Economics Field May Be Experiencing New `Sobriety'

Article excerpt

If economists were inclined to borrow from Shakespeare, they might dub this the winter of their discontent. Wannabe movers and shakers pine for the days when Cabinet officers and captains of industry could not get through the day without advice from a dismal scientist. Undergraduates who once majored in economics as a stepping stone to riches at Goldman, Sachs are turning to math.

Even The New Yorker has piled on, concluding in an article that economists need to be cut down a peg by abolishing their Nobel Prize. Most economists wining and dining their way through the annual meeting of the American Economics Association in New Orleans next week would probably concede that the profession has not lived up to the inflated expectations of the 1960s and early 1970s. What's worse, solutions to the gnawing economic problems of the era -- widening income inequality and tepid rates of productivity growth -- remain elusive. But it does not follow that contemporary economics is irrelevant, that an abundance of pointless academic research is overwhelming the good stuff. On the contrary: Economists probably have more useful things to say about the real world than they have since the British economist David Ricardo explained why free trade meant more to his nation's future than the prosperity of its wheat farmers. Start with the perennial complaint that economics has abandoned its roots in the real world in favor of mathematical games only the elite can play. There's a whiff of truth here: Like most scholars, economists publish a lot of research that might as well have been written in Aramaic. But that is no indictment of the profession's demand that young Ph.D.s know more math -- especially more mathematical statistics -- than previous generations. For while economics can be done with cookbook knowledge of statistical techniques, it cannot be done well without a clear understanding of first principles. It is also worth noting that math has never proved a barrier for the most productive policy economists of this generation -- everyone from Lawrence Katz, the former chief economist of the labor department, to Lawrence Summers, deputy secretary of the Treasury. The more serious criticism is that economists' reach has exceeded their grasp. …