Insider-y post. Everyone has already rightfully beaten up Kartik Athreya’s essay where he is mad that bloggers are willing to discuss economics in the public sphere without having an economics PhD. I’d note Scott Sumner, Yglesias, and Mark Thoma. I’m largely in agreement with them, so I’m actually going to take the critique one step further and be critical of economics.
Never, and I mean never, during the financial crisis, where we’d leave work on Friday and wonder whether or not the world would collapse during that weekend or what kind of market we’d walk into on Monday, did I think “man I wish there were more academic economists around.” Academic economists had very little language with which to describe the crisis. Most of our narratives come straight from journalism or sociology. There are no “toxic assets” in economics, that evocative description comes to us from business world and journalism. Same with the culture and pitfalls of high mathematical finance, math predicated on the efficient markets hypothesis. Even now it feels kind of sad to see them try and shoehorn the entire financial crisis into agency problems. The last time we had one of these it changed economics completely with the Keynesian revolution. I am really rooting for INET to change some paradigms, but it’s going to be an uphill battle. You can barely move old-school Keynesian thought into academia, and I can easily see the journals publishing as if this crisis was just us “forgetting” some technology.
I think he took down the essay, but he mentioned how bloggers who haven’t taken the first year of Economics PhD coursework, and passed the prelim exam, shouldn’t be writing. I think I’ve pieced together the first year between some coursework and self-study, and here are my thoughts: My very first economics class ever was auditing a graduate macroeconomics class where we went through the Lucas/Stokey “Recursive Methods in Economic Dynamics” and Ljungqvist and Sargent “Recursive Macroeconomic Theory.” I still remember asking my classmates “no seriously, this isn’t what macroeconomics is, is it?” It was like they were training to be electrical engineers, but could do no actual engineering. I still am terrified of what macro graduate students are cooking.
And speaking as someone who has taken graduate coursework in “continental philosophy”, and been walked through the big hits of structural anthropology, Hegelian marxism and Freudian feminism, that graduate macroeconomics class was by far the most ideologically indoctrinating class I’ve ever seen. By a mile. There was like two weeks where the class just copied equations that said, if you speak math, “unemployment insurance makes people weak and slothful” over and over again. Hijacking poor Richard Bellman, the defining metaphor was that observation that if something is on an optimal path any subsection is also an optimal path, so government just needs to get out of the way as the macroeconomy is optimal absent absurdly defined shocks and our 9.6% unemployment is clearly optimal. (An unfair description perhaps, but I wasn’t an actual student. This is a better, though mathy, take on the problems.)
But getting back to point, I don’t see why having to know all that is necessary to being an informed participant in the current debate. As Greg Clark noted:
The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner.
The bailout debate has also been conducted in terms that would be quite familiar to economists in the 1920s and 1930s. There has essentially been no advance in our knowledge in 80 years.
And plenty of people have credentials that are saying bizarre and dumb things. At one point in my life I would tell employers how I had studied John Cochrane’s Asset Pricing book and replicated Eugene Fama’s research in SAS. And employers would be happy about this; my human capital was high though bound up with their reputation. And I got to watch in horror during the year of 2009 they both poured gasoline on my pile of human capital and did their best to torch it with mind-boggling nonsense and elementary, freshman mistakes. I wondered if I had cause for legal action.
More: It is worth noting that graduate microeconomics is the very math-y way of explaining Econ 1 concepts. You don’t learn new concepts, you just learn more sophisticated ways of explaining, say, revealed preferences. (Then you learn general equilibrium, which throws out a ton of what you thought.) This is why people are comfortable engaging the research but not necessarily producing it themselves – because if you took Econ 1, you know what the story of moral hazard is, even if you don’t create complicated models of it.
So yes, economics is hard, but I’m not certain it is harder than, say, chemistry. But economics is, for better or worse, a major language in terms of how we speak in terms of understanding our lives, and I would expect anyone who loves it to be excited that more, and not fewer, people are engaged in trying to expand that conversation. And frankly, I’d take the blogosphere any day.