FT asks: What is the point of economists?
by Benjamin on July 29, 2009
Today’s blog debate in the Financial Times Arena asks a simple and provocative question: “What is the point of economists?”
“Why did no one see the crisis coming?” Queen Elizabeth asked last year. “A failure of the collective imagination of many bright people” who were all “doing their job properly on its own merit”, was the answer many of those bright people gave in a letter to the Queen last week.
If the economics profession could not warn the public about the credit crunch and the recession, what is the profession’s raison d’etre? Did this reflect, as some claim, that economics has gone astray with models that no longer help understand economic reality but rather distort it? Did such models even contribute to the crisis? FT writers and outside experts will set out their views in the posts below. What is the point of economists? What do you think? Click on the “62 comments” button to take part.
As one might expect, the debate is ongoing and interesting, but I have to admit that some answers in particular struck me. The argument was that the problem started in Finance, and Economics and Finance only mesh at the micro level, so “very few financial people cared because they knew nothing about macroeconomics” (comment 3), others are pretty adamant that “A lot of people were really good at math, but very poor at history” (comment 5, 7,… etc).
Tags: crisis, Economics, Financial Times
What do you think, Benjamin?
I’ll be honest with you, I have a high opinion of what economists should be doing, and what they think they sign up to do. My problem is often what they end up doing instead…
My immediate response to the question is the naive – perhaps cliche – statement that economists are there ‘to make the world a better place’… More specifically perhaps, we should be doing our jobs to understand that world – and define it – and then let the politicians try to make it better – with some well-placed advice.
I’d probably be on the side of the fence that agrees about the lack of macro in modern economics, and I would agree that a definite problem is the theorising about a world which is unreal, where we check the empirics to see if the model is close… Why not start with the world?
A long time ago I wondered how the economic theory of everything – general equilibrium – is a micro-theory… I’m still at a loss to find an answer.
Your thoughts?
Based on the economists I think had the greatest impact in the field (Smith, Marx, Keynes), the point of economists is to see the causal relationships in society on the grand scale and recommend the best set of actions.
Sadly:
1. seems as though people take sides in disagreements instead of attempting to be objective enough to consider both and
2. the field has been reduced to social statisticians (who lack the analytical ability to question what they’re doing in the first place).
In response to your two answers (making a better world and better understanding the world), I agree wholeheartedly.
Its as if being an economist is a position of honor. One that validates requiring the math without validating the math alone.
I like the final statement you made about the maths, and I think you are right about how we as ‘practitioners’ approach economics. It takes a lot of conviction to guide large groups of people. Economists who guide policy often have a buffer from the effects of their theory, as they can hide behind a bureaucracy of re-enforcing encouragement, as everyone has learnt the same ‘right’ theory.
I liked Nassim Taleb’s argument that no statistician in his right mind would trust his model criteria to make life-or-death decisions. Quick example: If you are given the option to fly a plane with a 5% chance that it won’t fall down, would you get in? … Why then would you accept policy making for millions of people on the same criteria only?