As Paul Krugman might say, let's indulge in some wonkiness. The subject: economics, with a particular focus on the institution where Krugman himself built his reputation, the Massachusetts Institute of Technology, before decamping to Princeton. There are two texts here to consider: a thin book by Nobel prizewinning econometrician Robert Fogel, his wife and two colleagues, "Political Arithmetic: Simon Kuznets and the Empirical Tradition in Economics," and a paper from economic historian and the former chairman of MIT's economics department, Peter Temin, which reviews the rise and fall of economic history at that institution on the banks of the Cambridge. Why should anyone outside academia really care? Because both works reflect a deeper struggle to define what economics is, or should be, how it should be taught and practiced. This, in turn, is part of a larger debate on fundamentals convulsing a field that looms over the other social sciences in power and influence.
Fogel died on June 11 at 87. This book, which his wife (who died in 2007) and two colleagues collaborated on (to some confusion: it's hard to tell who's speaking), is very different from the Nobelist's most famous works on the economic impact of slavery and the railroads. It does not bristle with charts, tables and masses of statistics - the chosen weaponry of the quantitative economist; it does not attempt to tightly argue determinative points between economic "fact" and social and historical realities. Rather, it's a sort of biographical essay, which rather leisurely - and dryly - wends its way toward the looming figure of Kuznets, who really established the field with his work on national accounts beginning in the '30s. Fogel was a student, colleague and friend of Kuznets, and this is his homage to a major, if largely forgotten figure. But Fogel is no literary biographer. "The modestly immodest" Kuznets emerges from a narrative that outlines the emergence of increasingly empirical economic research, including the post-World War I development of private and public institutions like the National Bureau of Economic Research aimed at "objective" research into economic fact. The book is half over before Kuznets even appears.
Temin's paper is shorter, livelier, if narrower in scope than "Political Arithmetic." He also views some of this material with a more critical eye. Temin focuses strictly on MIT. He lays out the landscape: Most of economics in the early 20th century was driven by narrative - economic history. Davis Rich Dewey, John Dewey's brother, who was an economic historian, built the MIT economics department; Temin himself taught economic history for 45 years. Over time, graduate economics required three areas of expertise: economic history (which involved writing), econometrics (a mastery of quantitative measures) and theory (math). Temin compares this trio to Marx's three classes: aristocrats, capitalists and workers. Over the decades, and particularly after World War II with the rise of econometrics and math-based theory (MIT famously lured Paul Samuelson from Harvard in 1940), the prestige swung from narrative to math. Despite John Maynard Keynes' own formidable writing skills and feel for economic history, followers like Samuelson increasingly defined the practice of economics as building and testing models. Thus, in Temin's cheeky analogy, the working classes first displaced, then overwhelmed "aristocratic" economic historians.
Temin's tale is gossipy, rich and knowing. Temin locates the decline of economic history at MIT to the tenure of Walt W. Rostow, an economic historian who, as he writes, "was marginal to economists" - and moved on to a policy role in the Kennedy and Johnson administrations. Temin replaced Rostow who, Temin notes, was never invited back to MIT after his Washington junket. Temin's own books on the Great Depression, and work from Charles Kindleberger, Evsy Domar and later Dora Costa, kept the study of economic history viable at MIT, but the tide was running out. Meanwhile, "economic historians responded to this change in economics by embracing the new tools of economic theory and measurement in what became the New Economic History." One of these pioneers was Fogel.
Temin recounts his tenure, starting in 1990, as chairman of the department and his efforts to keep economic history alive at MIT. It was difficult, though the department, by then a Nobel factory, thrived. With a few exceptions, the greatest talents congregated in theory, which tilted the balance of power. "In terms of the class struggle described earlier, the coalition of theory and econometrics left economic history out of power in the counsels of economics. Proponents of the New Economic History were using more and more econometrics in their work, but they were no match for the theorists."
He retired in 1993. The department abandoned the requirement that grad students take a course in economic history. Adopting a new metaphor, Temin characterizes it as a collapse of a three-legged stool. "The new had completely vanquished the old. Theory and econometrics joined to eliminate economic history as capitalists and workers joined earlier to exile aristocrats." Temin goes on to criticize a recent book by MIT economists Daron Acemoglu and James Robinson, "Why Nations Fail" as poor economic history, and one "that takes a shotgun approach to economic history, and many of the pellets go astray." He rounds on the failures of American politics, and the remarkable inability of the austerity-driven developed economies to learn from the Great Depression.
Temin may be overstating the case, particularly in his suggestion that a revived interest in economic history would cure what ails us. But there is a renewed sense of skepticism, certainly in the lay world, and occasionally within academia itself, about the reliance on models and on an abstract form of economic theorizing that ignores contingency, complexity and unpredictability in social systems. Perhaps markets are not always so efficient, or so determined by rational expectations. Perhaps vast amounts of new data - Big Data - and testing may still not insure prescience. Perhaps the past doesn't always determine the future. Perhaps human systems are not completely economically determined. Maybe at least part of the answer here is that economics operates through history, and is shaped by the stories people tell, and by memory, intuition and chance.
And perhaps there's still a major role for empiricism, for the kind of fact that Kuznets patiently accumulated. This is where Fogel, suddenly gets engaged. Fogel (I assume it's Fogel) wrestles with whether Kuznets, who like Rostow may have been marginalized by theorists, was an economic theorist at all. He believes he was, arguing that "the dubious equation of economic theory with mathematical models" has led to confusion between models and theories. He then recounts a past - the '50s and '60s - where "it was not necessary to emphasize that history was one of the principal sources of generalizations about the economy....Mathematical models are not generalizations about the economy. They are, as the word model implies, an abstract representation...In economics, models are often mathematical analogies that serve to represent in some simplified way some aspect of economic behavior. Analyzing the properties of a mathematical model is not the same thing as analyzing the way in which the economy actually works." These models can be useful, he adds, just like the study of history. Kuznets himself thought the "overinvestment" in theory led to a voguish sterility that can by an infusion of "findings from empirical, experimental and clinical research, as they normally were in the natural sciences."
And so we're back to Temin's three-legged stool and the attempt to bring arguably the most powerful of social sciences gently back to earth.