In conversation with

Exordium

The Strangeness of the Discipline

• 1. Big + Important = Normal?
• 2. Suspicion and Derision in Everyday Life
• 3. Suspicion and Derision in Political Life
• 4. The Strangeness of the Subject
• 5. The Strangeness of the Science
• 6. The Persistent Disagreements
• 7. Economists Are Human, Too
• 8. A Strange Lack of Reflection
• 9. Why Then Economics?

A Good Scientific Conversation

The dubious status of economics as a science is partly due to unrelenting conflicts among economists. In a war among natural scientists about, say, cold fusion or relativity theory. crucial experiment is a lethal weapon. Economists have no such arms. They operate in feudal groups here and there, some more powerful than others by sheer size, but always vulnerable to some younger and stronger group that has plotted its advance successfully. Some of the stronger armies are very small but good at surviving forever (Marxists); the campaigns of some have lost scientific steam after gaining political clout (Laffer and fellow supply-siders); others are loud and boisterous and enthusiastic but short on ammunition (Nelson and Winter followers). Two, maybe three, dominate at one time. The larger the army and longer it is able to fight (Keynesians, neoclassicists), the more memorable it is. Famous leaders are usually trained at elite schools. In economics, the armies fueling these endless feuds are known most familiarly as "schools of thought," and arguably the most famous academy is the University of Chicago. (MIT, Stanford and some leafy places would argue.)

Imagine, then, how difficult it is to agree on who should be allowed to teach economics at these prestigious schools? The disagreements can be quite ugly: a number of the faculty must agree, and their ideas of what to teach and what they consider scientific or right vary widely. Some can be downright adolescent about it. "We'll hire another Marxist over my dead body!" "What the f--- do we need another game theorist for?" "This guy is doing off the wall stuff. It's not even economics!" Strange, though: if economics were a real science, reason would prevail over this sort of bickering, wouldn't it?

A series of conversations with the major protagonists of various schools published in Conversations with Economists (Klamer, 1983) revealed how these economists are thinking and what motivates them. They also brought out their differences. Robert Lucas, a major figure in neoclassical economics (who would later win a Nobel Prize) was serious, charming, and spoke emphatically about his way of doing science. "What would you do if you were on the Council of Economic Advisors?" I asked, as a logical follow-up to his theories and objections concerning government intervention. "Resign," he said, with dead seriousness. His students later related how he would simply dismiss East Coast Ivy League policy advisors who continually commuted to Washington. "Here in Chicago," he (allegedly) assured them, "we are serious about economics." In other words, advising policy makers is not something that serious economists do.

The other economic camp made for quite a different story. James Tobin (an East Coast Ivy League policy advisor) had already won the Nobel Prize when I spoke with him. A true gentleman, he spoke softly about his life and his Keynesian approach to economics. With due respect, I worried after a time because the interview sounded so automatic, so "done" before; it would add little to the book. Then I brought up Lucas's criticism. Tobin began to speak much louder and faster (on transcribing the tape I actually had to adjust the volume).. He remained reasonable and gentlemanly but his voice betrayed his indignation towards Lucas and his camp, about how they were misleading sensible Keynesian economic thought. Bob Solow rubbed in the difference with his now quite famous remark:

Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the battle of Austerlitz. If I do that, I'm getting tacitly drawn into the game that he is Napoleon. Now, Bob Lucas and Tom Sargent like nothing better than to get drawn into technical discussions, because then you have tacitly gone along with their fundamental assumptions; your attention is attracted away from the basic weakness of the whole story. Since I find that fundamental framework ludicrous, I respond by treating it as ludricous — that is, by laughing at it — so as not to fall into the trap of taking it seriously and passing on to matters of technique.

How strange this is. How is it possible that very intelligent people in the same scientific discipline do not understand each other? Why do they dig deeper trenches rather than get together to resolve their differences? And the two examples above are about mainstream economics! Smaller schools of economics are further apart and communicate less. Siblings, even, may develop extremely different economic beliefs. The Americans Robert and David Gordon are well-known in economic circles, the sons of a husband and wife team of economists, the one conventional, the other a Marxist. (David died in 1996 at the age of 51.) The two operated in completely different worlds. They read a different literature, related to different people, had exceedingly different views on the very economy in which they grew up together. However close they were as brothers, David told me they "rarely talked economics" (Klamer 1983). They simply accepted it as not doable. How strange for a science, let alone brothers.

