I got several emails over the last couple of days about Christopher Hayes critique of economists at the AEA and the discussion it's spawned at TPMCafe. I was going to write something else earlier today but reading Paul Krugman gives me at least one shortcut.

...I'd like to warn against an error I think both sides tend to fall into: assuming that you have to use heterodox economics to reach conclusions critical of free markets. As I said, both sides tend to fall into that error: the heterodoxishly-minded bash neoclassical economics because they claim that it automatically makes you a defender of capitalism red in tooth and claw, and the free-marketeers reject warnings about markets gone wrong as somehow necessarily reflecting ignorance of economic theory. It just ain't so.

There are opinions I hold based on empirical evidence I've seen and others I hold as a matter of ethics. Taking from the rich and giving to the poor through force is theft, and solving a utility maximization problem to show that society has more utils after theft isn't going to persuade me to vote for redistribution. But just as Krugman says he was persuaded after looking at the data to change his views on the effects of trade on income distribution, many of us were persuaded that the Washington Consensus was wrong not by some new theory, but just by watching it in practice and finding the results far short of the promises. (Not convinced we could have done better, just that we oversold it.)

Ezra Klein also gets it:

There's no doubt that economics, like any other profession, has its sacraments, protects it orthodoxies, and exhibits group-think -- but those tendencies have, in my read, manifested more in the emphasis of certain conclusions over others (free trade boosterism over Dani Rodrik and Alan Blinder style concerns) than in the entire profession hewing to an outdated and insufficient intellectual framework. I'd be willing to believe differently, but I'm not seeing the proof. The profession actually seems quite flexible and adaptive when you dig into it. It's the public face which is somewhat less expressive.

What orthodox or any-other-dox economics provides you is a prism to ask the first question of inquiry: Is it true? Thus Craig Newmark can take a paragraph of Hayes and regard it as not fitting what the received literature tells us. That causes one to doubt some of the rest of what Hayes has done. But it's not that Craig's or my minds couldn't be changed by evidence to the contrary.

Thus I'm glad when my friends ask questions and are patient enough to let me expand my answer -- the quick public statement is seldom enough to get people to understand.

Evidence of Klein's sacraments, orthodoxies and group-think comes in both surveys (I still refer to Frey et al. [1984]; see also Whaples [2006]) or studies of how famous economists come to be (much of the work by David Colander, for example). Economists disagree on climate change but I doubt more than the public as a whole. We disagree on solving Social Security, but again that is an empirical issue; we know the ground rules of what constitutes a solution but haven't yet found it.

I think the most telling thing about the differences economists have from the public is in looking at how we score them on their economic knowledge. Only a handful of economists would view these results as anything other than a big problem. Of that handful, how many are heterodox?

Part of the issue is simply sorting. Frey, Pommerehne and Gygi [1993] found that students who ended up studying advanced economics were more likely to believe that a price rise caused by increasing demand was fair, compared to those who just took an intro class or those who never studied economics. Other studies (like Whaples [1995]) argue that attitudes change as one learns more economics. I think both probably are true. Perhaps because women are less inclined to support globalization do we find economics still a majority-male profession.

(In re that last link, a female friend I sent it to contends globalization increases the competition for men in industrialized countries. There are mail-order brides, but no mail-order grooms. That would mean women in developing countries should be pro-free trade; we should see a reverse pattern in males. This, my friends, is a testable hypothesis. Get to it.)

But as to heterodox economics per se, I'm left with the conclusion someone else drew (that I can't find right now but know it isn't my original thought): It would be nice to have a discussion with someone who knows neoclassical economics and has rejected it. The problem is many heterodox economists I meet are simply unaware of the details of neoclassical economics. And I'd agree that the reverse is true too.

Labels: economics