Notable Quotes

Must Reads

Maxine Udall Twitter Updates

    follow me on Twitter

    February 2011

    Sun Mon Tue Wed Thu Fri Sat
        1 2 3 4 5
    6 7 8 9 10 11 12
    13 14 15 16 17 18 19
    20 21 22 23 24 25 26
    27 28          

    Maxine's Essays

    • 21st Century Regress
      Sometimes it seems like the world is going to hell and there's absolutely nothing a girl economist can do about it.
    • What Exactly Are We Crowding Out?
      The current economic downturn isn't a random draw of a black ball from an urn containing white balls and black balls. There's no sampling distribution. Very specific policies and actions landed us here. Now we must decide not only what policies need to be put in place to prevent it happening again, but also what policies would best drive us out of the ditch faster and sustainably.
    • I Wish It Were Only Butter
      We should be giving up some butter if we must. We should not give up education or health investment (or infrastructure or the environment (hello, BP). They may be the only legacies of any value that we pass on to our children and grandchildren.
    • Rational Health Investment?
      The obvious "market solution" is to improve the long run return on investments in health among the disadvantaged through meaningful and effective publicly funded education. The obvious short run "market solution" is to reduce the costs of investment and the shadow price of health for the disadvantaged by providing health insurance cover and reduced out-of-pocket costs.
    • The Socrates Parameter
      To the extent that our limbic systems respond to such engineering by over-riding the judgment of our frontal lobe and to the extent that our frontal lobe is deprived of the information it requires to make a rationally self-interested judgment, we are not only pigs and fools, we are slaves.
    • The Economic Rewards of Virtue
      If individual virtue tempers our "piggy" desires and conditions our choices to something that is both individually and socially better, then the economic rewards of virtue as embodied in and promoted by societal norms and institutions are far greater than we have ever suspected. As economists, we would do well to recognize this when we teach U max.
    • The Market for Morals
      Markets then are places where more is exchanged than goods and services, labor and product, credit, and interest. They are places where we also develop the personal virtues of temperance and prudence and the social virtues of benevolence and justice. When they function well, they produce trust, loyalty, and sympathy among those who trade there.
    • Post-Modern Applied Economics: It’s the Error Term, Stupid
      Maxine believes it’s time to refocus attention and discussion on the error term. It is often where much of the action is in our models. It is where unexpectedly catastrophic events dwell resulting in fat tails. It is where our animal spirits manifest and cause us to do the right thing or the wrong thing or the thing everyone else is doing rather than the self-interested, fully-informed rational thing. It is where God and miracles and chance dwell.
    • Intergenerational Win-Win: Health Insurance, Education, Environment, Infrastructure
      So when we’re talking about fiscal stimulus packages and we’re borrowing from our grandchildren to finance them, we should be thinking about how to use stimulus monies to create value for those grandchildren AND stimulate our economy.
    • Short-term Private Payoffs, Long-term Social Costs
      The real health reform discussion, the one we should be having, is “What must we do to create a health system that is both efficient and fair?” The answer will almost certainly include relegating the private sector to markets where market forces or regulation are effective at aligning short-term private incentives and goals with long-term societal interests. If such markets are scarce or non-existent in health, then the private health sector will be of limited value.
    Blog powered by Typepad

    « The Price of Principle Is Too Cheap | Main | Rap Video: Keynes v. Hayek »



    TrackBack URL for this entry:

    Listed below are links to weblogs that reference Should Economists Be Sued for Malpractice?:


    Feed You can follow this conversation by subscribing to the comment feed for this post.

    While I agree with the general thrust of this post, I must point out that there are whole fields of economics that use mathematical techniques to investigate moral philosophy questions as they arise in economics: check out the journal Social Choice and Welfare, for instance. Based on this kind of analysis one then uses mechanism design theory to harness the power of incentives in the service of moral values, embedded mathematically in social choice functions. While the majority of the profession does not seem to think along these lines, there are those of us who do, and yes, we use a lot of math, as it is a powerful tool to help us address difficult questions.
    I am building a site at to elaborate more on this, and I have a book recently out, mentioned there, but there are plenty of other sources to look for what I am talking about on the web and in an library. One blog that explicitly addresses mechanism design is .

    I don't disagree in the main. As a non-initiate, it surprises me that anyone can summon the effort to join a fraternity whose primary characteristic seems to be that no one agrees on fundamentals. That said, I think you lay too much blame on your profession. It's like blaming physicists for the notion of mutually assured destruction. I think that you could at least as easily blame the advertising industry, or the legions of political scientists who study the science of herding voters into pens on the appointed day. Ultimately though, and I say this with sadness, the blame lies with the people who opt for easy answers to shallow questions. Moral philosophy, in the end, is hard.

