Friday, June 01, 2007

TPM Cafe

I really struggle with this TPM Cafe piece on heterdox economics.

Firstly, and trust me I'm a professional, the website stinks. It's impossible for me to follow the thread of the conversation, Brad DeLong seems to be all quotes, text seems to get clipped at the margins, and it was very very hard for me to find a stable URL to link to the damn thing.

Secondly, there seem to be two areas of criticism: 1) the rational forward looking utility maximizer at the heart of classical economics, and 2) the profession does not allow in crazy ideas and thinkers.

Let's take our friend the utility maximizer first. Is this model a realistic representation of human behavior? Of course not -- real life is much more complex -- but as crazed right winger Paul Krugman points out, models take arguments that are vague, inconsistently applied, and implicit and make them precise, consistent, and explicit. The forward looking rational utility maximizer posits a human being that puts himself, his family, and his friends before strangers, and then takes this idea through to its logical conclusions. Some people may call this selfish behavior, and I think that's fair, but it is also human nature. Ignore it at your peril. If you want to take on the utility maximizer, I need you to take on this description of humanity as well.

Secondly, let's take the isue that the profession does not allow crazy thinkers. Looking at the Nobel Prize list, I see we have Kanehman, Smith, Akerlof, Spence, Stiglitz, and Sen, all of whom fall well outside the neoclassical paradigm. Also, please note we have the rest of the Academy -- from History to English -- which take positions that are well outside the mainstream of macroeconomic thought and focus almost exclusively on issues of inequality, power, gender, etc. Within the broader context of academic inquiry, it is the economics profession which is uniquely heterdox, not the other way around.

I mean, what do you make of comments like this one:
Climate change! This enormous elephant in the room is finally receiving some attention in the U.S.—even, at long, long, long last, from the Bush administration! ... We need economists who take these threats—and science!—seriously, and are willing to think and act more broadly in relation to this issue. I think contemporary economists are going to look really, really silly (and irresponsible) in any future retrospective, fiddling while Rome burns (and New Orleans floods).
Whatever your thoughts on climate change, the computer models that underpin it are not science because they do not generate hypothesis that can be falsified through empirical observation. If it's not falsifiable, it's not science. (Note -- yes, economics is not a science either).

Finally, one of Julie Nelson's colleagues at Tufts should explain to her that New Orleans was built below the waterline, which means that flooding is inevitable.


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