Towards Pluralism: Contending Perspectives in Economic Thought – by John T. Harvey

January 6, 2015

Economics Finance

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The world economy is a mess because economics is a mess. Professor John T. Harvey argues that with too much focus on abstract mathematical puzzles over real-world situations, and the promotion of Neoclassical orthodoxy at the expense of all other perspectives, the discipline of economics is becoming both intellectually impoverished and unable to help rebuild a better economy.

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Our discipline has become increasingly insular and irrelevant as it has evolved into a place where practitioners spend their careers solving esoteric mathematical puzzles rather than understanding real-world economic problems. It is full of bright and energetic people who wouldn’t blink if asked to solve a system of equations; ask them how a bank really makes a loan, however, and they would quickly find themselves stumped–this despite the fact that the latter is critical to understanding monetary policy and federal government budgeting.

A number of forces brought economics to this point. For one, as it evolved into a discipline unto itself, so economists’ primary audience became other economists. Their goal shifted from devising solutions to the problems of business people, households and governments to having one of their colleagues say, “Oooh, that’s clever!” It would be as if architects designed buildings not for customers, but the admiration of other architects. Fancy structures with little practical purpose would survive and perhaps even thrive in a world where their utility was negligible.

Of course, if what impressed other architects was how customer-friendly a building was, then no problem. But herein lies another problem. Economists have what has been called physics envy. They want to be perceived as having a very rigorous discipline, where rigour means advanced mathematics and statistics. There is no doubt that these can be very useful tools for organizing our thoughts. Over time, however, the use of advanced mathematical techniques has become the goal in itself, to be pursued independent of the insights it provides. Graduate economics places a very heavy emphasis on math, so much so that the Economics Department at California State University at East Bay felt compelled to post the following warning to their students considering advanced degrees:

Preparing to enter a Ph.D. program in economics requires a lot of time. The courses you need to take are likely to surprise you. If you are contemplating a Ph.D. in economics, chances are that you have taken some economics courses already and that you have enjoyed them and performed well in them. It is natural to assume that this is sufficient to obtain admission to a Ph.D. program; that is, if you major in economics with a high GPA, one might naturally assume this will earn you admission into a solid Ph.D. program. Nothing could be further from the truth! The fact is that competition for a limited number of spots in Ph.D. programs in economics is fiercer than ever, and nowadays no one is accepted without extensive coursework and a high level of performance in mathematics. The level of mathematical preparation that is required for entrance into a Ph.D. program is considerably higher than it was for some of your economics professors at CSUEB when they entered graduate school.

(California State University-East Bay, Department of Economics; emphasis added).

That they felt compelled to say that “Nothing could be further from the truth!” in response to the idea that enjoying and earning a high GPA in economics might qualify one for graduate work is a little worrisome. But they are right. Decreasing numbers of PhDs actually have undergraduate degrees in economics because it turns out that math, statistics, and engineering are better preparation for a career as an economist than courses in economics!

This situation has been evolving for some time. Take for example this survey response from a book by Arlo Klamer and David Colander (1990). When asked what was most important to success as an economist, graduate students at top US universities ranked “Having a thorough knowledge of the economy ” dead last (Klamer and Colander 1990, p.18). As one student commented, “You can walk in off the street and take the courses and not know what the Fortune 500 is and blaze through with flying colours. You can also come in and know the difference between subordinated debentures and junk bonds and fail miserably” (Klamer and Colander 1990, p.18). And while this spurred reforms in economic education, it is not at all evident that these led to changes in the programs so much as a different selection process. Rather, they appear to have served to channel different people into graduate programs, specifically those with stronger quantitative skills. But, as David Colander writes:

Mathematicians often process information differently than other people, and by filtering student through a mathematical screen, one is likely to change the nature of economics, making it harder to replicate creative economists in the style of Easterlin, North, Olsen, Streeten, Tullock, Rosenberg, Kindleberger or Buchanan.” While these are all highly analytical and sophisticated thinkers who have contributed enormously to economics, it is unclear that they would have chosen economics (or whether graduate schools would have chosen them) using the current graduate school filtering system (Colander 2005, pp.193-4).

It is worth noting that his list of creative economists who might not have pursued or been accepted by economics includes several Nobel laureates.

