Economics as literature

Avner Offer says economics is “more like literature than like physics”. This might be seen as high-class trolling. Physics contains sums which are hard and scientific and manly, whereas literature is girly and so obviously inferior. For this reason, some economists have long had physics envy, writing papers whose titles offer “exact solutions” and “robust optimization”.

Such a reaction is wrong. Offer is right in ways that reflect both credit and discredit upon economics.

Let’s deal with the discredit first. Economists’ attempts to emulate physics have at least sometimes failed. Romer’s critique of “mathiness” and McCloskey’s accusation of scientism have some force. There’s nothing necessarily scientific about long lines of equations: Ronald Coase’s two (pdf) great papers (pdf), for example, gave fantastic insights without any.

What’s more, economics is more like literature than physics in that it doesn’t always progress. We can read 19^th century novels with profit, but few physicists would advise their students to study 19^th century work on the subject. Likewise, we should read the classical economists, not least because they were interested in issues with much of later economics overlooked, such as the distribution of income between capital and labour.

And some economics is like literature in a bad way. Those RBC models that assume continuous labour market clearing are like Iain M. Banks’ culture novels: they describe societies which do not exist, have not existed and will not exist in our lifetimes. And a common criticism of at least early versions of DSGE models was that they were as scrupulous in ignoring important matters as Jane Austen was in ignoring the source of her gentlemen’s incomes: Charles Goodhart said of the DSGE approach that “it excludes everything I am interested in.”

Nevertheless, there are two ways in which economics is and should be like literature.

One is that it asks the same question as writers do of their characters: given his motives, information set and constraints, how does he act and with what effects? Sloppy writers and economists give simplistic and implausible answers – as in the “incentives-magic!!-nice effects” approach of simple-minded free market economics. Great writers and economists, however, are much more careful and insightful. You can think of the recent Nobel prizes given to Hart, Bengstrom and Tirole as rewards for such carefulness.

Secondly, economics must be unlike physics because there are, as Jon Elster said, no (or few) law-like generalizations in the social sciences. Instead, like literature, there can only be detailed studies of time and place – although the best such studies yield great insights.

Does this mean that economics isn’t a “science”? I side with McCloskey. It’s a stupid question. What matters is whether the study is careful and disciplined? The objection to “mathy” economics is that it doesn’t bother with the discipline imposed by pesky facts.

In this sense, economics is like literature in that in both there is a constrained subjectivity. Literary scholars might reasonably differ on whether, say, Virginia Woolf was a better writer than D.H Lawrence but most would agree that both are better than, say, Louise Bagshawe. Likewise, whilst there might be disagreement in economics, there can also be unity or at least general consensus about what constitutes rank bad economics.

Comments

[Luis Enrique]

The smarter (imo) economists are explicit about this. I think I have linked to this before but here are Gilboa, Postlewaite, Samuelson and Schmeidler on Economic Models as Analogies

https://drive.google.com/file/d/0ByKYk1_tFV_vOVc1bTAtR3dTYVE/view

They also have a new one, I have only just come across, called

Economics: Between prediction and Criticism

https://drive.google.com/file/d/0B8qjElhQA3nKTktlb3lYdzhKMUU/view

which sounds quite literary.

[Luis Enrique]

also: there is a place for theory that does not bother with pesky facts, so long as it's kept in its place. Division of labour. Some economists are good at highly abstract posing of, and solving, problems. Other economists (or sometimes the same ones) can take those idea and methods and maybe do something reality-based with it. If you don't allow room for that kind of stuff, you end up with the sort of stupid criticisms that, for example, one sometimes sees leveled at papers like Markets For Lemons. i.e. this model says nobody would trade used cars, but they do, there this model is wrong.

[Dave Timoney]

Of course, literature sometimes suffers from physics envy as well, e.g. Charlie Stross's Accelerando. Part of the attraction of Banks's Culture series is the evident fun he has in assuming a can opener.

