…especially these days. Almost non-existent in politics today (with the very noteworthy exception of some recent soul-searching by David Frum), I have come upon a small, but heartening trickle of economists who have the courage to change their minds or rethink issues or positions. Many more though, even in the aftermath of the biggest financial crisis of our time continue to chug merrily away with nary a pause. To whit:
Things that I think I have gotten really, really wrong so far in my career:
My belief that central banks had the tools, the skill, and the political will to stabilize economies at high levels of employment and low levels of inflation, and thus that fiscal policy and financial institutions policy no longer had any compelling stabilization policy role to play.
My belief that large, leveraged financial institutions had sufficient caution and sufficient control over their derivatives books that their derivative positions did not pose major systemic risk.
My belief that the principal threat to the world economy would come from the fact that in a crisis the shaky long-term finances of the U.S. social insurance state might provoke a collapse of confidence in the long-term value of the dollar.
My belief that closer economic integration between Mexico and the U.S. would be, while a rough ride for Mexico, a clear net plus for Mexico.
My belief that economists as a group understood as much about the causes of recessions and depressions as John Stuart Mill understood in 1829: that a downturn is a shortfall of planned spending at full employment below income caused by an excess demand for financial assets, and it is cured by either (a) having the government do the spending-in-excess-of-income that the private sector will not, or (b) having the government flood the zone with financial assets so that there is no longer an economy-wide excess demand for them.
My belief that pushing neoliberal, market-opening reforms on countries like Argentina in the 1990s was not a policy as wise as giving a supply of gasoline to a bunch of pyromaniacs.
My belief that the rapid growth of the Japanese economy in the 1970s and 1980s would continue into the 1990s and 2000s.
My belief that the 6% unemployment NAIRU of the U.S. in the 1970s and 1980s would continue into the 1990s and 2000s.
My belief around 1990 that the rapid privatization of Russian industry was the best chance to set up a favorable political dynamic that would lead to rapid economic recovery and political development in Russia.
My belief that, automatic stabilizers aside, fiscal policy no longer had a legitimate countercyclical role to play because the Federal Reserve and other central banks were mighty and powerful and could and would act appropriately inside fiscal authorities’ decision loops.
My belief that no advanced country government with as frayed a safety net as America would tolerate even near-double digit unemployment for years.
Any others to suggest?
While I am in no position to argue over much of anything economic with DeLong, his deep (professed) loyalty to the tenets of neoliberalism has rankled on a modest number of occasions as a blog reader and lecture listener of his for about the last 3 years. However, his exceptional command of history (his series of lectures: Econ 113-American Economic History at iTunesU are a major asset I highly recommend to anyone interested in history or just learning) and his earnest propensity to admissions of error and of noteworthy enlightenment by others more than make up for any of that. This post of his to intro macro students at semester’s end also begets major credibility as he admonishes them to remember just how rare and stringent the conditions are “for any form of ‘market efficiency’.” (That’s for any form, mind you.)
Next up: This (to my knowledge) unprecedented admission of error based by George Mason University economist Daniel Klein is really a major mitzvah to intellectual honesty by someone who I would be not-at-all predisposed to look upon favorably otherwise (a little admission of my own of fallibility with regards to the faults which follow). In the middle of last year, Klein published a paper in Econ Journal Watch (which he edits) and an accompanying editorial in the surely delighted Wall Street Journal purporting to show that “the left flunks Econ 101.” Using a series of mostly politically loaded questions, the author finds that liberals “incorrectly” disagree with statements such as “minimum wage laws raise unemployment” and a number of similar propositions. While perfectly qualified economists like Alan Krueger, among many others, might beg to differ with that example, it was off to the races for the press and the blogosphere of the right.
Fast forward to now. Klein has more to say. What he had to say this time ended up in The Atlantic though, as it’s content apparently didn’t interest the WSJ terribly. I recommend just reading his piece on the follow up study he had the courage to not only undertake, but to actively publicize. In it he admits to belatedly recognizing the fairly obvious confirmation bias and also points out that the intention of the original research (done by his coauthor Zeldjka Buturovic of Zogbys) was to look at the epistemological origins of the respondents beliefs, not their alleged grasp of facts. At any rate, he makes no bones about publishing a faulty paper or about how his own confirmation bias played into his interpretation of the material. Reading up on Klein a bit more, it’s less surprising as he displays a red flag for intellectual honesty on his web page at GMU, namely he focuses some of his research and attention on the deep personal biases that guide the formation of our intellectual underpinnings. In his own words:
I push the point that the cleavages in character run deeper than is usually acknowledged. Like Gunnar Myrdal, I think that deep-seated ideological sensibilities play a role in one’s purpose, basic formulations, and judgment throughout, and that candid communication calls for openness about own ideological sensibilities.
