Why I Don't Like Economists

Actually, I do like economists. One of my long-time friends is Jeff Frankel, who teaches economics at the Kennedy School of Government at Harvard and who served on President Clinton's Council of Economic Advisers. I rented a room at Jeff's house in Berkeley 25 years ago, when he was a young professor and I was an even younger graduate student. There I was able to meet many famous economists, including future Treasury Secretary and Harvard President Larry Summers and future Nobel Prize winner George Akerlof.

At Knowledge Mosaic, one of my jobs is to publish the Securities Mosaic Blogwatch, which includes licensed content from more than 25 of the leading legal and financial bloggers in the country. Among them, I count a number of professors from the Law and Economics movement, lawyers with a background in economics (some, such as Josh Wright, a rising star at George Mason University, have both a law degree and a PhD in economics).

They're all great guys, smart and amusing and passionate about their work. So what's not to like about economists? In a word, hubris. Economists fly too close to the sun of science. Their wings melt.

Consider Greg Mankiw, the famed Harvard economist and CEA chair under President G.W. Bush, now author of a popular blog. On November 5, he printed a table ranking GRE scores by graduate field, with graduate students in physics, mathematics, and computer science alone ranking higher than economics. Political science, sociology, and psychology trailed far behind, in 17th, 23rd, and 24th place, respectively.

Mankiw titled this post, "Larry, Vindicated," a reference to a conversation in which then-Harvard president Larry Summers asked Peter Ellison, a professor of biological anthropology, whether he didn't "agree that, in general, economists are smarter than political scientists, and political scientists are smarter than sociologists?" In his subsequent recommendation that Summer resign, Ellison condemned the "intellectual arrogance" of Summers' question and emphasized the generally polarizing and demoralizing impact of his attitudes on the Harvard faculty.

For now, let's not even consider that Mankiw's post, with its sneer of "neener-neener", is remarkably juvenile and significantly beneath his professional station. The underlying logic of the post itself - that economists are "smarter" and therefore more "worthy" than other social scientists - is silly. Mankiw adopts a similarly patronizing (and silly) tone in his November 8 "Memo to the POTUS-Elect," which tosses out recommendations that Obama listen to his economists on various and sundry matters, like garnishes upon a wilted bed of lettuce.

The contempt of economists for other social science disciplines is legendary, associated with their view that economists practice "real" science while political scientists and sociologists and psychologists practice, at best, a kind of crude guessing game. As someone who holds a PhD in political science, far be it from me to defend that discipline, or to claim that it in any way resembles the natural science disciplines. I plead guilty to the crude guessing game charge.

The problem with economists is that they possess no similarly ironic distance from their own discipline. The mathematical orientation of modern economics is the foundation of the view within the discipline that they practice real science. In truth, this resemblance constitutes a false positive (reinforced by the false Nobel Prize the Bank of Sweden awards to an economist each year).

In the GRE table, economists rank 8th in quantitative skills and 4th in analytical reasoning. However, mathematical, logical, and reasoning aptitudes alone do not translate into wisdom, judgment, or intelligence (think Warren Buffett) Financial engineering systems failed to successfully model risk, for example, because they did not accurately assess the behavioral dimension of risk, the "hierarchies of belief" that underpin human preference-ranking and decision-making.

In retrospect, of course, many economists have analyzed and criticized the failure of these models, and more specifically, the failure of the analysts who misused these models. Some have belatedly acquired the religion of regulation. Save James Galbraith, however (who believes the financial meltdown constitutes "an enormous blot on the reputation of the profession"), economists themselves, have not used this misapplication of mathematical modeling as a teaching opportunity for their own discipline.

By the way, if one looks more closely once more at the scores in the GRE table, economics ranks only 10th in the verbal component, behind philosophy, English language and literature, history, religion and theology, art history, anthropology and archeology, physics, political science, and earth sciences. Neener-neener, indeed.

Comments

[Social Construct]

I would much rather play "a crude guessing game" than get too close to the sun with other people's money!

