Bryan Caplan  

Hating on Econ

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Rationing and Recalculation... An Indispensable Book...
My favorite section in Diane Coyle's The Soulful Science: What Economists Really Do and Why It Matters tries to figure out why economics enrages as often as it bores:
Mechanical, mathematical, removed from the "real world," reductionist, autistic - why do so many people, even so many economists, insist that these descriptions characterize the subject, which they portray as unchanged in more than a generation?
Her four main "mutually reinforcing reasons":

1. The Public Face of Economics.  "What the nonspecialist sees of economics is largely the kind of macroeconomic debate covered in the news programs and newspapers."  She avers that most of this econ is (a) "of poor quality and spuriously precise"; (b) "jargon-ridden and possibly not understood even by the person... spouting the jargon on television"; (c) partisan or business P.R.  In short, "When a critic charges economists with only caring about money, it's easy to believe, as that's all we're seen to talk about in public."

2. The Use of Mathematics.  Mathophobes overestimate how important the math really is.  "We use the mathematics for clarity and to ensure logical consistency."  Move on, nothing to see here...

3. The Scientific Method and Literary Culture.  "Economics is a science not because it mimics the same specific techniques or equations as natural scientists, nor because it consists of falsifiable statements which would keep Karl Popper happy, but because it tries to model human behavior in general statements (or equations) with relatively few variables and seeks to bring the models face to face with empirical evidence."  And lots of people hate this idea.  "[M]any of the critics of economics, especially those working in the humanities, simply do not accept that it is appropriate to study human culture and society with this methodology..."

4. The Politics of the Critique.  "[M]any if not most of the legion of critics of economics are left of center in their politics."  But "There are economists of all political persuasions, for economics is a method of thinking about issues, not a set of conclusions."

I have two reactions to Coyle's list. 

First, after two decades in econ, I'm convinced that #4 inspires 90% of the hate.  Sociology is almost as bad by measure #3, but humanities professors bear it no ill will.  In any case, if leftism were true, leftists should despise our profession.  For Coyle to protest that econ "is likely to cut across conventional political orthodoxies" is scant comfort to all the intellectuals who swear by conventional left-wing orthodoxy.  Even worse, self-styled leftist and moderate economists typically accept an array of specific contrarian pro-market positions.  I've even talked to Marxist economists who favor a free market in human kidneys!  In the face of leftist displeasure, then, self-respecting economists have no choice but to stand our ground and tell them, "It's not us, it's you."

Second, contrary to Coyle, critics' complaints about excessive math are justified, and not reducible to opposition to "bringing models face to face with empirical evidence."  Especially in economic theory, math rarely "brings clarity."  Math more often leads to neglect of important facts and confusion about irrelevant mathematical issues.  Indeed, Coyle's book strikingly confirms my position here.  Almost all of the advances of the last thirty years that she hails are empirical, and almost none of these empirics even hinge on technical econometrics.  Yet during these decades, economist theorists enjoyed great status and published vast numbers of "top" papers that Coyle damns with faint praise.  Even worse, these theorists have emotionally taxed more empirically-minded economists with soul-crushing coursework and faux incredulity (e.g. "I can't take your claim seriously without a formal model").

Unlike Austrian economists, I have no principled objection to mathematical econ.  I just think that we should evaluate mathematical econ empirically - and admit that in hindsight, the vast majority of it fails the cost-benefit test.  While many complaints about econ are unjustified, this one is, and it's time to clean house.


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COMMENTS (12 to date)
hk writes:

As a mathematician, I have the feeling that sometimes economists and physicists use the term 'mathematics' somewhat differently. Often people think of qualitative ideas as being the important part and the equations that express them as secondary. I would agree, as would, I suspect many mathematicians. The important thing is that mathematics(modern mathematics even more so) deals with phenomena at the qualitative level.

Entire theories can be stated formally and proved just at the qualitative,(but rigorous) level. One can see this even in elementary theorems like the number of primes being infinite that it is the ideas which count. The only place where this is possibly not true is school & undergrad calculus courses where math is treated as how to manually replace a fancy calculator.

This qualitative pursuit is in fact one of the reasons why math has become abstract. Physicist notation avoids the abstraction by using concrete notation for equations but then this leads them, to refer to the abstract ideas as physics and the detailed equations as just math. (Though sometimes there is something to this - cases where there is no known formalism even abstractly for their ideas).