I was struck by these disagreements at the outset of my studies at the University of Amsterdam in the seventies. The profession was then split among Keynesians, monetarists, and post-Keynesians. Post-Keynesians were favored at the university and monetarists were not; Keynesians were approaching the end of their reign. Milton Friedman, the leading monetarist, regularly had the academic door slammed in his face. One of our Keynesian professors of monetary theory actually refused to read a student's paper because it was about Friedman's ideas. "Hogwash," the professor called it. Our post-Keynesians, meanwhile, were discrediting his economics. We had exciting discussions, but I was puzzled. How can this possibly be a science?

Economic tension does not always derive from a particular stance in theory and, in fact, passions flare most when the discipline itself is at issue. Economists have vastly divergent perspectives on what constitutes the science of economics. The most devastating criticism an economist receives is that her work is not scientific. "What you are doing is not economics" is a powerful statement, and can destroy honest work. Primary research seems perfectly reasonable for modeling the real world but it is rarely taken seriously. For Talking Prices: Symbolic Meanings of Prices on the Market for Contemporary Art (2005), Olav Velthuis launched the development of his theory by asking people in the art market how they priced their paintings. How perfectly sensible! This type of approach, however, is likely to be rejected for being "unscientific" or "not economics." But it does very well under the label of socio-economics.

The heavy emphasis on mathematical tools in contemporary econospeak strikes many an outsider as strange. Insiders insist on it as part of their scientific baggage. But do you really need to be a mathematician in order to be an economic scientist? If so Adam Smith or John Maynard Keynes would not qualify for the job anymore. They would be considered too wordy, too imprecise, too unscientific. They would have difficulty arguing with economists now even if their ideologies were identical. There are exceptions: Austrian economists, notably, take issue with theorizing with ever more complicated models. Deirdre McCloskey subscribes to the intuitive and verbal mode of reasoning characteristic of the so-called "Good Old" Chicago School (whose more prominent members include Ronald Coase, George Stigler, Gary Becker and Milton Friedman). When this Old Chicago gang was still in charge at Chicago, "lunchtime" economics focused on the real world. "How about that new government policy [that seemed to have had a real effect and in which, of course, they did not believe]…" would bring about a great discussion. The goal was to deal another blow to the myth that government intervention is good for the economy. Lunch with the "New" Chicago School (lead by Robert Lucas) features more technical issues, like computer programs or the effectiveness of new mathematical methods. Even though the political ideology is fundamentally the same, the style of argument has changed so completely that the Good Old Chicago economists, like McCloskey, feel out of place on their own turf.

McCloskey has been a most outspoken critic of the New Chicago school, which she scornfully calls "Nouvelle" Chicago. She opposes the scientific engineering of Keynesian economics — the tinkering with models for the purpose of economic policy — and vehemently objects to what she calls black-board economics. She sees Nouvelle Chicago's mathematical fiddling as math for math's sake. She points to flaws in all of economics, where they have mistaken statistical significance for theoretical significance. At a seminar at the Tinbergen Institute she presented her critique of statistical significance, a bad use of statistics that appears to be dominant in the econometric literature (McCloskey and Ziliak, 1996). This was the year after she crossed gender. (Deirdre had been Donald McCloskey — how can you say economists are not interesting?) She had her audience by the balls, so to say. One of the male economists sputtered somewhat in protest but she was prepared and showed the flawed statistics in his own work. She ended her talk by standing in front of her audience, the arms crossed the female way, bent over slightly and said slowly and emphatically, "Listen, your boys have been playing in the sandbox. Grow up!" Only in her current unmistakably female presence and former life as a male could she have gotten away with such a style of argument. Yet, attentive as the "boys" may have been to such stinging criticism, it has had little to no effect. McCloskey and Ziliak (2004) showed that since the publication of their earlier article the problem got only worse.

Whatever, the criticisms have had little to no effect. If any, mainstream economics is becoming more adamant about the use of sophisticated mathematics and statistics. That may be strange, dependent from which perspective you look at it.