How can we solve this deeply-seated and very troubling problem? First and foremost, we need to start admitting to students that there is more than one game in town. In the overwhelming majority of classrooms, it is implied that Neoclassical economics is universally accepted as the state of the art. In fact, pedagogy experts in Neoclassicism have actively argued against introducing other perspectives!

Including strongly held minority views of economic processes risks undermining the entire venture. With too many qualifications and alternatives, teachers and their students may abandon economics entirely out of frustration born of confusion and uncertainty. (Siegfried and Meszaros 1997, p.249)

Above and beyond the fact that this seems suspiciously self-serving, it makes ours a very sterile discipline in which the the only remaining questions are a matter of tweaking the extant approach. Our intellectual ancestors laid the groundwork, it’s just up to us to fill in the gaps. There are, however, many economists outside the mainstream who would contend that the justification for such an approach is not only questionable given Neoclassicism’s pathetic performance in predicting real-world phenomena like the Financial Crisis, but it betrays a very primitive epistemology: science is the gradual process of replacing ignorance and error with truth.

Contending_Harvey_PRESSWere this only true. But, economics, like science in general, is affected by sensory and cultural biases. It is a social activity embedded within a larger culture. As such, the popularity of a theory or model involves more than just its ability to explain the phenomenon in question. It is also necessary to account for politics, personalities, prejudices, religion, vested interests, jealousies, and so on. In such an environment, progress is by no means guaranteed and for that reason our scientific skepticism should extend every bit as much to our own theories as to others’–perhaps more so, given the natural tendency to notice only phenomena that fit our preconceptions.

We must, therefore, at the very least allow others into the conversation. If Austrians, Feminists, Institutionalists, Marxists, New Institutionalists, and Post Keynesians are not crackpots, if these are instead intelligent, hard-working individuals who share with Neoclassicals a strong respect for systematic analysis, skepticism, objectivity, logic, and evidence, then there should be a scholarly forum in which they converse so that each is challenged in a far more fundamental manner than is currently true. Speaking for myself, there is not a single paradigm from which I have not learned something unique and insightful. This does not mean that I believe that they are all correct any more than each of the competing diagnoses of a patient’s disease can all be right. But, presumably, the method by which we cure our patient begins with an open discussion of the strengths and weaknesses of each theory, not the a priori suppression of all but one. The same is true of the economy. Economic pluralism points the way to progress.

 

harveyJohn T. Harvey is Professor of Economics at Texas Christian University.  His research area is in International Monetary Economics and Macroeconomics.  His latest book Contending Perspectives in Economics: A Guide to Contemporary Schools of Thought is published by Edward Elgar this month.

 

REFERENCES

California State University-East Bay, Department of Economics, “Mathematics Preparation for a Ph.D. in Economics”

Accessed October 3, 2014

http://www20.csueastbay.edu/cbe/departments/economics/ma-econ/thinkingofaphd.html

Colander, David. “The making of an economist redux.” Journal of Economic Perspectives (2005): 175-198.

Klamer, Arlo and David Colander (1990), The Making of an Economist, Boulder, CO: Westview Press.

Siegfried, John J., and Bonnie T. Meszaros. “National voluntary content standards for pre-college economics education.” The American Economic Review (1997): 247-253.

Top Wonks. (2012, Mar 19). James Galbraith on the Economics Profession

http://youtu.be/O3zH87gA2G0

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2 Comments on “Towards Pluralism: Contending Perspectives in Economic Thought – by John T. Harvey”

  1. elisa Says:

    I am an architect who’s been reading these conversations among economics pluralism advocates with interest. This time, I am somewhat bemused by the inclusion of architects as a comparison point. Architects are in the same boat as economists, with even louder tirades going on regularly about the state of our profession (usually written by blowhards, but occasionally someone cuts the bullshit). Haven’t you looked around and noticed that the built environment is in analogous crisis to the economic environment? And last week, I saw an article in the same vein about the field of Philosophy! Is there anything to learn, or gain (lessons? allies??), from these cross-disciplinary crises?

    Reply

  2. rommeldak Says:

    I had no idea! When I included architects in my argument, it was on the assumption that, of course, they’d be far more pragmatic than economists.

    But this isn’t so?

    John Harvey

    Reply

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