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November 15, 2010


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Well, maybe.

But, "That stuff wasn't supposed to be taken seriously" isn't the most convincing defence I've ever heard. Perhaps you could try , " A big boy did it and ran away" next time.

Yes, economics as a discipline is more than efficient market theory - there are even the odd Marxist or Veblenian who have managed to survive,somehow, in the economics depts of the academy. But it is notoriously bad, as a discipline, at looking at itself from the outside as it were. So much so, in fact, that the musings of a Cambridge trained anthropologist (Tett) on the economics profession seem to you to be tantamount to 'anti-intellectualism'.

Phil Ruse

"But that stuff was only ever what we did to make money."

I think I understand the message (as much as any layman can) but unfortunately that's the kind of remark I always use to hear from people who had plenty and to whom it was therefore unimportant.

Business directory

There are too many assumptions and guesses in economics.

Luis Enrique

There's a way of reconciling these stories. It's true that economics is diverse in the sense that there are economists of many political stripes, and also in the sense that perfectly mainstream economic insights (information problems, agency problems, utility theory etc.) could prove very valuable to radicals, if only the troubled to learn about them before instinctively disparaging them. But I think it's also true that economics developed something of a priesthood, and certainly the story that the "policy community" heard from economics was far narrower than that which exists within academe. So economists failed: the failed to get their many useful insights into the heads of the people running the show.

Tom P

She's keen on the church/priesthood idea. Here's a bit from Prospect last year:

"There is a real sense of intellectual confusion. Over the past year I have been speaking to former true believers and they're like a priest who has lost faith in the Bible, but still has to go to church, and the congregation is sitting there but he doesn't know what the Bible is anymore."


Well,to be playful, let me ask what is it that distinguishes priests from scientists? That they hold non falsifiable theories is the traditional Popperian answer.

So can I just gently enquire of Chris or any other passing economist how they assess this assertion, from a non orthodox economist:


"The...standard core of utility theory is non falsifiable. ...Boland (1981) asks if any conceivable evidence would refute the standard assumption of maximising behaviour. He shows that such an attempt at falsification could never work. Any claim that a person was not maximising anything can always be countered by the response that the person is in fact maximising something else. Given that we can never in principle demonstrate that 'something else' is not being maximised, the theory is invulnerable to empirical attack...

The problem with the maximisation argument are doubly severe when it assumes utility is being maximised. There is no experimental or other phenomenon that cannot in principle be 'explained' within a utility maximising framework...No evidence can, in principle, falsify the assumption that behaviour results from individuals or households maximising their utility.....by encompassing all possible arrangements and interconnections, the important relationships and connections are lost in a sea of universal possibilities. Accordingly, the universality of a theory does not necessarily mean it is useful or informative..."

Just asking, like.



Only a student here, but why do feel that you have to prove that agents optimize? We like optimization problems--that's the point. It's a methodological assumption, not an ontological statement.

Tom Addison

I'm not sure if it's anti-intellectualism or people who haven't studied economics not being aware of the level of maths behind some of the models. As someone who reads layman's books now rather than textbooks and academic papers (despite having a degree in economics) I can understand how many self-professed economics literates are unaware of the limits of their knowledge.



I'm not even a student, so no need to sound defensive - but I do wonder exactly what's the difference between a methodological approach usually thought to be part of the bedrock of a subject, as utility optimisation is for (micro) economics, and a ontological statement. A spot of anthropological or sociological insight might not do most economists any harm in my view. Wait, let's think what we might call some bastardised cross breed version of these subjects - hang on, I think I've got it: what about 'Political Economy'?

Tom may be right about we non economists not understanding, or even being aware of, the underlying maths in many economic models. That's certainly the case with me. But I suspect Gillian Tett is nobody's fool and can probably count up to 11 without taking her socks off...


It's just an assumption--no one mistakes it for reality where I study. Have you ever broached this subject with any operations research guys? Why not?

Are there any other modelling assumptions that annoy you--homogeneous degree one production functions in GCET maybe, or Gauss Markov or CLM in emetrics, etc?


To be fair vimonthy, I think the clue to my answer to your most recent questions might be found in my previous statement that I don't understand the underlying maths to much of economic theory. I'm neither proud nor ashamed of this. I just happen to have spent my life doing other stuff. But utility maximisation really isn't a modelling assumption like any other - its a basic psychological theory underlying your entire discipline. Or at least so I, perhaps in my ignorance, have always understood.


poor Chris....is he not aware that dissension and divergent streams of thought exist in churches? The fact that he is so resistant to anthropological thinking perhaps suggests that maybe economics goods a good dose of people and systems and structures based thinking to try and move on from the aridity of the standard orthodoxies of micro and macro ecnomic thought - whether marxist, marshallian.....


@Charlie - here's one recent attempt to test the Umax hypothesis - it is falsifiable:
That said, vimothy has a point - Umax is an assumption more than a prediction. And loads of everyday behaviour suggests the assumption is reasonable: demand cruves slope down, supply curves up, and so on.


