More problems with economics

I thought this article in Time magazine last week by the head of the Institute for New Economic Thinking was quite good. It’s nothing new but it summarises some of the methodological criticisms of economics over the last few years.

“Economists should resist overstating what they actually know”. A lot of mainstream economists bleat on like pub bores, pretending they know all the answers when really they’re just groping in the dark like the rest of us. Dressing things in fancy technical terms helps them hoodwink us.

Which brings us to the second point: “economists have to recognize the shortcomings of high-powered mathematical models, which are not substitutes for vigilant observation.” A lot of maths is only there because it looks cool and makes economists feel sciencey (NB. I know that’s not a word). Much better to look at what’s actually going on in the world then write about it well.

Instead of devising universal laws that are supposed to work in all places at all times, “more research on economic history and evidence-based studies are needed”. Most journals operate in some sort of imaginary theoretical world, proposing ideas that have learnt nothing from history and which aren’t tested with practical research. If I learnt one thing from working abroad in traditional agrarian economies, it was that some of the theories we learnt in university weren’t relevant there.

The final point of the article is that politics and economics are unavoidably related. It’s virtually impossible to theorise in a vacuum; to imagine that research or policy prescriptions are valid unless you take into account political context. Just as the early thinkers like Smith and Ricardo talk of political economy, not economics,  “research teams would benefit from multidisciplinary interaction with politics, psychology, anthropology, sociology and history.” I’d add philosophy, as well.