    Thank you for weighing in, Dimitrios. Of course, you are right. There is always a danger when one oversimplifies and constrains oneself to ~1500 words, that something or someone will get left out or misrepresented. As you say, "the majority of the profession does not seem to think along these lines," which was the point of the blog. I knew when I wrote it that I was doing a disservice to people in your area and to behavioral economists and economic historians and historians of economic thought and political economists and probably others. I apologize for it and will attempt to balance with a blog on the minority at some point in the near future. :-)

    Peter, Thank you so much for your comment. I thought long and hard about the issues you raise before I wrote the blog. If I diffuse blame, I can't hope to persuade at least some economists that we must do a better job of translating econ out to the public and that we must return to being a discipline that includes normative analysis (beyond what currently passes for welfare economics). So, yes, I laid a lot of blame on my profession. There is a lot we could have done and could still do to help non-economist voters, policy makers, politicians, and journalists to understand and participate meaningfully in reasoned, informed political and economic discourse about economic growth and development, human capital formation, finance, jobs creation, etc. Until we do it, I fear I must occasionally weigh in (albeit a tad prophetically). :-)

    Violence is, to my mind, the ultimate source of immorality. Morality, therefore, comes from avoiding aggression. But anything a government does (EXCEPT the reduction of aggression) starts with aggression, since the only thing that distinguishes big government from big business is its monopoly on violence. Therefore, the only possible moral stand is to treat government as the source of immorality.

    So, given a dislike of violence, government is the problem.

    I long for the days of more normative discussions within the field of economics. I'm a masters in economics student and the other day my professor quoted Pigou, something to the effect that the markets may be distribute efficiently but it may still be disgustingly efficient. I reacted to the normative part of that quote and the professor responded by saying that economics is positive. Economics started off as both a normative and positive field of thought and I think it should return to that. If you focus solely on one or the other you get lost.

    I feel for you, Chris. I went through exactly the same thing in grad school. Now that I teach, I find that many of my students are more moved by and interested in the normative aspects of economics. Maybe in time the market for economic ideas will correct for this. In the meantime, keep thinking about and reading about the normative issues. There is a lot more out there than you might think from my blog. Amartya Sen's writings would be a good place for you to start, but there are many more.

    hey maxine, did you know this post was linked to by the wall street journal?

    rjs, thanks for letting me know.

    I'm sorry, but what is your argument?

    You start off with a Krugman quote, you point the blame at maths (and a lack of "moral philosophy") and then you segway into just about any political criticism you can throw at the profession.

    Is your argument that the maths is too difficult, too inaccessible? If so, so what? Many things in life are hard and require years of study. The principles behind bridge building or fluid dynamics are difficult and hard for engineers to understand. Why should a similarly technical profession such as economics be any different?

    Is your argument that an ideology that "government is the problem" has clogged the arteries of US politics? If so, that's a political, ideological issue that has little to do with economics. Instead, that is a dogma spun by self-centred ideologues and special interests to the point of destruction. Your points about healthcare or recent economic events are similarly confused - these are fundamentally social and political issues, not ones of economics.

    Is your argument that the maths involved is too focused on self-interested rationality? If so, as a economics grad student, you should know the reason why we assume that. For every Jesus of Nazareth there is a Gordon Gecko, and on average we can assume that the two cancel each other out! And for every efficient markets ideologue you find, you can find a behavioural finance guy in a university. The alternatives are out there, and they came from economics and its partner subjects.

    There is a irony in your citing of Keynes as a great economics hero when his body of work goes against some of the many points you are making - Keynes developed maths of the fiscal multiplier and the AD/AS system that is the bedrock of macro analysis. Keynes was also a patriarch with a firm belief in the control of the government by a ruling elite.

    Economics is a quantitative science, and maths is its ideal partner. Moral philosophy is a subject of qualitative discussion. If you want moral philosophy, go to a philosophy book. If you want economic analysis, go to an economics book. If you want politics, turn on the tv. But don't go looking for one of these things expecting other things.

    Charles, I don't think we're going to see eye to eye on this, but thanks for your comments.

    I've been thinking about this some more and for me there are things I hear all of the time that just don't add up. Fundamentally, it seems absolutely true that markets really do work, but it doesn't seem that anyone really wants to confront the implications of that squarely. We've been living with this notion that if we each pursue our self-interest we can achieve the optimal collective outcome. It's an attractive notion because it frees us from any greater responsibility for our choices both individually and collectively. I think it's working out as we might have expected, if not as we had hoped. The sum of our individual pursuit of self-interest turns out to be a great collective of selfishness where education is under-resourced, prison populations swell, and social cohesion deteriorates. I just don't understand why anyone is surprised by this.