[JDT]

"And some economics is like literature in a bad way. Those RBC models that assume continuous labour market clearing are like Iain M. Banks’ culture novels" - bit unfair to write those novels off because they are they describe societies which do not exist, have not existed and will not exist in our lifetimes. Literature doesn't necessarily claim to tell us anything about the world, just to entertain

[chris]

@ JDT - of course; I meant no disrespect to Banks whatsoever. RBC models, however, don't entertain.
@ Luis - Yes. There are two types of wrong models. Some invite us to a deeper understanding of the world, because they raise real puzzles because the theory seems robust but inconsistent with the facts. Eg:
1, Markets for lemons. People are cheats - so why do we trust them?
2. Equity premium puzzle. Small gambles should have small pay-offs. So why have equities done so well.
3. Miller-Modigliani. You can't change the size of a pizza by cutting it into 8 rather than 6 slices. So why does the way we cut it matter?
Some other wrong theories, though,are just daft.

[andrew]

Ian banks did not pretend to write anything other than non-fiction.
Books on DSGE do pretend to be non-fiction.

... I suppose the real difference is there is more truth to be found carefully reading Ian Banks.

[B.L. Zebub]

@Chris,

You wrote:

"Offer is right in ways that reflect both credit and discredit upon economics."

I agree 100%. You dealt with many of the things he said. You, however, did not comment on something he also said. That point Offer made but you left out is related to democratic debate and is particularly relevant to the Brexit debate. To wit, this:

"I think that in the absence of an agreement about what the objectives of policy should be, what we know about the real world, and how to achieve these objectives, we should listen to economists, but we should not pay them any greater respect than to other people who are making valid arguments from other premises.

"In practice, we do that much of the time. We don't let economists run our society, although what central bankers are doing right now is coming dangerously close to that. I think we should listen to economists with respect. They are smart people, they have good arguments, but they don't have decisive arguments. In that respect, it's more like literature than like physics: When physicists agree, laypeople are in no position to contradict them, no position to argue. That's not the case with economists."

In your opinion, is Offer right on that?

[chris]

@ B.L Zeebub - I was hoping to avoid that question! I wish Offer had given examples. Often, public "contradictions" of economists are based upon ignorance and prejudice - eg on fiscal policy and immigration - and an unwillingness to engage in proper debate, as I argued here:.
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/09/persuasion-in-a-post-truth-world.html
This paper discusses a common way in which economics is misperceived:
https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2677659
There is, though, more reasonable engagement. Eg a layman might ask: "why do you say immigration doesn't hurt low-wage workers when it looks to me as if it does?"
I'd hope that economists could and should engage on those terms. Sadly, though, the media and BBC deny us platforms for such rational debate.

[Steven Clarke]

"why do you say immigration doesn't hurt low-wage workers when it looks to me as if it does?"

Where economics is closer to literature than physics is in that it deals with psychology.

There are often conflicts between economic efficiency and psychology.

For example:

- Economics would say let markets determine incomes, then redistribute. But psychology may prefer pre-distribution, intervention in markets, as people are offended by pre-tax income inequality and dislike handouts.

- Economics supports higher taxes on property, land and inheritances rather than income, but psychology dislikes it as you notice when you pay it.

- Economics supports free trade (for labour as well as capital), but psychology dislikes the economic and cultural discombobulation.

In all these cases, the standard of economic efficiency (which is a hugely valuable tool) has to be supplemented by knowledge of psychology, politics and other diciplines.

I don't know whether economics deserves to "enjoy superior authority over other modes of discourse", but it shouldn't have sole authority.

[Luis Enrique]

Chris,

also a role for exploring theoretical territory, seeing what results rest on etc. Akerlof introduced one change, blew everything apart. Could say econ also like philosophy. Some of the internet's leading heterodox critics seem puzzling opposed to this aspect of econ.*

you could say that we evolved trust to overcome the problem that Akerlof demonstrated would otherwise exist?

* well, it's not that puzzling: they are the equal and opposite theological sect to the one Romer depicts

[shitpostingleftisthack]

Surprised Mirowski's name isn't on here, since he has a lot to say about economics as metaphor (in fact, it's his whole schtick) AND physics envy (I think it was his 1989 More Heat Than Light that really pushed this thesis into methodological discussions)

[JKH]

"Likewise, whilst there might be disagreement in economics, there can also be unity or at least general consensus about what constitutes rank bad economics."

I think that's absurd.

Do you think Keynes would have said such a thing?

Do you think mainstream and heterodox would say such a thing about each other?

The literature connection is important.

[Brad Culkin]

This is why I have long believed we need a Nobel prize for epistemology.