Another Year, Another Prize, Another Rant

We’ve been down this path so many times that I feel like I am in a video loop. Every year, the Sveriges Riksbank announces a winner for its annual prize in economics. Every year, it goes to a candidate few people outside the field would have heard of. There would be a brief spark of interest in the winner’s work and then the critics descend – some of them questioning the relevance of economics as a field (“It’s not a science!”), some of them asking why the field needs a Nobel (“How about scrapping it in favour of a social sciences Nobel?”), some of them ranting about the irrelevance of the Nobel itself. It’s a circus I’ve witnessed all too many times and it never really makes any impact (the closest we’ve come to a genuine critique was during the 2008 recession). Every year, we wind the video back and press replay.

In a way, this circus (very much like that other circus, the World Economic Forum), is a good representation of the field’s relationship with much of the world. Economics is still often seen as an abstract, dull, dismal, plaything of foggy old professors spinning webs in their ivory towers. Economists don’t really help their own cause either. It’s unfortunate, but for a long time many economists distanced themselves from other fields. I don’t just mean the other social sciences such as history, sociology, or anthropology, but even surprisingly the subjects that economists are accused of emulating – physics, mathematics, or psychology. Eric Beinhocker, in his book The Origin of Wealth, mentions an interdisciplinary exchange between scientists and economists in the 1980s, where the scientists came out shaking their heads – they’d realised the mathematical techniques and assumptions of the economists remained unchanged since Leon Walras’ General Equilibrium Model in the 19th Century. It’s only in recent decades that new interdisciplinary fields such as Behavioural Economics or Complex System Sciences have risen to challenge conventional norms in the field.

There is another way economists shoot themselves in the foot, and this is a topic few talk about, though it’s more worrying. There are hierarchical setups in economics where a few theoretical approaches are considered superior to others. However, the idiocy of this is quite apparent, because which schools of thought are held superior depends on where you’re studying the subject. If you’re at a place that tries to emulate MIT, congratulations, you’re probably going to be taught the neo-classical synthesis. If you’re at Chicago, you’ll be taught Milton Friedman and criticisms of Keynes. If you’re at Ludwig Von Mises, you’ll be told that mathematics is not to be trusted, and the Austrian School is the way to go. I am not saying any of these assertions are wrong, but it’s tragicomic how each camp ends up treating education as a zero-sum game, where some heroes have to be upheld at the expense of others. Remember the Bhagwati-Sen debates on Gujarat versus Kerala? It could have done with a little less polarisation and a lot more nuance.

But then again, negative perceptions of the field aren’t only due to economists. Non-economists are as guilty of perpetuating stereotypes and misinformation. I recently watched a film which made me want to bang my forehead on the table in frustration. An ecologist in the film was pontificating on why he disliked economists – “They take all these important things – water, forests, our natural resources and classify them as ‘externalities'” he fumed. “All these things which cannot be calculated as part of their system are pushed out, and externalised…” Not only had he misunderstood what economists mean by an externality, he believed that externalities were unimportant to economists. I badly wanted to give him homework.

Equally depressing is the banality of debates among the general public. Economics and Nutrition are partners in being victims of misuse. Everyone has a pet theory about how it works, and everyone prescribes a diet they claim to be the right way. Economic theories are lifted out of complex papers and (under the pretext of ‘simplifying them for the public’) turned into half-baked arguments in favour of one prescription or another. Politicians do it to push their pet policies, businessmen do it to promote their products, journalists do it to get some eyeballs, but a lot of people also do it because they have no choice. They have to use what knowledge they can get to inform their decisions, and the effective teaching of economics remains a serious problem.

In fact, I suspect much of this partial baking stems from badly taught economics courses. While full-time courses have several problems, these problems are often recognised and somehow navigated by students. However, economics is often not studied as a full-time course. It’s a favourite minor subject for people in other disciplines. I know of engineers, managers, media-persons, sociologists, marketeers, and even a couple of architects who’ve studied the subject for its alleged “relevance” and they often have to contend with distorted, compressed, or diluted courses. A friend specialising in Media Studies once told me about a mandatory economics course. Whoever designed the course had basically taken a three-year bachelor’s programme and crushed it into a super-dense ball that could fit into a single subject for a single semester. I have no idea if anyone learns anything from such a course.

The result is a plethora of graduates who’ve been given a brief, nuance-free glimpse into an extremely complex world, and are even told this glimpse is enough. It’s like being given a globe to explore a city. Most people are smart enough to recognise this as flawed, but some of them are placed in circumstances where they’re required to demonstrate their competence. Hence they end up spouting badly formed arguments which may do more harm than good.

When one looks at this picture, of an economics distanced from other subjects, divided into ideological camps, and produced half-baked for consumption by others outside the field, it’s hardly surprising that the field gets so much flak. Sometimes this flak can be unfair. Many of the criticisms about economics applies to other fields as well, whether it’s physics, history, politics, neuro-biology, or management. They’re as subject to bad theories, worse practice, hype-cycles, false notions, and misinformation  as economics is. Yet, economists can’t really escape blame by using this as an excuse. Economics needs an overhaul and economists need to be the ones conducting it.

As I grow older, I realise that people everywhere are spending their adult lives doing what they were forbidden to do as children – divide into gangs and bully everyone else. This is why debates on matters such as economic policy are often so polarised and heated, especially when professional economists are joined by other academics, journalists, and commentators. The way to move beyond the trenches is through nuance. Professional economists have to start injecting more nuance into their approaches. They can do this in several ways. They can bring in learnings from other fields, accommodate alternative economic theories, or adopt multiple research techniques.  At the same time, they need to find ways to bring this nuance out into the public domain, because economics is too important a subject to be left to the experts alone. Economics teaching needs to be restructured and students ought to be exposed to a wider range of thought than the narrow camp-based ideologies they’re provided at the moment. Non-economists deserve better tools than what they have right now.

In a way, the awarding of the Nobel Prize to Angus Deaton is a good place to start thinking about these things. Deaton has a history of work that reflects many of these arguments. His work is theoretically grounded in the mathematical rigour of quantitative measurements, but is backed by field-work from scholars like Jean Dreze. He’s a well-known critic of Randomised Control Trials (RCTs) but rather than the technique itself, his opposition is to the evangelisation of the technique as superior to others. His work can still (and must) be criticised, and I would caution anyone who would want to adopt a single scholar as a role model. Nevertheless, he demonstrates how nuanced approaches to economic problems that are open-minded, careful, and critical can be useful in economics. Nuance is something the field sorely needs.

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