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Economics is Hard. Don’t Let Bloggers Tell You
Otherwise by Katrik Athreya, a research economist at the Fed can
be summarized “Kids, don’t try this at home. Economics requires
adult supervision.”
The
following is a letter to open-minded consumers of the economics blogosphere.
In the wake of the recent financial crisis, bloggers seem unable to resist
commentating routinely about economic events. It may always have been thus,
but in recent times, the manifold dimensions of the financial crisis and
associated recession have given fillip to something bigger than a cottage
industry. Examples include Matt Yglesias, John Stossel, Robert Samuelson, and
Robert Reich. In what follows I will argue that it is exceedingly unlikely
that these authors have anything interesting to say about economic policy
The
reason for this is that economics is hard, or, to quote Athreya, “not,
by any reasonable measure, simple”, “very complicated”,
“far, far, more complicated than most commentators seem to
recognize”", “takes enormous effort”.
Athreya’s
critique of non-professional bloggers is primarily the field is so complex
and subtle that no one without specialized Ph.D.-level training from “a
decent economics department” is likely to even understand the terms of
debate correctly, not even to make a contribution to it. In contrast to
bloggers who have no external checks on what they write, the self-identified
scientific community of economists rigorously enforces high internal
standards through peer review:
The
punchline to all this is that when a professional research economist thinks
or talks about
social insurance, unemployment, taxes, budget deficits, or sovereign debt,
among other things, they almost always have a very precisely articulated
model that has been vetted repeatedly for internal coherence. Critically, it
is one whose constituent assumptions and parts are visible to all present,
and can be fought over. And what I certainly know is that to even begin to
talk about the effects of unemployment, debt, deficits, or taxes, one has to
think very hard about many, many things. .. Comparing, even momentarily, [the
careful work of certain economists] its explicit, careful reasoning, its
ever-mindful approach to the accounting for feedback effects, and its
transparent reproducibility, with the sophomoric musings of auto-didact or
non-didact bloggers or writers is instructive.
What
Athreya is saying is not so different from the view of Murray
Rothbard , who said, “It is no crime to be ignorant of
economics, which is, after all, a specialized discipline and one that most
people consider to be a “dismal science.” But it is totally
irresponsible to have a loud and vociferous opinion on economic subjects
while remaining in this state of ignorance.” People who write about
economics should first become educated about the subject matter.
Many
of the writers and bloggers on this site have a Ph.D. in economics (although
I’m not sure whether the institutions where they studied would qualify
under Athreya’s standard to enter the select who can
“meaningfully advance the discussion on economic policy.”). But I
can cite numerous examples of writers in the Austrian camp who do not have
economics doctorates who have meaningfully advanced the discussion: Henry Hazlitt; Lew Rockwell;
Thomas Woods (a historian). Some other
non-Ph.D.-accredited economic writers in the financial sector that I follow are
David Tice and Doug Noland, Sean Corrigan, Doug
French, Fred Sheehan, James Grant,
and Gary North (a Ph.D. historian). I like
Stossel as well.
Athreya
is probably right to the extent that he is saying that the models taught at
most university economics departments are so complex and specialized that
anyone who has not taken the coursework probably does not understand them.
But where I think that he goes wrong is to identify the study of university
macro with learning economics. Economics, as we see it, is the understanding
of human action under conditions of scarcity. Many of us in the Austrian camp
believe that the field of economics, macro in particular, went off the rails
in the mid-30′s under the influence of Keynes. By Keynesian thinking I
mean the meta-model underlying most modern macro models: the focus on very
high levels of aggregation, the focus on consumption, the lack of capital
theory, the lack of an explicit model of inter-temporal coordination through
the interest rate, and the obsession with sticky prices. Athreya defines a
meaningful advance in the discussion of economics in terms of the models that
are taught at university economics departments, which for the most part
inherit the problems with the Keynesian meta-model.
Those
of us who have been influenced (to a greater or lesser extent) by the
original thinkers of the Austrian school need a place on the net to discuss
what is going on in the world according to our view of how things work. The
general lack of availability of university training in Austrian economics
ensures that most of the commentary in this area is going to come from
non-university trained writers. Some of the time we may take on the
mainstream, but other times we only want to have our own internal discussion
among people who share the same starting point for analysis.
I have
no reason to doubt that he is correct the self-appointed priesthood of macro
enforce high standards when it comes to a discussion within their own
frameworks. Writing at length, as Athreya does, about how difficult it is to
master those models, does not address the point that the intellectual
framework underlying those models may be fatally flawed for reasons that are
not nearly so difficult to understand as the models themselves.
I also
would fault Athreya for not making a clear distinction between pure economics
and policy analysis. Mises wrote“There
never lived at the same time more than a score of men whose work contributed
anything essential to economics.” Mises would no doubt agree with
Athreya that making an advance in fundamental economics is hard. But many of
us who blog as not trying to make make an original contribution to the field.
We are trying to apply the thinking of Mises and the other great original
thinkers of the Austrian tradition to current events. But most bloggers are
not trying to make fundamental advances in economics (at least not in our
blog posts); we are usually observing the world around us and attempting to
explain some features of it using our understanding of economics.
Robert Blumen
Robert Blumen is
an independent software developer based in San Francisco, California
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