11 California schools hand-picked by the authors), so you appeared to be alluding to it elsewhere on this thread.”–

            That seems to be common knowledge to me, so I didn’t bother citing anything. I don’t know if I’ve seen that Klein study or not.
            In any case, I’ve seen a variety of surveys with this result, and none with the contrary.

            For example, this survey from Dilbert:
            http://www.dilbert.com/blog/entry/dilbert_survey_of_economists/

            –“Well, I believe that schools of thought that have an underlying goal of arguing about politics are far less likely to achieve accurate modeling techniques.”–
            I guess that’s possible. I don’t know, so I won’t take a position on this. (Though it would make for an interesting phenomena to try to model … : ) )

            –“So I think politicization is a problem the field needs to think deeply about.”–
            I tend to agree with this, though I’m more frustrated with the irresponsible economic advice given out by economists who don’t seem to be competent on the issue they’re discussing. (Robert Barro comes to mind.) Your point could be an issue too.

            –“Anyway, I can e-mail the papers to you.”–
            The Bergmann one looks interesting.
            williamcmay@live.com
            Thanks.

          • perfectlyGoodInk

            Thanks for the survey link. As a libertarian, I like how the Political Compass divides political ideology into two-dimensions, one indicating how much government should intervene in markets, the other one indicating how much it should intervene in society. I don’t think this is complete (there should be a dimension regarding the direction one believes society should move), but that’s beside the point right now.

            One disadvantage that libertarians have in our two-party system (among many others — the plurality voting system being the biggest one) is that they are split in half between the two parties. The more extreme ones will be in the Libertarian Party, but the moderates will likely pick one of the main two. The ones that prioritize economic liberty will likely be Republicans. The moderate ones that prioritize social liberty will likely be Democrats. Both groups will be dissatisfied with this choice in the other dimension.

            Note, economics as a field does not take a stance on the second dimension (whereas voter registration would capture this). I would argue that it is definitely to the right of center on the first dimension. Most of the electorate simply does not understand opportunity costs, nor the effects of price controls, tariffs, and taxes.

            perfectlyGoodInk: ”Well, I believe that schools of thought that have an underlying goal of arguing about politics are far less likely to achieve accurate modeling techniques.”
            Will May: “I guess that’s possible. I don’t know, so I won’t take a position on this. (Though it would make for an interesting phenomena to try to model … : ) )”

            As I mentioned in the e-mail, I would agree, but while my knowledge of economics might be somewhat broad, I must admit it is not nearly deep enough to make me qualified to do this.

            Will May: “I’m more frustrated with the irresponsible economic advice given out by economists who don’t seem to be competent on the issue they’re discussing.”

            Agreed (I think DeLong does this too). This is not a problem unique to economics (a certain linguistics professor comes to mind), nor academia. Though I can’t really begrudge people who enjoy influence from using it to further their beliefs. At least the Internet is making it easier to call people out on their errors.

  • Ed Snack

    Sadly it is hard to take seriously anyone who looks up to a site like Realclimate, which is a politicized defender of the indefensible, and snarky and unscientific to boot.

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  • 1. Agree.
    2. Agree.
    3. Neoclassical economics is none of these things. But it does refer to a set of modelling assumptions, arguably ones that have done more harm than good in terms of delivering economic understanding.
    4. Agree, but Walras (1874) contributed one particularly outlandish modelling assumption.
    5. Neoclassical modelling assumptions are used an awful lot in what is widely referred to as mainstream economics, and not at all in what is widely referred to as heterodox economics. So the terms are referring to some underlying reality, but clearly it’s silly to claim mainstream economics is just the sum of neoclassicalism.
    6. I don’t really know what the word neoliberal means. Certainly, there are many politicians and thinkers today inspired by classical liberal ideas who believe in a relatively laissez-faire economic system. Whether they can really be grouped together as “neoliberal ideologues” is hard to say.
    7. Agree.
    8. Agree, but economists should be guarded against using definitions of rationality as a modelling assumptions if empirical evidence shows these assumptions to be false…
    9. Agree, but it did make lots of ideas look silly, and provided a good deal of support for Minsky’s Financial Instability Hypothesis.
    10. Economics is too large a field to apply these kinds of labels to the entire field, but I do think it should be guarded against a focus on theory. And UnlearningEcon’s question regarding any example of modelling assumptions being discarded due to their falsification stands…
    11. Agree.
    12. Agree that very many economics critics use the term “rational” mistakenly, but I wish more economists were more open to moving away from this micro-assumption…
    13. Agree, but I wish more economists were open to moving away from this micro-assumption…
    14. Agree.
    15. Agree.
    16. Definitely agree.
    17. I don’t know, this is a very effective troll argument…
    18. I enjoyed reading Keen’s book. I do think he’s at the very least doing a good job of keeping Minskian ideas in vogue. I don’t think using unrealistic microfoundations is any kind of answer to the Lucas Critique. I think modellers need to use better microfoundations, based on observations from behavioural economics. Non-microfounded approaches may have some appropriate uses, too, in entirely emergent domains. So good luck to Steve Keen in his future work.

