What Do Academic Economists Contribute?

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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 academiafew economists take policy positions and accept intellectual challenges.Few do scholarship relevant to policy issues. Few even have opinions theyare prepared to defend in serious debate.

Academic economists belong to a careerist club, and the club has officialways of performing. Only by excelling in those ways does an economistsurvive and prosper. The official ways are locked in at the topuniversities -- MIT, Stanford, Chicago and some others -- and at the topjournals. The journals are read by almost no one except other economistswho are busy trying to excel in the club. Feeding on tax and tuitiondollars, the club is incestuous: MIT produces Ph.D. members of the club,whothen take over the university departments and journals and perpetuate thedemand 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, academiceconomists ignore all features of the real world that cannot beincorporatedsuccessfully in a formal model or statistical investigation. The club maybe able to address many aspects of an issue, but each only in isolation,leaving us with a meaningless series of pedantic twirls. Club performancedoes not -- and cannot -- generate overall understanding of an issue.

Club members have two official ways of performing. The more exalted ismodel building. Mathematical functions are called "consumers," "producers"and so on, in a toy economy. Like solving a puzzle the model buildersolvesfor an "equilibrium," which is treated as the conclusion of the story. Onlyone or two of the many particulars of human institutions can be modeled atatime.

The other genre of performing is finding statistical significance. If dataexist or can be created, economists hunt for patterns in the data hoping toshow a statistical result that is too improbable to be the result of merechance and hence supporting a hypothesis.

Both model building and statistical significance are technical andformalistic, and club performance focuses on technique rather than subjectmatter. Model building goes by the code word "theory," yet many modelsmakeno reference to real-world happenings. Pointless work of this kind appearsin The Journal of Economic Theory. Economic theory of what? Such journalshave no connection with real issues, yet their official prestige is high.

For the most part, model building is a craft circle in which artisansevaluate each other's work using money that comes ultimately from sources(taxpayers, foundations, university students and donors) that care nothingand know nothing about such crafts. Outside those circle the crafts havenovalue.

Though important as a basic method of studying the world, statisticalsignificance as practiced also tends toward irrelevance. Teasing outstatistical results is a sort of accomplishment, but rarely are thoseresults placed in a broader body of argument on a policy issue. Ifattempted, the fancy statistics are usually not the persuasive part of theargument. Very often simpler forms of evidence and reasoning are much morebelievable. But the simpler forms don't qualify as club performance.

In short, the complexity of the real world does not fit neatly intotechnical schemes. A serious discussion of policy leads into a richthicketof moral, legal, political, historical and institutional matters. Becausesuch study does not grant exalted status to logic chopping and statisticalEaster-egg hunting, it is spurned by club officials.

The profession's barren tendencies have been defied and criticized by somegreat postwar economists: Friedrich Hayek, Ronald Coase, Thomas Schelling,Albert Hirschman, James Buchanan, Gordon Tullock, Israel Kirzner, PeterBauer and Deirdre McCloskey. (Several of their critiques appear in thecollection I edited, What Do Economists Contribute? just published by NYUPress and the Cato Institute.) Many of them have argued that the reasoningand evidence with the greatest oomph are very low tech. Indeed, theirwriting, like Adam Smith's, can be read and understood by nonspecialists.Important economic ideas can be taught and developed using only numericalexamples, or even without mathematics at all. In fact, mathematics oftenpoisons theoretical development.

Like a mime pretending to catch fish, club economists pretend to engage inpolicy discourse. But with the economist, unlike the mime, the pretense isnot understood for what it is. At a mime show, if someone off-stage weretotoss in an actual fish, as though it had been caught by the mime, theaudience would laugh as reality intruded on the artistic performance. Butat an academic performance, if anyone had the temerity to explain all theimportant ways in which the model failed to represent reality, clubofficials would close ranks and expel that insolent person.

Society would have much to gain if economists did work more relevant topolicy issues. But at MIT, Stanford, Chicago and too many other schools,academic economists carry on within their own world, giving each otherjobs,grant monies, and hollow praise, pretending all the while that their modelbuilding and statistical trivia contribute to society at large.

Thomas C. Schelling

Daniel B. Klein is associate professor of economics at Santa Clara University and editor of What Do Economists Contribute? just published by New York University Press and the Cato Institute. His email address is dklein@scu.edu.