Coming back to your post, here's my point: One definition of a science would be - 1) a formal model, 2) informal but widely agreed upon ways of interpreting its theoretical terms & statements in observations and experiments, 3) nontrivial agreement with the observed data.
Given this, it is important to separate two kinds of critcisms -
A) particular types of formal models are bad.
B) formal models themselves could be bad
Austrian economics critique, for instance, that the economy is too complicated to predict movement of its indicators is just saying that formal models with predictions above a certain detail is hopeless. Indeed, reading some of their ideas, it still seems like a formal universe with modelling of actions of agents, just at a more abstract level - not predicting numbers but predicting patterns in behaviour, right or wrong.
Overfitting in econometric models, again a critique a specific type of model.

It is vey hard to imagine a situation with B) holding because it is mainly just a constraint about being clear about what your model is. One might, for the sake of exposition write it out as a collection of essays, but if the concepts are clear, it should be easy to convert it into a formal universe.
The very demand that ultimately everything comes down to empirical data implies a clarity (even, formalism) about what empirics the model predicts in order to avoid adhoc adjustments.

hk writes:

Reading the Klein-Romero link, I think I missed what you were trying to say, not so much a critique of setting up mathematical models but about the missing steps 2 & 3, a way of interpreting these models in observations and then checking them.

Rick Weber writes:

I certainly agree that 90% of people who reject economics by number 4. However I think that by divorcing itself from reality, economics itself increases this. If what professional economists did wasn't so boring (i.e. if we saw more work along the lines of what's done at GMU or Bloomington), fewer people would be willing to reject economics out of hand.

This separation from reality is (IMHO) largely caused by the math. In an effort to force analysis to be internally consistent and to force economists to state their assumptions, math is only partly successful; it still allows implicit assumptions, and these assumptions go unnoticed. And often these assumptions are where the interesting questions lie. In a perfect competition model, the implicit assumption is that people are willing to trade and there are institutions that make it possible; this raises interesting questions that many economists ignore.

Khoth writes:

I think even apart from implicit assumptions, economists too busy with models sometimes neglect the stated assumptions. You'll see some theorem that explicitly assumes perfect competition, rational agents, no transaction costs, or whatever, and then someone will try to apply it to a situation where those assumptions don't hold.

jsalvatier writes:

By the way, I would be really interested in a nice collection of all the Caplan/Boettke/Block debate papers with some introduction. I would really loveto have a single resource to point the Austrians I meet, to what I think is the best explanation of why the Austrians are not on an especially fruitful path.

mlb writes:

My biggest complaint with economics is that it fails to recognize that the economy and asset markets often adjust to incorporate prevailing economic thought. A policy may have dramatically different outcomes in two similar situations depending on whether the market expected/positioned for it or not.

The current thinking of using policy asymetrically to shorten recessions but avoid popping bubbles was succesful at first but is now less successful (i would argue) as the market has positioned for it (high degree of leverage, large % of economic activity in banks that are too-big-too-fail, home ownership at record highs, dramatic wealth inequality, etc.).

mark writes:

I think you are right about the math, particularly its obscuring of other variables.

I strongly disagree with her abut point 3. Even if it is aspirationally a science, it falls far short. Experiments are rarely replicable or susceptible to strict controls, in large measure because economic life is Heraclitan and there is too much change and variation going on outside the experiment to give weight to the results of the experiment.

I watched Peter Diamond's Nobel lecture and was struck when he said that he tried to construct a model where there was search friction on both sides of the market but gave up because it was too complicated. Now he didn't give up. He just put it on one side of the market and continued. Which succinctly proves my point that economics is not a science. There is a lot of logical reasoning in economics papers but no recognition of how far removed the assumptions and constraints are from the real world. As Einstein said, "Pure logical thinking cannot yield us any knowledge of the empirical world; all knowledge of reality starts form experience and ends in it. Propositions arrived at by purely logical means are completely empty as regards reality. Because Galileo saw this, and particularly because he drummed it into the scientific world, he is the father of modern physics -- indeed, of modern science altogether."

Evan writes:

I agree that #4 is probably the most common, but what I think is interesting is why economics offends those political groups. It seems to me the reason has to do with the fact that most politics is focused on signaling, whereas most economists are focused on policy. In essence, economists are the academic equivalent of the person who, when hearing their significant other complain about their problems, tries to solve those problems rather than express sympathy.