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  • It takes 30 seconds of paging through the preview of Manikiw’s Principles of Economics to invalidate most of Chris Auld’s argument. For example, one page 5 we are told that Efficiency and Equality are conflicting goals. This is a purely ideological statement, reflecting Mankiw’s right wing politics. “When government redistributes incomes from the rich to the poor, it reduces the reward for working hard”, says Prof. Manikiw. Really? What’s the scientific basis for this “fact”? There is none. But on the other hand ” the poor should not be ignored just because helping them distorts work incentives”. How nice. Of course the 15% cap gains tax for running a hedge fund does not distort work incentives! Mainstream economics is right wing ideology masquerading as science. It is no more scientific than Scientology.

    • Jim Rose

      When government redistributes incomes from the rich to the poor, it reduces the reward for working hard”, says Prof. Manikiw. Really? What’s the scientific basis for this “fact”? There is none.

      None is a very high standard of proof.

      even a tiny literature such as by diamond and Saez refutes that there is ‘none’. a good example of criticisms going over the top.

      there is a large literature on how the optimal rate of tax on capital is zero.

      If the elasticity of taxable income reaches 0.92, the current US top rate is optimal under the diamond and Saez regime set out recently in the journal of economic perspectives. If the elasticity numbers move higher, they may have to advocate lower taxes for the super-rich.

      Diamond and Saez quickly past over the issue of optimal taxation of capital income being perhaps zero, or at least low, by referring to administrative issues at the capital-income boundary.

      When human capital investment is accounted for, the labour supply is highly responsive to taxes. see keane’s 2012 survey in JEP.

      • Oh please. Let’s start with the implicit assumption that rich people work harder than poor people. For sure, some lazy hotel maid, on her feet 10 hours, doing heavy labor, paid minimum wage is not working as hard as, say, a hedge fund analyst. Of course. So taxing him an extra 2% to pay for free child care for her children will reduce the incentive to work hard. Undoubtedly that’s why social welfare states like Sweden and Denmark are so poor. BTW Diamond & Saez disagree with Manikiw. http://online.wsj.com/news/articles/SB10001424052702303425504577353843997820160

        • Jim Rose

          so there is a literature on taxes and the rewards for working harder. I was told “There is none”. now I am told there is disagreement in an empirical literature that was not supposed to exist!

          arguing for higher taxes on laffer curve grounds is welcome. It changes the debate from soak the rich to does it pay to have more progressive taxes because we are on the right side of the laffer curve.

          studies starting from Peltzman showed that government grew in line with the growth in the size and homogeneity of the middle class organised and politically articulate enough to implementing a version of Director’s law.

          After the 1970s stagnations, the taxed, regulated and subsidised groups had an increasing incentive to converge on new lower cost modes of redistribution.

          Reforms ensued led by parties on the left and right, with some members of existing political and special interest groupings benefiting from joining new coalitions.
          – More efficient taxes, more efficient spending, more efficient regulation and a more efficient state sector reduced the burden on the taxed groups.
          – Many subsidised groups benefited from reforms because their needs were met in ways that provoked less opposition from the taxed and regulated.

          Sweden, Norway and Denmark are examples of Becker’s idea that political systems converge on more efficient modes of regulation and income redistribution as their deadweight losses grow. They have low rates of tax on income from capital.

