Quotation of the Day…

by Don Boudreaux on January 30, 2015

in Economics

… is from pages 59-60 of George Stigler‘s November 1959 Quarterly Journal of Economics article, “The Politics of Political Economists,” as reprinted in Stigler’s 1965 collection, Essays in the History of Economics (original emphases):

The main reason for the [political] conservatism [of economists on the economic front] surely lies in the effect of the scientific training the economist receives.  He is drilled in the problems of all economic systems and in the methods by which the price system solves these problems.  It becomes impossible for the trained economist to believe that a small group of selfish capitalists dictates the main outlines of the allocation of resources and the determination of outputs.  It becomes impossible for him to believe that men of goodwill can by their individual actions stem inflation, or that it is possible to impose changes in any one market or industry without causing problems in other markets or industries.  He cannot unblushingly repeat slogans such as “production for use rather than for profit.”  He cannot believe that a change in the form of social organization will eliminate basic economic problems.

While, as my colleague Bryan Caplan reports, today’s professional economists continue generally to have a better and more nuanced understanding of economic reality than do non-economists, I fear that the mature and realistic understanding reported by Stigler more than 55 years ago is today neither as widespread nor as deep among economists.  A greater focus on mastering complicated tools has dimmed the typical economist’s insight into the functioning of the economy; this focus has denied to a larger portion (than in the past) of economists what Deirdre McCloskey describes as “the refined common sense we call price theory.”

Focusing on tools has had this baneful effect through a number of channels, some of which I’ll just mention here without going into too much of an explanation.

First, as economics becomes more mathematically intricate, the people who, as students, choose economics as a major tend to be those who naturally excel at mastering the beautiful sparse logic that is math rather than at pondering the great complexities of real-world economies – pondering that is fruitful only with some knowledge, not only of formal economic theory, but of history, of political science, and of institutions (especially law).

Second, more time spent mastering formal tools means less time that is available to read, ponder, discuss, and debate history – including economic history and the history of economics – and other aspects of reality that one must be much more than passingly familiar with in order to become a genuinely good economist.

Third, to master a tool – be it high-level mathematics or econometric techniques – too often gives to those who master it a false sense of mastery of economics.  Yet just as mastering, say, how to use a hammer does not thereby make the hammer-master an excellent homebuilder, mastering technique does not make the technique-master an excellent economist.

I must add that my colleagues and I at George Mason University’s Department of Economics work against this lamentable trend in economics and in economics training.

….

Other forces are likely also at work today making too many ‘economists’ poor economists, at least by the standards of the past.  I’ll mention here only one: the expanding reach of the state.  As the state intrudes into more areas of our lives, a demand naturally arise – both from the politicians and bureaucrats who do this intruding, and from the special-interest groups who benefit from it – for apologia for these intrusions.  A politician and lobbyist who can point to a favorable study by Prof. Jones of Acme University has a better chance of imposing his or her pet intrusion than does a politician or lobbyist who can point to no such study.  So, of course, as the number and frequency of such intrusions grow, so too do the opportunities for the Prof. Joneses of the academy to be rewarded with notice or acclaim – and sometimes even lucrative consulting opportunities – for his or her formal arguments and empirical findings.

I don’t accuse the Prof. Joneses of the academy of being mercenary.  I’m sincerely quite sure that almost none of them are.  What’s going on here instead is a kind of academic natural-selection process: as the state expands its reach, the chance for some economic hypothesis or empirical result in support of greater state involvement to find a receptive audience grows.  And because that audience includes many people who, because of their office, are widely respected and have access to generous budgets, economists who are naturally biased in favor such intrusions have greater personal and professional incentives (in addition to the greater opportunities) to produce more of their research – research which, while supporting such intrusions, is produced honestly and scrupulously.

….

The upshot of all of these forces is that, compared to the past, a smaller portion of the economics profession today has mastered the economic way of thinking.  Being credentialed as “economists,” these economists (and the general public) understandably believe that these economists today understand the economic way of thinking.  But too many of them do not.

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