In the case of the left, most of their preferred policies are excellent for signaling how compassionate they are, but awful for actually fixing problems. Naturally they get mad when economists suggest that that policy won't work, because it screws up their signaling. Here they are trying to signal how much they care about a problem, when suddenly these economists come in and try to solve it, without even bothering to signal caring!

Similarly, most right-wing types who get mad at economists (you know, the Pat Buchanan, Steve Sailer sort of crowd) are trying hard to signal group loyalty by trying to protect members of their ingroup from outgroup produced labor and products. They naturally get very upset when the economists point out that their policies will, in the long run, actually hurt the economic well-being of those they are trying to signal loyalty and support for. It also certainly doesn't help that most economists have the intelligence and integrity to realize that ingroup loyalty is not the same thing as morality (in fact it's often morality's opposite), and therefore tend to be fairly universalist, showing no ingroup loyalty unless one regards the whole human species as an ingroup.

The insults that that Coyle lists, "Mechanical, mathematical, removed from the "real world," reductionist, autistic" I consider to be the highest complements one can give a profession, or a person. It is these attributes that drive people to solve problems and do real good in the world, rather than get caught up in signaling and status games.

infopractical writes:

While the recent leaps in Economics may not have been particularly mathematical in nature, the leaps in Finance have been mathematical and computational (or deception if you count that).

Personally, I feel that Economics and Finance are joined at the hip. In fact, the people that I trust most about matters of Economics -- who have made statements that made sense that matched future events -- were not Economists. But Financiers run hedge funds and don't always blog their most important ideas, so what they have to say about Economics often goes unheard. (Which is a true shame, but I honestly believe that's where most of the best Economists are. And by "most" I mean "nearly all".)

So perhaps mathematics is yet still extremely important to economics, but people don't necessarily get a glimpse at the mathematics. Most people wouldn't understand it anyway.

Don't take that as an indict of your blogging. I read it because I (at least) find it more valuable than other bloggers at the margin.

Tom West writes:

I suspect Bryan is having a fairly good chuckle in more or less deliberately trying to become the primary embodiment of why people hate economics, and he encapsulates in quite nicely in one sentence:

if leftism were true, leftists should despise our profession.

First, leftism cannot be "true", any more than it can be "correct" to be believe in God or anything else. It's a set of principles. However, the implication of the statement is manifold.

(1) Economics is not descriptive, but prescriptive. It's not "if you do this, then this will happen", it's "this is what you should do".

(2) Humanity exists to serve the market, not the other way around (although this is perhaps a restatement of (1)).

Of course, this isn't helped by Bryan's "war on democracy" :-).

(3) Economics is exact - the base understood laws are always accurate and always apply regardless of situation (after all, you need exactitude to "disprove" something as nebulous as leftism).

(4) All economics principles are universal - they are cross-cultural and they scale from micro to macro. Otherwise how could a such a science be the basis for policy on people should be governed?

Obviously economics has a lot to offer, and has a lot of truth, but it deals with human beings. And when you add human beings, you've instantly added 10,000 degrees of freedom that pretty much disqualify economics from being universal and exact (as evidenced by the fact that economists famously disagree among themselves on almost every single principle - minimum wage, anyone?)

So, choose a field in which the experts are making pronouncements of an exactness that even the uninformed can see are patently wrong and add to that power and influence (there are a lot more economists on government call than physicists or sociologists) and you've got a recipe for 'hating on econ'.

Sociology escapes because while sociologists are constantly making pronouncements about human nature (then 'over-turned' by another experiment a few months later), they are rarely used as a basis for policy. And when it is - *watch out* - the hate is many times stronger than that for economics.

Anyway, that's my take.

Tom West writes:

In fairness, it should be noted that (1) economists have a lot less influence in policy than people think they do (at least to hear the economists moaning :-) and (2) people conflate economics and finance and thus blame problems that come out of finance on economists.

In all, I'm not claiming the hate is deserved, just making a claim as to why it's there.

Fergus O'Rourke writes:

It seems to me that this discussion well illustrates why lawyers are as indispensable as economists: more care in the use of language would eliminate many of the mini-disputes that have arisen.

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