    It all seems so unnecessary. So much of the political posturing seems to be geared towards making sure that we're not being taken advantage of by some malingerers and yet our economy is far more constrained by limits of consumption than limits of production. Is there really a credible case to be made that this is the best we can do?

    Peter, thank you for your thoughtful reflection. I've written elsewhere in the blog about the good things that come from properly functioning markets, among which is efficiency, but also trust, commitment, and to some extent fairness. I've noted the characteristics of properly functioning markets and that some markets do not conform to those characteristics, notably health and finance. Finance is an obvious case where we could do better. There is also clear evidence in health, where market failure is the norm, that we could do better, that we are inefficient. We spend twice as much as any other developed country with the possible exception of Switzerland where we spend almost twice as much. We fail to cover roughly 20% of the population and we have some of the worst health indicators among OECD countries including very poor (read costly) management of chronic diseases and very high rates of use of high tech diagnostic procedures (read MRI, CT). Someone will now weigh in and say that if only we would implement tort reform, use of revenue generating MRI/CT scans would decline. It's hard to see why they would when money can be made from them (unless docs are different from everyone else and motivated purely by altruism). Implement tort reform and their margin on procedures should increase since it should reduce their bottom line. Anyhow, I don't want to argue about this, just provide you an obvious example of a "credible case" that we could do better. Finance, the other credible case, should be self-evident.

    Thank you for commenting.

    rjs, thanks. Interesting. I'm starting to remember why I was drawn to a mathematized pseudo-science. Maybe it IS better to keep econ separate from moral philosophy. :-)

    I'll have to think about this. Thanks.

    This is perhaps a little off topic, but one of the things that puzzles me is the focus of economics on markets, when we plainly in practice do not rely on them for more than a fraction of our economic needs.

    Various estimates put the total goods and services produced in the household sector at a third of the total economy. A large fraction of the rest is in the hands of various levels of government, or in the non-profit sector. And that part within firms is not traded - few companies have an internal market for, say, accounting. I recognise there are overlaps (governments and households buy goods in the market, firms can outsource and so on), but any way I do the arithmetic, the market has to less than a third of total economic activity. Maybe the maths has to do with the fact that only markets can be modelled?

    Peter, I hope you're majoring in econ if you're a student. Why do we measure output the way we do? Why do we treat the output of women in childbearing and lactation as zero? Why do we treat parental (usually maternal) time inputs to children's health and welfare and the child health and welfare produced as of zero value? Why is housework not counted unless done by a paid employee? Why when we calculate gender specific productivity losses do we assume that if women are paid 80 cents on the male dollar for the same job, they must be 20% less productive? And what distortions does this introduce into our society and our economy? I don't think the answer is "the maths" and what they can or cannot model.

    Here's a link to a blog that contains a link to the Sarkozy-Stiglitz-Sen Well-Being Report: . I couldn't get the report's link to load, but I downloaded it a while back from the same link so I hope it will work for you. The report is a step in the right direction.

    To attempt to answer your question: maybe our understanding of what a market is and what a market does is evolving; maybe it's time for a modern day Adam Smith to come along and move us to the next level of understanding, to unify the wealth of nations and moral sentiments, to lay the groundwork for new theory that takes account of the many, many variables all changing at once at the macro and the micro levels, the complex interconnections and interdependencies that generate animal spirits and fat tails and well-being, that incorporates all the stuff that right now resides in the error terms of our equations, and that makes "the maths" so limited. I think we need a Hari Seldon of economics. :-)

    Thanks for your comment, Peter.

    Seems to me I covered some of this ground in a blog post entitled Ethics and the Discipline of Economics a few months ago. I take a somewhat different tack, though. It seems to me that the formerly-dominant school of economics has taken leave of basic scientific ethics, and thereby forfeited its scientific accuracy, and its claim to scientific authority.


    Raven, Very nicely put. I think you made a better case for putting ethics and econ together than I did. Doing it to improve the science is probably as important if not more important than doing it to improve the public discourse. Or maybe it's the same thing. Thanks for sharing.


    thanks for the feedback. No, I'm not a student - I'm a retired bureaucrat.

    I take all your points about eg child-rearing. I was being a bit simplistic in relating directly to the "maths". My thought is that:

    - the whole social complex is too large and too poorly understood to be modelled (and my mathematical friends tell me that it is likely that systems of this complexity cannot be modelled mathematically).

    - economics set out to try, not understanding this (thinking that, if we could do it for physics, then we could do it for human society).

    - when this did not work, it retreated to ever more recondite argument about things that sounded plausible, and looked like they should work. This has parallels in other disciplines (Chomsky's grand linguistic theory does not work, even though it starts from an observably true set of facts - which does not stop it dominating the field).

