Ouch!

Still traveling (and catching up on reading), but had to post the following from the Telegraph's International Business Editor, Ambrose Evans-Pritchard, in response to poor (at best misguided, at worst brain-washed, now beleaguered) Richmond Va. Federal Reserve Economist, Kartik Athreya (link to paper here).You can get a sense of how beleaguered here, here, here and (I especially like this comment by Rajiv Sethi) here.

Evans-Pritchard is harsher on the profession than I would be:

Economics should never be treated as a science. Its claims are not falsifiable, which is why economists can disagree so violently among themselves: a rarer spectacle in science, where disputes are usually resolved one way or another by hard data.

It is a branch of anthropology and psychology, a moral discipline if you like. Anybody who loses sight of this is a public nuisance, starting with Dr Athreya.

I suspect he's harsher because he hasn't spent as much time among psychologists, sociologists, and anthropologists as I have. We may not bring much to the table, but at least economists have a strong sense of the potential value of efficient production and allocation. Recognizing the importance of a budget constraint is also not a bad place to start from in examining both human behavior, the aggregate behavior of markets and economic actors within them, and the welfare and wealth of nations. 

On the other hand, Evans-Pritchard's view that Athreya is advocating that

Matters of economic policy should be reserved to a priesthood with the correct post-doctoral credentials, which would of course have excluded David Hume, Adam Smith, and arguably John Maynard Keynes (a mathematics graduate, with a tripos foray in moral sciences).

Seems right on. Athreya's position is not that much different from the profession's own (implicit) attitudes about whose voice should count in economic policy (at least up until the recent financial sector problems). His specific critique of Elizabeth Warren as a voice that should be ignored seems remarkably similar to voices that urged that Brooksley Born be stopped from regulating derivatives in the late 1990s. The "priest" who is common to both the Rajan and Born episodes appears to be Larry Summers. (I'll leave it to my disciplinary brethren to decide whether there is information in that.)

The tempest within the econ blogosphere that poor Mr. Athreya has triggered has, IMHO, a much deeper and philosophical undercurrent that I am not able to do justice to in a brief post written between stops. It relates to very fundamental questions about economic methodology, about the ways in which conjectures about economic actors and economic outcomes become theory and how those theories are evaluated and judged relative to other theories.

Evans-Pritchard alludes to this when he says that "[economics'] claims are not falsibiable."

I will simply close by saying that within the discipline, a hard core of theory has evolved, with sometimes too little attention paid to the historical and institutional contexts that gave rise to the phenomena upon which the theory is based. Over time and in the absence of falsifiable propositions, the preservation of theoretical consistency has tended to dominate and counter trends that would otherwise tend to reconcile theory with reality. The isolation of theory from reality, bolstered by a liturgy conducted in a language that few outside the religion understand, may have, in turn, allowed certain aspects of the theory to be uncritically co-opted by certain groups to further their causes at the expense of the general public's interest and general welfare.

New eyes, untrained and unbiased by indoctrination into the hard core of economic theory and its accompanying heuristics and corollaries, may well be exactly what economics needs to become a true and more useful science.

******************

hat tip to rjs for supplying the Evans-Pritchard link.

Comments

[ryan a]

Thanks for this post. As someone who is studying anthropology, I have a great interest in the history, theory, and practice of economics--for numerous reasons. Anthros and econs tread similar ground, but often in pretty different ways. Still, I think that each side has a lot to gain from the other, IMO.

"I suspect he's harsher because he hasn't spent as much time among psychologists, sociologists, and anthropologists as I have. We may not bring much to the table, but at least economists have a strong sense of the potential value of efficient production and allocation."

Economists bring plenty to the table, and deal with pretty important issues at various levels. It's just about time to take stock of the difference between theoretical human behavior and the various ways in which humans all around the world actually behave.

"It relates to very fundamental questions about economic methodology, about the ways in which conjectures about economic actors and economic outcomes become theory and how those theories are evaluated and judged relative to other theories."

If theories are never actually checked on the ground, and in various contexts, then how can anyone be sure that they make any sense? I have always wondered exactly how economists actually cross-check their ideas and theories.

Anyway, I'm glad I found your site.

[tjfxh]

To become a "true and useful science," economics needs two things"

1. Empirical data. Official reports and statistical extrapolations are not hard data. The reality is just too complex to arrive and anything that is not uncertain. These data are best guesses that pass for fact when they are not.

2. Falsifiable hypotheses. Experimental testing is all but impossible in economics, as it is in most of psychology, other than cognitive studies on brain function. However, connecting brain function to complex human thought and behaviors is still in its infancy.

The human "sciences" are actually still very much branches of philosophy, not "real" science like physics, chemistry, and biology.

Let's call a spade a spade here. This is not actually a criticism of economics. I happen to be a philosopher and have good reason to think that philosophy is an important field of study that has made hugely significant contributions. In fact, the hard sciences are spin-offs of philosophy.

But a discipline whose assumptions (foundations) are not testable cannot be called a true science. There are no continuing arguments in the hard sciences for the simple reason that they are resolvable on the basis of fact. That is not the case in much of economic theory or we wouldn't be arguing for decades over matters that are undecidable.

[ryan a]

"There are no continuing arguments in the hard sciences for the simple reason that they are resolvable on the basis of fact."

No continuing arguments in the hard sciences? Are you sure about that?