The debate about the state of economics has long been in danger of falling into a mutual accusation of fallacy-mongering. Critics of the mainstream are accused of attacking straw men, whilst defenders sometimes stray dangerously towards the “no true Scotsman” fallacy: “ah yes, but that’s not proper economics." The Econocracy by Joe Earle, Cahal Moran and Zach Ward-Perkins should elevate this debate.
They argue that “economics has become dominated by a particular, narrow way of thinking about the economy” and that “Economics education involves memorizing and regurgitating neoclassical economic theory uncritically.”
They back up their claim by a survey of economics courses at some leading universities which I find truly depressing. The emphasis that courses place upon fact-free theory suggests that teaching hasn’t caught up with the “credibility revolution” (pdf) which places more weight upon facts. And the “problem sets” Earle, Moran and Ward-Perkins reproduce have me agreeing with Martin Wolf, that I wouldn’t become an economist today: they look more like teaching dogs to jump through hoops than a proper education.
Their call for a true liberal education which prizes critical thinking over rote-learning is laudable.
This poses the question: why did economics education change so much from the 70s and 80s, when pluralism was prized? The answer lies not just with economics but with the university system. Earle, Moran and Ward-Perkins describe how increased pressure to publish caused university departments to value orthodox neoclassical economists who better appeal to journal editors: for all its virtues, peer review can also promote groupthink. And they show that increasing student numbers and a desire to cut costs squeezes out critical thinking in favour of abominations such as multiple choice tests.
All this is good. For me, though, the book raises some questions.
One is: how radical must be the changes in economics education? Earle, Moran and Ward-Perkins call for teaching to “start with empirical evidence and real world issues and then introduce theory afterwards.” This sounds admirable. But it’s difficult to implement.
For example, some important basic facts in macroeconomics are that: there’s no such thing as a “representative firm” (see this great paper (pdf) by Nick Bloom and colleagues); that GDP growth in developed nations is often stable but interrupted by occasional crises; and that recessions are unpredictable. The sort of theory that can account for these facts is very tricky. A shift away from equilibrium theories towards complexity, evolutionary models and agent-based modelling would require massive changes for which students and perhaps academics are ill-prepared.
A second question is: do the authors let off the media too lightly? They say:
In an econocracy political decisions are redefined as technical questions to be answered by experts and thus removed from the public arena…The vast majority of citizens face the struggle of making informed democratic choices in a language they have never been taught.
This overstates things: the EU plebiscite was a big and regrettable counter-example. But insofar as it is true, whose fault is it? Even if economists were truly knowledgeable humble experts, their voices would not prevail against a media which is largely hostile or indifferent to the truth.
Much as I sympathize with the authors’ critique of economics (at least as it is taught) I fear that it is not just economists that are the problem. Some of our fundamental institutions – universities and the media – are perhaps failing to sustain an open society. And this even more dangerous than the flaws in economics.