Friday 4 December 2015

What does it take to be a good economist?

The study of economics does not seem to require any specialized gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy or pure science? An easy subject at which few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man's nature of his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician. (J. M. Keynes. 1924. "Alfred Marshall, 1842-1924" in The Economic Journal)

Greg Mankiw, uber economist at Harvard, quotes Keynes' definition approvingly in the introduction to his Principles of Economics undergraduate textbook, and notes "It is a tall order. But with practice, you will become more and more accustomed to thinking like an economist."

The problem is that it is hard to see how the present manner of educating economists will ever give them access to the Keynesian standard of excellence, rather than merely the intellectually easy one of combining faith in the narrow selfishness of homo economicus (i.e. it's all about incentives) with some capability for social mathematics (mapping the complex interactions of incentive structures).

Rather the opposite seems to be the case. David Colander's surveys (1980s2000s) of graduate students at elite institutions (i.e. those on track to wield real academic authority and policy power) suggest that students are initially motivated to be the kind of economist Keynes talked about, but quickly adapt to the narrow standards and expectations of their economics departments. As Jacob Viner noted "men are not narrow in their intellectual interests by nature; it takes special and rigorous training to accomplish that end."

In particular, it seems to me that the emphasis on mathematical ability in graduate programmes leaves little space and time for developing those other talents in history, statesmanship, and philosophy, and leads to a profession excessively biased towards only one of the necessary talents. Thus it is less likely that we will have more of the 'master-economists' Keynes talks of, though we do have plenty of economists with the self-confidence of masters of the universe (like Larry Summers or Jeffrey Sachs).

The profession also suffers from the monoculture of talent. Because the graduate schools only really bother with mathematical talent they thereby exclude people with more limited mathematical abilities from joining the profession. Perhaps only a few prodigies like Keynes, Marshall, Schumpeter, etc can be truly gifted across all those dimensions, but if there was substantial diversity of talents in the economics profession as a whole, and means of coordinating that specialisation, one could get the benefits of a division of labour. If one had a diversity of talents.

I believe this artificial narrowness in what young economists are taught to pursue and value explains the failures of intellectual depth and perspective of many economists. It also accounts for the widespread public perception that academic economics has failed to understand the real economy - the global recession that no one saw coming - despite economists' belief that theirs is the most scientific of the social sciences.

Colander's latest survey results suggest a shift from theory for the sake of theory to a (relatively) greater concern for empirical and policy relevance over the last 20 years or so, and thus a shift from interest in pure mathematics to mathematical tools. For example, in the latest survey one graduate student quipped, "You learn the five tricks of the math as it applies to economics and that's it for the math."

Perhaps this renewed interest in practical problem solving can be seen as some kind of revival of an interest in 'statemanship' in the narrow sense of good policy-making. Yet this has been accompanied by a sharp decline in the teaching of history, whether of the economy, or of economic thought, which surely bodes less well. In short, the teaching of economics seems as far away as ever from providing students with the practice they need to think like true Keynesian economists, and thus the intellectual tools they need to exercise the authority and policy power of modern economics responsibly.