Before railing against economics, read this

I had trouble getting out of bed this morning, so to help get me going I decided to read an essay about economics.  And I ran back into a treat of an essay I think we should all read.  This is Modern Economics and its Critics, 1:  by Partha Dasgupta.

His focus is explicitly on what economists actually “do”, noting that economists tend to focus on small questions we can actually go someway to answering – and that economists through economics, in no way, try to derive sweeping universal rules for society.  Furthermore, the focus of economists, and the assumptions economists make, are a product of their times and the questions that “matter”.

My favourite quote though:

I said earlier that modern economics treats people with respect; it does not regard them as mere dupes and foils of Business and Government.

Note, I largely agree with the essay, even though I personally fall in a different camp – I find myself having to look at economics issues in the way he stated his father did:

My father, Amiya Dasgupta, lectured on both advanced economic theory and the history of economic thought. In later life he often told me he wouldn’t have known how to proceed on one front without keeping a look-out on the other.

I don’t think the two styles are in conflict, they just offer different attributes to “answering a question” – in fact this makes the disciplines of economic history and economics complementary, even if the individuals involved have to specialise in one or the other!

Dasgupta’s essay nicely discusses why many of the compelling criticisms we hear currently about ‘economics’, that we heard in the 1990s (when he wrote the essay), and that we heard in the 1970s, are really the product of not understanding what economists do mixed with poor historic analysis.

He also makes the point that there are many things to criticise and argue about, but appeals to the “Masters” and “paradigm shifts” are often vacuous.  This supports the point made by Chris House recently.

Note:  Before those on the left criticise him out of hand, look at the highly interesting (left-leaning) concepts he writes about.  Read the essay, and you’ll notice him talk about how very high inequality is related to lower economic activity, and how this is the result of stratification.

Before libertarians criticise him, recognise that his essay pushes us to think about individuals, incentives, and individual choice – he is rallying against the lazy, and impersonal, way that many will clump things into “government”, “business”, GDP” etc.

Unlike politics, in economics we are willing to admit that these issuses, and trade-offs, are hard – and that there is no “silver bullet” to improving welfare in society.  Incremental change to go with incremental improvements in knowledge make sense.  To pretend we know more would be the height of arrogance, and I think Dasgupta’s essay indicates that economists realise this!

Update:  CPW just sent me this, it is relevant.  I am surprised to hear Noah Smith state that microeconomics is a dismissive term though, the one I always hear is “microeconomics is economics, macroeconomics is just applied micro”.

  • “You can emerge from your graduate studies in economics without having read any of the classics, or indeed, without having anything other than a vague notion of what the great thinkers of the past had written.”

    This quote alone explains why my economics degree has been such a chore. There is hardly any discussion of how the *current* idea got to become the *current* idea. Throwaway comments about “Fresh water vs Salt water macro” simply isn’t deep enough.

    • Peter Cresswell

      I’m happy to say that’s something the Auckland Uni Economics Group is doing its best to remedy. 🙂

    • I remember when I was studying and I felt the same way, so I ended up reading up on a whole bunch of economic history online.

      This is the kicker though – time we spend understanding these ideas is also time we could spend learning technical skills that allow us to measure and express things. Think of it like a Cobb-Douglas production function – studying one increases the marginal product of the other, but given a budget the two inputs act as substitutes. Picking the right “mix” is tough.

      In this environment the solution seems to be group work – we can each specialise to some degree, and learn enough general theory and history to work together. However, whether current economic education supports that, and how we coordinate, are pretty tough questions.

      • Do you think technical skills or erudite appeals to authority are more convincing? In what sphere of life?

        • Technical skills and appeals to authority share some elements – technical proficiency can be used to appeal to authority, as we often see in economics.

          If we want to actually have someone accept our description, then thinking about persuasion is important, indeed. When it comes to learning the skills to create a description, the question is a bit different right.

          • Definitely. If we want our ideas to be widely accepted then they need to be explained to non-economists who will be unimpressed by your sexy, new, agent-based macro model. Appealing to Keynes is more convincing to the average PPE grad than appealing to Gali!

            Of course you’re right that economists regularly appeal to authority in their technical work, too, but their phrasing is rarely ‘erudite’ 😉

            • Indeed, persuasion is a skill – the issue is that it is a different skill to wisdom, and those that can persuade often convince themselves that they are the same 😛

              LOLOLOL, true.

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