Saturday, April 28, 2018

Economics: Reviled Because It Matters

Marion Foucade is one of the most thoughtful and incisive interpreter/critics of the interaction between academic economics, other disciplines, and the real world. She delivered a keynote address at the 2017 meetings of the Swiss Society of Economics and Statistics. Her talk, "Economics: the view from below," is available in the Swiss Journal of Economics and Statistics (2018, 154:5) or you can watch video of the presentation here. Here, I'll quote some snippets that struck me in particular, but the entire lecture is recommended.
"In the course of the twentieth century, economists have been able to establish a remarkable position for themselves, as experts in local and national governmental organizations, in independent agencies and central banks, in international institutions, in business and finance, and in the media. They supplanted lawyers in government and historians in the public sphere. As such, they have been involved with some of the most consequential decisions that societies make—decisions having to do, for instance, with the level of unemployment that might be left unattended, because it should be considered “natural”; with whether or not to authorize the purchase and sale of untested financial products or with how to organize the delivery of clean water, vaccines or electricity. This involvement has come at a cost. As Robert Chernomas and Ian Hudson put it, “economics has the awkward distinction of being both the most influential and the most reviled social science” (2016, 3). We might add: economics may be the most reviled social science precisely because it is the most influential. ...
"Where does this belief and the authority of economics come from? Here, it is useful—perhaps—to consider the origin conditions of modern economic discourse. ... By knowing the natural laws of the market, political economy offered a way to tell the truth about the correct limits of governmental practice. Government action was not to be judged primarily in terms of legitimacy or justice, but in terms of whether it was right or wrong. And it is the market that was to provide that truth-test, through the work and voice of political economists. ... Economists, consequently, have become the guardians and the revelators of this truth, not simply in their own eyes, of course, but in the eyes of everyone, and first and foremost in the eyes of government itself. ... 
"Unlike the other social scientific disciplines, economics comes with a promise: the promise to make money, the promise to save money, the promise to allocate money (a rare resource) in the most efficient manner. In other words, part of the authority of economists also comes from their association with whoever holds the purse strings. They navigate the most powerful parts of the world, where financial decisions are being made and where political and corporate leaders are being trained. And, I shall add, this association has become increasingly tight over the course of the twentieth century. Business schools, for instance, have gone from being intellectual backwaters staffed with practitioners to becoming scientific powerhouses filled with disciplinary social scientists (with economics PhDs being the largest group) (Fourcade and Khurana 2013).
"The consequences of this prosperous social position are not trivial. Let us remember that money is not neutral (Frey 1997). It changes people from within. As their jurisdiction has expanded and diversified, economists as a group have seen their financial fortunes multiply. This is especially striking in the USA, where economics is one of the most lucrative degrees over a person’s lifecycle, both at the undergraduate and graduate levels (Weissmann 2014).The salaries of academic economists have grown faster than any other arts and sciences discipline, including “hot” subjects like computer science, over the last 30 years, and opportunities for extra-academic income have proliferated. ...
"These thoughts, which expose the fundamentally contingent and heteronomous nature of economic knowledge, are sobering, perhaps. Paradoxically, I do not think that they necessarily bode ill for the discipline. First, we should recognize that what Michael Reay (2012) calls the “flexible unity” of economics is a fundamental component of its strength. On the one hand is a fairly united “way of looking at the world” (Coase 1978, 210) and an eminently recognizable style of reasoning, which is applicable across a broad range of domains: in that sense, economics is a truly generalistic form of expertise, defined by its techniques and epistemological processes rather than by its core beliefs about the way the world works. In fact, what we call the mainstream has been malleable enough to incorporate waves of peripheral (and once rejected) ideas and concepts (think: price rigidities into real business cycle models, increasing returns into growth theory, non-rational behavior). As a result, the core has become multiple and fragmented, but it can still legitimately claim to hold up through, rather than against, this fragmentation. As French regulationist economist Robert Boyer (2016) has recently suggested, this is a paradoxical world in which the respective “truths” of Eugene Fama and Robert Shiller can both legitimately exist, and where the very multi-vocality of the field is actually the mechanism that fosters its resilience.
Want more Fourcade? One starting point is her article "The Superiority of Economists," co-authored with Etienne Ollion and Yann Algan, in the Winter 2015 issue of the Journal of Economic Perspectives (where I work as Managing Editor). A taste from the abstract: 
"Taken together, these traits constitute what we call the superiority of economists, where economists' objective supremacy is intimately linked with their subjective sense of authority and entitlement. While this superiority has certainly fueled economists' practical involvement and their considerable influence over the economy, it has also exposed them more to conflicts of interests, political critique, even derision."