Mainstream economics has clearly had a great fall.
Just two days ago, I argued that—after the crash of 2007-08 and, now, Brexit—mainstream economists have had “nothing to offer, either in terms of insight or a path moving forward.” Also recently, Antonio Callari challenged Brad DeLong’s attempt to reduce economics to the mainstream debate between supply-siders and demand-siders and his argument that there’s no room for economists as public intellectuals.
Now, Mark Thoma has stepped forward to explain why it is that “in recent years the public has lost faith the in the economics profession.” And since by the “economics profession” Thoma is essentially referring to mainstream economists, he’s absolutely correct.
One reason for the lack of faith is the failure to predict the Great Recession, but the public’s dismissal of macroeconomists is based upon more than the failure to foresee the dangers the housing bubble posed for the economy. It is also due to false promises about the benefits to the working class from globalization, tax cuts for the wealthy, and trade agreements – promises that were often used to support ideological and political goals or to serve special interests.
Even more, mainstream economists simply don’t have “a solid understanding of the mechanisms that drive the economy.”*
Therefore, in Thoma’s view, economists need to exercise more humility and flexibility:
more humility about what we do and do not know, more willingness to change our minds when the evidence disagrees with our favorite theoretical model, and the willingness to acknowledge disagreement within the profession. But most of all we need to take a strong stand against those inside and outside the profession who misuse economic theory and empirical results for political and ideological purposes.
I’m all in favor of theoretical humility and flexibility. I certainly do not hold to the idea that our processes of producing knowledge can, or even should aim to, give us access to a complete or definitive model of the world. And I’m quite willing to admit—against the pretensions of most mainstream economists—that all we have (and can have) are partial and local and incomplete knowledges, which themselves are always changing.
But, while a good start (given the arrogance and rigidity with which much mainstream economics has been and continues to be produced and disseminated), that’s not enough. The real challenge, it seems to me, is to go beyond that and criticize both the theoretical models utilized by mainstream economists and their self-identified status as scientists who are somehow outside and independent of the world of politics and ideology.
There are, according to all three of us (Callari, Thoma, and myself), good reasons why mainstream economists have fallen in the eyes of the public. And try as they might, it’s doubtful “All the king’s horses and all the king’s men” can or should put mainstream economics back together again.
What’s needed is a fundamentally different way of doing economics and of thinking about the role of economists—economic theories that focus on issues of power and class (instead of relegating them to the margins) and a conception of economists as real public intellectuals (who play “a galvanizing role in the production of public knowledge and policy, where ‘public’ means not just ‘for’ the public, the people, but also ‘of’ and ‘by’ the people”).
I recognize that’s a radically different way of defining economics compared to the mainstream tradition. But, as it turns out, it’s a move Humpty Dumpty himself would have recognized.
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.”
*Thoma’s list of issues on which mainstream economists simply don’t have answers includes the following:
- Why has productivity fallen? Will it stay low in the future?
- What has caused the decline in labor force participation?
- How strong is the economy’s self-correction mechanism in recessions, and how does it work?
- Is there a Phillips curve (i.e. a reliable relationship between inflation, inflation expectations, and unemployment)?
- How are expectations formed, and do they converge to rational expectations over time?
- What is more important in the determination of wage and capital shares of income, marginal products or bargaining power and other institutional features of labor markets?
- What frictions should we focus on? Price and wage stickiness? Financial frictions? Both? How do these frictions vary over the business cycle?
- How high can the minimum wage be raised before there are significant employment effects?
- What is the cause of inequality? Is it baked into the capitalist system, or is it the result of political and institutional forces?
And, according to Thomas, “that’s nowhere near a complete list of the things we don’t fully understand. We don’t even agree about what caused the Great Recession.”