Mike the Mad Biologist

DeLong on the Future of Economics (or Econ Departments)

Posted by Mike on May 23, 2011
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I find reading economist Brad DeLong interesting since, even though I don’t always agree with him on economics, he approaches his subject with the humility that scientific disciplines brutally instill in their faithful practitioners. This was an interesting notion regarding the future of economics education:

It is the scale of the catastrophe that astonishes me. But what astonishes me even more is the apparent failure of academic economics to take steps to prepare itself for the future. “We need to change our hiring patterns,” I expected to hear economics departments around the world say in the wake of the crisis.

The fact is that we need fewer efficient-markets theorists and more people who work on microstructure, limits to arbitrage, and cognitive biases. We need fewer equilibrium business-cycle theorists and more old-fashioned Keynesians and monetarists. We need more monetary historians and historians of economic thought and fewer model-builders. We need more Eichengreens, Shillers, Akerlofs, Reinharts, and Rogoffs – not to mention a Kindleberger, Minsky, or Bagehot.

Yet that is not what economics departments are saying nowadays.

DeLong then warns:

Perhaps academic economics departments will lose mindshare and influence to others – from business schools and public-policy programs to political science, psychology, and sociology departments. As university chancellors and students demand relevance and utility, perhaps these colleagues will take over teaching how the economy works and leave academic economists in a rump discipline that merely teaches the theory of logical choice.

I hate to say it, but disciplines can toddle on for a very long time in bizarre directions without being relevant. Since economics isn’t heavily dependent on external funding (although that could conceivably change if it became a more data- and natural history-driven discipline), the only external impetus I can foresee would be the need for governments to have reality-based economists.

And that last sentence definitely opens a can of worms (not to mention opportunities for snark).

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Comments

  1. #1 D. C. Sessions
    May 23, 2011

    the only external impetus I can foresee would be the need for governments to have reality-based economists.

    Or at least less demand for economists who will make up an economic rationalization justifying their patrons’ agenda.

  2. #2 becca
    May 23, 2011

    “he approaches his subject with the humility that scientific disciplines brutally instill in their faithful practitioners”
    Oh Bah. I don’t think economists are *that* much more arrogant than fizzycysts, I just think that it’s less justified in the case of economists. Scientific disciplines no more instill true humility than does academia. Quite the opposite, in some senses. Indeed, arrogance may be the only rational coping mechanism.

  3. #3 stripey_cat
    May 23, 2011

    becca, my interpretation of the humility remark was that, in the experimental sciences, everyone has to deal with the idea that their work is falsifiable: someone in the next room could show conclusively that everything you’ve published in the last five years is marsh-gas. This awareness is at the back of the mind of every scientist I know (admittedly, I do try to avoid narcissists in any discipline!), and rather rarer (albeit not non-existent) in the humanities scholars. It’s not so much humility as not attaching your self-worth quite so firmly to the ideas you propose.

  4. #4 Barry
    May 26, 2011

    I came across a comment by James Heckman last summer (it might have been something that he was repeating from another source). He pointed out that there are few market incentives in the economics professoriate. A tenured professor has no particular incentive to change just because he’s wrong.

    A professor working for tenure is incentivized to go along to get ahead. Bucking the system would hurt him, unless he’s in a discipline where proving the current theories wrong would help, and economics doesn’t seem to be such a field.

    Similarly for grad students, although that’s where the progress will eventually come from. Students who witnessed the crash before becoming emotionally invested in the current theories will approach the field differently.

    As for the larger academic system, there’s no incentive for the heads of universities to tamper with the existing economic system. It wouldn’t gain much for the university in the short or medium term, and would provoke resentment. It’s more rewarding to focus on raising money and cutting costs.

  5. #5 Roman
    May 28, 2011


    The fact is that we need fewer efficient-markets theorists and more people who work on microstructure, limits to arbitrage, and cognitive biases.

    I don’t know about cognitive biases (I don’t know what they are, in fact) but in the hedge-fund and high-frequency trading industry there is a lot of on-going practical research on exactly the same topics: what is the market microstructure, how arbitrage opportunities occur, etc. This should put pressure on the academia to also pursue research in this direction.