@Chris: thanks for that. It looks a dauntingly long and technical paper, but I'll do my best to struggle through it given the courtesy you've shown by directing me to it. So I have to plead the Captain Oates defence ('I may be gone some time') before continuing this conversation.......

My point in this discussion has really *not* been to wind up vimothy or you or any other economist by insulting your household gods. But the point about whether people optimise utility is related to concepts of power and how power might operate. Whose utility are people optimising and how far are certain choices (given that economics is sometimes defined as the science of choice or scarcity) simply 'organised out' of both daily life and economic models is my underlying question I suppose. You've posted on this sort of thing regularly I seem to recall.

I'm certainly not claiming all economists have been blind to the concept of power, that would be ridiculous. & I do accept Luis Enrique's point about the benefits of radicals grasping economic principles if only, sometimes, to reject them on a firm basis. Tett's piece which so annoyed you was presenting a view of your profession ('a priesthood') as being impervious to such questions and/or over confident in its self belief that it alone can answer them.


Marion Fourcade said similar things in "The Construction of a Global Profession:The Transnationalization of Economics" AMERICAN JOURNAL OF SOCIOLOGY (2006)
This article relies on an analysis of the institutionalization of economics worldwide during the 20th century to argue that the logic of professional development in this particular field has come to be increasingly defined in global terms. Connections to (mainly) U.S.-based standards of work and professional practice are routinely used in the local competition whereby different professional segments and groups seek to assert their authority on particular jurisdictions (scientific, corporate, or political). In this process of professional construction (or reconstruction), economies are being transformed through complex transnational mechanisms which, ultimately, feed back into the identity and jurisdictional claims of the economics profession itself, both in the “core” and in the “periphery.”

Maxine Udall (girl economist)

Chris, Charlie,
I don't see that paper as testing/proving UMax. It tests whether under very general conditions, the assumptions that we economists regard as "rational" hold empirically. As the authors note, the conditional independence assumption is key. I think this rules out correlations across households from some common, but unobserved or unmeasured source, such as positional or neighborhood effects. I think that's a plausible assumption for food, housing and energy (maybe not so much housing recently, but over their time frame, yes). Also, note that they (again reasonably) restricted analysis to fairly homogeneous groups (1 and 2 person households and trimmed the extremes of the expenditure distribution). This has the effect of limiting somewhat the generalizability of their results, but is not fatal. They then show that many or most of their sample appears to behave rationally (as we define rational). It's a reassuring study in that it suggests the U max heuristic corresponds to reality on average in a not too restricted space with not too restricted samples. I don't think it "proves" anything.

I wrote something possibly relevant here: http://www.maxineudall.com/2010/03/the-socrates-parameter.html


@ Charlie - you're asking a profound question here. The standard view amongst economists is just that preferences are "given". It is, though, entirely possible that they are an artefact of social circumstances, as Jon Elster and Amartya Sen have stressed (eg if we reduce our wants to match our impoverished condition). Whether this is a matter of power, or rationality, is an open question.

Ian Bright

Bravo, Chris!
Gillian Tett's article reminded me of the diatribe by Gideon Rachman in the FT on 6 September.
Even worse, the views expressed by Ms Tett are very old hat and have been thoroughly rebutted in Diane Coyle's book The Soulful Science.


on this utility maximization thing ... perhap check out chapter 1 of jon elster's "sour grapes" ... it explains clearly (though abstractly) what "rationality" / "optimisation" means in mainstream neoclassical economics, and how narrow this conception of rationality is (basically, maximising individual benefit or utility, on the basis of given, consistent preferences). This narrowness is both a methodological advantage and disadvantage. The narrowness of the concept means it can be turned into maths, and so used to build models that may generate insights. The disadvantage is that at times the very narrowness of the concept restricts what economists look at ("where do preferences come from?" is not a question economists ask that much), and so the wood may be missed for the trees. Good economists know these methodological pros and cons of the mainstream economics literature, and keep them in mind when reading it. Bad economists don't, or just assume that the mainstream literature is all there is.


@ Chris
I don't really do profundity. & I can accept that all fields of inquiry need certain borders ('givens') if one is to focus on anything. But as economics, as an academic discipline, usually sits in offices close to politics and sociology I struggle to believe that they haven't engaged more deeply than you suggest with at least the more obvious debates around power and decision making in those fields. (Stephen Lukes anyone?)

P.S. I'm struggling a bit with the Hoderlein paper to be frank: actually I am more than struggling, I was lost by the first mention of 'Borel space' on page 6.On the upside, I suppose that makes me 4 pages better than Harold Wilson, who claimed he gave up on Capital 'at the first footnote'- which is on page 2 in my edition. But it also means I'm going to have to do a very un-interwebby thing and retire from a debate becasue I have no means of understanding the point that has been put to me.


"This attributes far more homogeneity to the economics profession than ever existed. "

The diversity of thought in a profession is largely irrelevant when those in the profession who actually get to put their ideology into action do not actually reflect that diversity in their actions.

Economic ideological diversity is as relevant as party political opinion diversity. Which is to say it isn't.

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