          • There is no evidence that as a general rule taxing the rich decreases the motivation to work hard. Pointing to a tendentious interpretation of a model, one that the authors would not accept, does not constitute evidence. Show me a behaviorial econ study that validates Manikiw’s claim. Or show me how making the slices more equal, as a general rule, reduces the size of the pie. And note, Manikiw is not stating these as a possibility, he is asserting these very dubious tenets of right wing ideology as scientific facts. You do not find this kind of bullshit in actual science classes.

          • Jim Rose

            see http://www.american.com/archive/2010/july/labor-painsshowing that a 10 percentage point increase in the tax rate on labor leads to a 10 to 15 percent decrease in hours of work.

            europeans spend 20% more time in home production to save on high taxes.

            countries with higher marginal tax rates have lower employment in those market activities for which there are good nonmarket substitutes.

          • FYI, Denmark has 27% tax on cap gains up to 48DK, and 42% above that. In science, we are big on empiricism no matter what it says in sci-fi writings, like those of Becker.

    • Jim Rose

      Swedes had the third-highest OECD per capita income, almost equal to the USA in the late 1960s, but higher levels of income inequality.

      Assar Lindbeck has shown time and again that ‘Sweden became a rich country before its highly generous welfare-state arrangements were created’. See http://www.project-syndicate.org/commentary/the-three-swedish-models

      Sweden moved toward a welfare state in the 1960s, when its government sector was then about equal to that in the United States in size. Sweden was one of the fastest growing countries between 1870 and 1960.

      By the late 1980s, government spending grew from 30 percent of gross domestic product to more than 60 percent of GDP. Swedish marginal income tax rates hit 65-75% for most full-time employees as compared to about 40% in 1960.

      Swedish economists encountered a new phenomenon they named Swedosclerosis:
      1. Economic growth slowed to a crawl in the 1970s and 1980s.
      2. Sweden dropped from near the top spot in the OECD rankings to 18th by 1998 – a drop from 120% to 90% of the OECD average inside three decades.

        • Jim Rose

          the paper says “are we already near or beyond the peak of the famous Laffer Curve, the revenue-maximizing tax rate?”. tax revenue maximising is different from growth maximising.

          their discussion of top tax rates and economic growth is separate from its revenue effects and does not refer the general literature on this point. Research by others indicates that raising tax rates further will significantly reduce U.S. economic activity. a major explanation for the large gap between EU and US incomes per capita is higher taxes.

          Lucas showed in 1990 that abolishing taxes on income from capital would increase the size of the capital stock by 60% and consumption by 7%.

          • If economics was a science, you would not write “Lucas showed” for “Lucas constructed a crackpot model in which”.

            Here are Diamond and Saez in the article I cited: “But will raising top tax rates significantly lower economic growth? In the postwar U.S., higher top tax rates tend to go with higher economic growth—not lower. Indeed, according to the U.S. Department of Commerce’s Bureau of Economic Analysis, GDP annual growth per capita (to adjust for population growth) averaged 1.68% between 1980 and 2010 when top tax rates were relatively low, while growth averaged 2.23% between 1950 and 1980 when top tax rates were at or above 70%.”

            But graduates of intro courses using Manikiw’s book will have been told, as a fact, that this is not possible.

          • Jim Rose

            Diamond and Saez compared the period of post-war reconstruction and catch-up growth with the period of Eurosclerosis.

            Robert Gordon has pointed out frequently that Europe’s level of productivity has almost converged to the USA, its income per person has levelled off at about three-quarters of America’s in the 1970s or so.

            Gordon gave the reasons as hours worked per person in Europe fallening drastically in the past 40 years, reflecting long vacations, high unemployment, and low labor force participation. Europe stopped catching up in terms of income with the USA by 1990, if not in the 1970s.

            Interestingly, tertiary education attainment is one-third less in Europe as compared to the USA, as are hours worked per working age person. European taxes are one-third higher.

          • Just for the hell of it, you do realize that Lucas “showed” this in terms of a model in which, among many other absurd assumptions, he assumed only a flat tax rate and also that it was impossible to tax old and new capital differently? You know that right? And yet you claim that Lucas “showed” that, in the real world, abolishing taxes on income from capital would ….

    • labor economist

      19. Conflates opening chapters of econ 101 textbooks with the content of the literature.

      • Ha ha, In the actual sciences, intro textbooks do not start with political claims masquerading as axioms.

