Economics after the crash

Posted: 5 January 2016 in Uncategorized
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Students often ask me if the discipline of economics has changed since the spectacular crash of 2007-08.

“Not much,” I tell them. “The economists and economic theories that prevailed before the crash are still pretty much the ones that are on top today.”

The good students, of course, get the irony: the mainstream economics they’ve been taught celebrates free markets and “creative destruction” but the discipline itself seems to be anything but.

And that’s exactly what Frederico Fubini found when he compared the rankings of top economists in 2006 and 2015: barely anything had changed.

Despite the profound – and largely unpredicted – financial and economic turmoil of the intervening decade, the intellectual influence of those whose theories suffered the most evidently remains undented.

After a succession of bursting multi-trillion-dollar credit bubbles, you might wonder what to make of Robert Lucas’s view that rational expectations enable perfectly calculating “agents” to maximize economic utility. You might also want to rethink Eugene Fama’s efficient markets hypothesis, according to which prices of financial assets always reflect all available information about economic fundamentals.

You must not be an economist. In fact, Lucas and Fama both moved up in the RePEc rankings during the period I examined, from 30 to nine and from 23 to 17, respectively. And the persistence at the top is striking across the board. Among the top ten economists in September 2015, six were already there in December 2006, and another two were ranked 11 and 13.

Mobility in the RePEc rankings remains subdued even after widening the sample. For example, of the top 100 economists in September 2015, only 14 were absent from the much wider top 5% in 2006, and only two others had advanced more than 200 spots over the previous decade. Among those recently ranked from 101 to 200, just 24 were not in the top 5% in 2006, and only ten others had moved up by more than 200 places. The rate of renewal among the 200 most influential economists was as low as 25% – and just 16% among the top 100 – during a decade in which the explanatory power of prevailing economic theory had been found severely wanting.

So, as mainstream economists gather in San Francisco for their annual meeting, they’ll be listening to pretty much the same figures and presenting the same ideas they did back in 2006.

Addendum

Here is the list of the top 20 economists as of November 2015:

economists

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