I’m pretty sure this is only a big revelation in economics, which craves scientific detachment as much as the press craves “balance;” nonetheless such observations, sadly, seem to be apostasy in the dismal science.
Witness no more than the “who me?” rebuttal of N. Gregory Mankiw to the recent partial walkout of an introductory Macroeconomics course to protest their “discontent with the bias inherent in this introductory economics course.” They continue “We are deeply concerned about the way that this bias affects students, the University, and our greater society.” As someone who has recently gone through intro macro and micro courses using Mankiw’s text, I can attest to my own perceptions of such biases (carping to that effect has appeared in this blog).
Contrary to the introspective search of the economists above, Mankiw characterizes the fairly concise criticisms of the walkers-out as “a grab bag of anti-establishment platitudes without much hard-headed analysis or clear policy prescriptions.” Here are the main critiques of the letter:
A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics.
Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand.
Maybe those are platitudes at Harvard? At any rate, Mankiw’s take (“If my profession is slanted towards any particular worldview, I’m as guilty as anyone for perpetuating the problem”) reminds me of George W Bush’s famously limited list of regrets at the end of his Presidency (I guess they did do some work together) including that he shouldn’t have stood in front of the “Mission Accomplished” banner. Maybe there were a few other things one could add to that?
The profession is slanted and I’d go out on a limb and say that he is a little bit more guilty than some others. For someone who has advised multiple Republican Presidential candidates to not even mention that perhaps he views things through a lens that leads to the same confirmation bias that Professor Klein went well out of his way to cop to says about all one needs to know.
Here is a good rejoinder on the Econospeak blog to some of the rebuttals he raises, though as someone who went through his book, I think this take is perhaps a bit generous in terms of his homogeneity within the mainstream economics crowd. (Mankiw’s text is remarkably dumbed down versus, for instance, the Krugman/Wells or Abel/Bernanke texts, perhaps explaining some of it’s popularity. Though they all may suffer from the same big biases, the latter two at least make it much clearer that much of the information presented is still contentious to some). To be sure, if you are a highly employable and renowned tenured Professor who produces a popular and profitable textbook, can get an editorial published in the NYTimes pretty much any day of the week and moonlights as the go-to GOP Presidential advisor on matters economic, there are likely some very real imperatives to not admit to significant bias or the need for revision in your teaching approach. Certainly it would not be good for business. However, it would certainly put a bit more much needed credibility back into our beleaguered discipline in the eyes of many well outside the small group of protestors he was rebutting.
Finally, apropos of Robin Wells, she recently published a nice perspective from the “mainstream” point of view advocating giving some good, hard thought to what the protestors were protesting. In her words “something is shifting out there, and we ignore it at our peril.” She lists off a set of ideas for instructors to consider that are a great first step. They mostly add up to giving a LOT more context about the uncertainty and limited applicability to what is being taught in early Econ courses.
That piece was part of another piece at INET called “Imagining a New Intro Economics” which has a collection of syllabi from some varied Professors. One of my favorites (PDF) was from Stephan Ziliak of Roosevelt University in Chicago. His idea is to look at some of the issues of intro Econ through the lens of “The Grapes of Wrath” which seems pretty clever. But I really liked his take on what he is teaching. He states it thusly:
It would not be wrong to think of our course as a conversation about how the economists Adam Smith, Karl Marx, John Maynard Keynes, Joan Robinson, Milton Friedman, and others have responded to Mercantilism, Romanticism, and the rise and fall of Communism and Fascism.
Just something as simple as that seems (to me at least) to make A LOT of difference in terms of placing what you are teaching in a meaningful context. This is not special relativity, it is a collection of thought on a most volatile subject, human behavior, which is almost entirely non-falsifiable by its nature (i.e. it cannot be convincingly refuted by empirical testing, hence the absurdly conflicting hypotheses and assertions on even some of the most basic issues in economics) and should be doled out with considerable humility or, at the least, a few grains of salt. It’s encouraging to see some people trying hard to do so.
Interesting related links:
Post-Autistic economics (protest movement in the field from a decade ago. I’m reading up….)
Association for Evolutionary Economics “Got it Right” project (an answer to “no one could have seen the Great Recession coming”)
“Does Studying Economics Inhibit Cooperation?” (some reasonably strong empirical evidence suggesting that, as it’s currently taught, the answer is “yes it does.”)
(edited for typos 111227 1:58PM)