        • Pretty sure anthropogenic global warming has become a political claim. Climatology texts, as far as I’ve seen, don’t shy away from the political claims in that regards.

          Besides, how could economics, even as a science, avoid making political claims? It wouldn’t be economics if it didn’t. This is an impossible standard.

          • You compare the scientific case for anthropgenic global warming with some commonplace of right wing doctrine backed up by nothing but surmise ?

          • You make dumb ridiculous claims without any supporting evidence, and ignore arguments you can’t counter?

    • That seems unlikely, given that among academic economists, Democrats outnumber Republicans by a huge margin.

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  • Jim Rose

    Best evidence of bad criticisms and bias is going on about the methodology of economics. Who does that for sociology?

  • Andrew

    19. Begins criticism with a definition of science, often in terms of whether one is able to send a rocket to the moon.

  • GregH

    Well of course anyone who claims neo-classical or neo-liberal economics is synonymous with “mainstream economics” is nuts. Mainstream economics is Keynesian. It’s just yahoos and kooks, often found around watering holes in and around Hyde Park, who adhere to those bizarre hypotheses that have no basis in empirical reality.

    • But as I noted, Manikiw’s widely used “mainstream” Econ 101 text begins by essentially asserting, as a supposedly known fact, that Keynsian economics is impossible.

      • No, actually Mankiw is himself a Keynesian. Not only is he a Keynesian, but he’s one of the people who put together the New Keynesian perspective. His career is based on Keynesianism.

        If that’s really in his book, please point it out for us, because, for those of us who actually know who Mankiw is, that is really hard to believe.

        • “Since the end of the nineteenth century significant progress towards the removal of very great disparities of wealth and income has been achieved through the instrument of direct taxation — income tax and surtax and death duties — especially in Great Britain. Many people would wish to see this process carried much further, but they are deterred by two considerations; partly by the fear of making skilful evasions too much worth while and also of diminishing unduly the motive towards risk-taking, but mainly, I think, by the belief that the growth of capital depends upon the strength of the motive towards individual saving and that for a large proportion of this growth we are dependent on the savings of the rich out of their superfluity. Our argument does not affect the first of these considerations. But it may considerably modify our attitude towards the second. For we have seen that, up to the point where full employment prevails, the growth of capital depends not at all on a low propensity to consume but is, on the contrary, held back by it; and only in conditions of full employment is a low propensity to consume conducive to the growth of capital. Moreover, experience suggests that in existing conditions saving by institutions and through sinking funds is more than adequate, and that measures for the redistribution of incomes in a way likely to raise the propensity to consume may prove positively favourable to the growth of capital.” – Keynes

          “”When government redistributes wealth from the rich to the poor it reduces the reward for working hard; as a result people work less and produce fewer goods and services. In other words, when the government tries to cut the economic pie into more equal slices, the pie gets smaller.” – Manikiw.

          • You are taking poor Mankiw way out of context. He’s talking about the tradeoff between equality and efficiency. This is a very traditional and relatively uncontroversial topic in economics. The relationship may fall apart outside of full employment economies, but otherwise most economists, Keynesian and non-Keynesian alike, would probably agree with it. (I mean, they do use Mankiw’s textbook, right?)

            Since we’re not at full employment right now, he should probably edit his textbook to make that clearer, however the macro stuff in the second half should get the point across anyway.

            “IF you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. His insights go a long way toward explaining the challenges we now confront.”
            – Mankiw
            http://www.nytimes.com/2008/11/30/business/economy/30view.html

            PS: I had a pretty left-wing econ professor (totally Keynesian, with clear sympathies for post-Keynesian work) for some of my early econ classes. He used Mankiw’s textbook.

    • w0g

      I come from the United States, where among the lay population Keynesian Economics is considered Socialism, which is believed to automatically lead to death squads and secret police. How ironic then that the economics of Milton Friedman was used as a justification for backing the Pinochet Regime with its actual death squads and secret police. This is the problem. It is very difficult to divorce economic systems and theories from political systems and theories. There are some in society who have a great deal to gain by telling us that their advantages and power are necessary to a properly functioning economic system, and any opposition to them is in essence an opposition to established science.

  • 19. Can’t get over Sraffa

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