    - my background tells me that when something cannot work, best to stop trying it, rather than persist (no scientist tries to build a perpetual motion machine - they KNOW it can't be done). Some strong social drivers prevent this happening in economics - not least the way the practice has woven itself into our social and political life.

    One possible way foward would be to accept economics a a discipline like history - where one accepts that there are limits to the knowable and focuses on building up knowledge increment by increment, occasionally stepping back to synthesise. Much of the best economics I have read is economic history.

    I guess I am more interested in the social drivers than the actual practice.

    Well, thank you for reading my article, and thank you for the kind words.

    Are you aware of John Quiggin's *Zombie Economics?* He's written a whole book on economic ideas which by rights would be buried and yet...keep...walking...on. I believe it's at his publisher now; a good part of his draft is online at:

    Peter, yes, that is what I was saying, perhaps obtusely, in the last paragraph of my reply to you. I happen to think the math is extremely useful as long as one keeps it in perspective and does occasional reality checks as you seem to suggest. I also tend to agree with you that the best economics and the best economists have a strong grounding in economic history and use it to inform their thought and their models. When thought or theory is abandoned because there is no math that fits it (Brad Delong has a good example here:, we have IMHO abandoned the right to call ourselves scientists. That we exclude or ignore the fire bearers attempting to point to the missing pieces because there is no math that fits that piece is shortsighted and shameful. That we appear not to be able to convey to the general public enough knowledge about our discipline to enable them to recognize and engage in reasoned political discourse...well, I've already written about that. :-)

    To be clear, I love economics, all of it, the math, the theory, the history, the thought. It gives me no pleasure to point out our shortcomings.

    Thank you for another thoughtful comment, P.

    Raven, I was not aware. Thanks for the link. (Laffing out loud (at trickle down)). :-)

    Maxine, Thank you for taking the time to respond to comments. I agree with you completely about health care and finance. In my last comment I was trying to get to a larger question about how the models we adopt constrain the world we can imagine and build for ourselves. I don't think I put it very clearly, but a lot of the subsequent conversation seemed to head down that road anyway.

    Raven, I liked your post very much.

    Peter K, " the models we adopt constrain the world we can imagine and build for ourselves." This is a really nice, concise way of describing models and modeling when it becomes a constraint rather than a tool to extend knowledge. Better than I could have said it. Thank you.

    The comments to this entry are closed.

    Economics Blogs

    • Nancy Folbre - Economix Blog -
      Excellent blog "…where analytical rigor meets a mother’s intuition."
    • interfluidity
      Steve Randy Waldman provides critical insight into and critique of economics, finance, and economists
    • Environmental Economics
      Economists on Environmental and Natural Resources News, Opinion, Analysis (and Other Stuff)
    • Angry Bear Blog
      Slightly left of center economic commentary on news, politics, and the economy
    • Front Page | Institute for New Economic Thinking
      Credible attempts to improve economics will be found here.
    • global glass onion
      Everything macro: the Fed, QE, debt & deficits, FX & and macro issues; banks, banksters & congress critters; the main street economy, including CRE, foreclosures, unemployment, state budgets and health care issues; &global issues, including the Chinese economy, world trade, energy and the environment, and peak oil.
    • Rajiv Sethi
      Barnard College, Columbia U, and Santa Fe Institute economist Rajiv Sethi's thoughts on economics, finance, crime and identity...
    • VOXEU
      Research-based policy analysis and commentary from leading economists
    • The Baseline Scenario

    Health Reform, Health Economics, & Health Policy

    History, Philosophy, Ethics, and Political Economy

    • Salvaged Liberty
      Provocative, thoughtful and well worth a visit.
    • UnderstandingSociety
      A web-based, dynamic monograph on the philosophy of social science and some foundational issues about the nature of the social world.
    • The Barefoot Bum
      Excellent, thoughtful blog grounded in philosophy and not afraid to take an honest girl economist to task.
    • Eyes On the Prize
      Peter Kurze provides thoughtful, imaginative insight and perspective on contemporary issues and dilemmas.
    • How Do You Know?
      I was tempted to place this under aesthetics. A thoughtful blog by Ecrive that roams across a broad intellectual landscape, always with a new perspective.
    • Advice Unasked
      Nice thoughtful blog with political, economic, ethical, and philosophical insights worth reading.
    • Adam Smith's Lost Legacy
      A much-needed website devoted to restoring Smith's legacy as one of our finest moral philosophers.
    • David Coates: Answering Back
      David Coates has created a "living book" that will be of interest to all progressives.
    • History of Economic Thought Website
      Includes links to electronic versions of some HET texts
    • Suburban Guerrilla
      Keeping an eye on the corporate media


    Infrastructure and Housing

    Political Blogs

    The Best of the Rest