People used to complain that 10 economists got you 11 opinions (Keynes had 2). Those were the good old days. Today, at our universities 10 economists might not get you even one.
The few economists to be found in the media have opinions. But in academia few economists take policy positions and accept intellectual challenges. Few do scholarship relevant to policy issues. Few even have opinions they are prepared to defend in serious debate.
Academic economists belong to a careerist club, and the club has official ways of performing. Only by excelling in those ways does an economist survive and prosper. The official ways are locked in at the top universities — MIT, Stanford, Chicago and some others — and at the top journals. The journals are read by almost no one except other economists who are busy trying to excel in the club. Feeding on tax and tuition dollars, the club is incestuous: MIT produces Ph.D. members of the club, who then take over the university departments and journals and perpetuate the demand for new MIT Ph.D. club members.
But club performance doesn’t contribute much to society. It is narrow, rigid and artificial. In purporting to address a policy issue, academic economists ignore all features of the real world that cannot be incorporated successfully in a formal model or statistical investigation. The club may be able to address many aspects of an issue, but each only in isolation, leaving us with a meaningless series of pedantic twirls. Club performance does not — and cannot — generate overall understanding of an issue.
Club members have two official ways of performing. The more exalted is model building. Mathematical functions are called “consumers,” “producers” and so on, in a toy economy. Like solving a puzzle the model builder solves for an “equilibrium,” which is treated as the conclusion of the story. Only one or two of the many particulars of human institutions can be modeled at a time.
The other genre of performing is finding statistical significance. If data exist or can be created, economists hunt for patterns in the data hoping to show a statistical result that is too improbable to be the result of mere chance and hence supporting a hypothesis.
Both model building and statistical significance are technical and formalistic, and club performance focuses on technique rather than subject matter. Model building goes by the code word “theory,” yet many models make no reference to real‐world happenings. Pointless work of this kind appears in The Journal of Economic Theory. Economic theory of what? Such journals have no connection with real issues, yet their official prestige is high.
For the most part, model building is a craft circle in which artisans evaluate each other’s work using money that comes ultimately from sources (taxpayers, foundations, university students and donors) that care nothing and know nothing about such crafts. Outside those circle the crafts have no value.
Though important as a basic method of studying the world, statistical significance as practiced also tends toward irrelevance. Teasing out statistical results is a sort of accomplishment, but rarely are those results placed in a broader body of argument on a policy issue. If attempted, the fancy statistics are usually not the persuasive part of the argument. Very often simpler forms of evidence and reasoning are much more believable. But the simpler forms don’t qualify as club performance.
In short, the complexity of the real world does not fit neatly into technical schemes. A serious discussion of policy leads into a rich thicket of moral, legal, political, historical and institutional matters. Because such study does not grant exalted status to logic chopping and statistical Easter‐egg hunting, it is spurned by club officials.
The profession’s barren tendencies have been defied and criticized by some great postwar economists: Friedrich Hayek, Ronald Coase, Thomas Schelling, Albert Hirschman, James Buchanan, Gordon Tullock, Israel Kirzner, Peter Bauer and Deirdre McCloskey. (Several of their critiques appear in the collection I edited, What Do Economists Contribute? just published by NYU Press and the Cato Institute.) Many of them have argued that the reasoning and evidence with the greatest oomph are very low tech. Indeed, their writing, like Adam Smith’s, can be read and understood by nonspecialists. Important economic ideas can be taught and developed using only numerical examples, or even without mathematics at all. In fact, mathematics often poisons theoretical development.
Like a mime pretending to catch fish, club economists pretend to engage in policy discourse. But with the economist, unlike the mime, the pretense is not understood for what it is. At a mime show, if someone off‐stage were to toss in an actual fish, as though it had been caught by the mime, the audience would laugh as reality intruded on the artistic performance. But at an academic performance, if anyone had the temerity to explain all the important ways in which the model failed to represent reality, club officials would close ranks and expel that insolent person.
Society would have much to gain if economists did work more relevant to policy issues. But at MIT, Stanford, Chicago and too many other schools, academic economists carry on within their own world, giving each other jobs, grant monies, and hollow praise, pretending all the while that their model building and statistical trivia contribute to society at large.