I’ve discussed a number of times in this blog the peculiar combination of activities, interests, and methods one finds among academic economists, even among the restricted cadre of economists working within the intellectual confines of neoclassical welfare economics, that is to say, conventional, traditional microeconomics. It occurs to me after talking with a wide variety of random economists online that the rather confused, non-rigorous state of economics as an academic discipline had created a situation in which different economists have entirely different conceptions of what they’re actually meant to be doing, about what the field of economics is meant to be all about. Seems to create quite a bit of confusion. Let’s take a quick look at the main contenders this week.
Some economists working with neoclassical economic models seem to believe they’re doing science, that is to say, predicting empirical phenomena. This is the group who views modeling assumptions like perfect information and perfection rationality as obviously false simplifying assumptions that are instrumental for model building and believe the resulting models can be evaluated as a unit with respect to how well they predict observable economic phenomena.
Some economists working with neoclassical economic models including the seemingly normative or evaluative models one finds specifically in neoclassical welfare economics seem to believe they’re simply doing mathematics in the form of solving random optimization problems. That is, they don’t believe it’s their role to actually evaluate any normative inputs or indeed factual premises that appear in their math problems or models. They’re working strictly with logic and mathematics and producing theories of the general form: if X, then Y. Other people can make of their theories and conclusions what they will. For these economists, assumptions like perfect rationality and perfect information have exactly the same status as inputs to their math problems as assumptions like the moon is made of green cheese and we need to get it to planet Earth. If we have X space ships traveling at speed Y, how many years will it take?
Some economists working with neoclassical welfare economics seem to believe they’re doing social ethics. They believe their role is to serve as ethical arbiters, explaining to others what economic systems and outcomes they should find optimal or preferable to others. They may be using logic and math to make their arguments, but they also pretend to understand and to have evaluated both the normative or ethical inputs and any factual premises required for their normative or ethical conclusions. They think they’re producing theories of the general form: X, therefore Y is normatively best. Other people can always disagree with them, but if they do they either don’t know how to do logic or math or their ethical beliefs are flawed in some way. They view assumptions like perfect rationality and perfect information as true factual premises that are logically required to deal with certain otherwise ethically dodgy implications of the proposition we should maximize total social utility. They’re likely to respond to doubts on the truth of those assumptions with a haughty, “Do you think people are stupid?”
Some economists working with neoclassical welfare economics seem to believe they’re engaging in the art of telling stories or making myths. They want to help other people “understand” markets and the economy by constructing psychologically appealing frameworks for thinking about such issues. They seem to care less about the empirical predictions of science and the normative or ethical inputs and conclusions of social ethics as they do about just getting other people to “think like economists,” to frame issues in a certain way, to adopt a certain perspective when thinking about economic matters. They don’t much care if assumptions like perfect rationality or perfect information are true or not. They’re all just part of the story, plot devices, like the Great Fairy Castle in the Sky the hero visits in chapter five. However, to work as intended some elements of the story must bear some relation to reality. This is the sort of thinking that leads some people to observe that economic theory only changes when the gap between theory and reality becomes too big to ignore, as a newspaper article I read recently had it.
Some economists working with neoclassical welfare economics seem to think they’re doing some combination of the preceding. A little bit of this, a little bit of that. Jack of all trades, master of none. Assumptions are sometimes interpreted one way, sometimes another. Normative inputs and conclusions are sometimes defended, sometimes not. These are the people who are fond of portraying economic theory as a magical, Mary Poppins sort of purse or toolbox such that nothing in particular is really entailed by the theory at all, it’s just a matter of whatever one feels like saying or doing from one moment to the next. This is the annoying sort of slippery, shape shifting economist who is likely to bring to mind the sarcastic rebuff, “Whatever you’re talking about, I’m talking about the other.”
It’s a comical sort of field, isn’t it? Has there ever been such a sloppy, intellectually ill-defined field of inquiry admitted into an academic environment that thinks so highly of itself and proclaims its own fake rigor with such pathetic persistence? We have to fight bad economics to be sure, but I wouldn’t really expect a lot of help from perpetually confused academic economists. Not until they decide amongst themselves what economics is all about, anyway. No, it will apparently depend upon non-economists learning the normative or ethical program of neoclassical welfare economics, interpreting it correctly, addressing bad economics, and working around the self-proclaimed experts on the subject.