[nanny138]

Well put... additional comments on the "physics envy" that ails many economists is in this short section of a book on business cycles: http://books.google.com/books?id=1aiX6yg3vUUC&pg=PA25&dq=physics+envy

[rainbowblue]

Thankyou! As a poli sci grad, and a future public admin grad student, I have to say I always thought those in the economics department were a little full of themselves. What I never understood is how they always accepted the idea that people behave rationally. If people behaved rationally, then it stands to reason that they wouldn't have taken home loans out they couldn't afford, or that a bank wouldn't hand out loans to people they knew couldn't afford them. That's what's nice about the poli sci field, we know that people don't act rationally so we allow for that in our analysis.

As Homer says "...you can prove anything with statistics...60% of people know that." I will never understand why economists think they can offer up opinions as experts in other people's fields just because they ran a statistical analysis. From day one in my poli sci courses were were tought to come up with a solid theory/model before anaylizing any data.

[sposton]

They are never wrong! Their models always "prove" them right. Their major flaw is to mistake their models for reality. The dumber amongst them even think that manipulating models manipulates reality.

[hollybork]

Interesting post. Hubris indeed. People are liable to be egotistical about any exceptional skill they have, whether it is singing opera, playing dominos, or doing complex macroeconomic functions. The problem is when they feel this special skill means they are entitled to steal from, use, humiliate, enslave or risk the life, limb and welfare of the rest of us.

Intelligence is multi dimensional. A person with a stupendous memory and quick processing time on math and reading would score high on SAT or GMAT. But speed and memory does not wisdom make, nor does it impart ploise, perspection, priorities, empathy, emotional understanding or intuitive insight..

There are so many kinds of intelligence. While I would prefer having someone with math and business skills working at my bank, mortgage company or insurer, I would not want such a person running the country, or providing curriculum guidance to a magnet school for the arts. How brilliant do you have to be to know that an economy based upon debt instruments, financed by people buying disposable electronics with money taken out of their houses is an economy in danger? How long can an economy be based upon people selling each other their inflated homes and spending the proceeds on fripperies? How smart do you have to be to realize banks, insurers and brokerages cannot borrow $40 for each $1 they have in equity and survive?

[repearwo]

"...economists practice "real" science while political scientists and sociologists and psychologists practice, at best, a kind of crude guessing game."

Economic is no more a Science than is Sociology, Psychology, or Political Science. All four are crude predictive disciplines, but are still far better than no predictive disciplines. While economic may seem to be more of a science that comes from the fact that its disciples believe it to be be real science. In that belief they walk in lock step and create the reality that they believe - some of the time. The world changed in the mid 1970's and economic models have not caught up.

Now that failure to change model to reality has finally caught up with Economist and if the basics of Free Market Economics are not rethought the current crisis will only get very much worse. That downward direction in the economy will escalate rapidly without a critical review of the basic assumptions of our Economic Model.

Ironically, John McCain was right when he said that the fundamentals of our economy are good. It is not right in hte sense that he meant it.

Why is it vital for there to be continual growth? Can one really make real money from the manipulation of money? How do we determine the value of our money? Economists have answers for all of these questions but they are suspect in the new realities of the world. Economist need to be more philosophers and less scientists.

[Denmark2]

" To an economist, the real world is a special case"

Quote by ??

[repearwo]

Laurence J. Peter

source: http://www.avendano.org/quote/quote2.html

[souldog71]

One should distinguish between descriptive and predictive sciences, the social sciences and biology belonging to the former, the natural sciences belonging to the latter (On a side note, Mathematics is not a science. It is the process of using patterns of thought to formalize and abstract the perceptions of space, quantity, pattern and symmetry; a process which is as inherent to human nature as love and hate, if not as acutely experienced by most individuals. Mathematics does not concern itself with the scientific method). The mistake being made with economics is to conflate the use of complex mathematical models to DESCRIBE economic systems with the ability to make predictions about these systems which are TRUE. I use upper case true to indicate the Platonic sense, to be distinguished form lower case true in the Quinian sense; a distinction which may aptly be used to differentiate the social and natural sciences. Biology will certainly become a predictive science in the future. Will the social sciences? Given the subject matter, I hope not.