Non-economists regularly criticize the field for unrealistic models of human behavior, neoliberal indoctrination, professional arrogance, and many other supposed flaws. Picking up the latest issue of a top economics journal confirms that many criticisms are simply wrong. Critics’ insistence on attacking what they think economics is, rather than what it actually is, suggests that jealousy plays a role.
Every year in October, when the Nobel committee awards the economics prize, a media mob assembles demanding that the field be taken down a few notches due to its intractable flaws. Some criticisms are undeniably valid: the representation of women and minorities at the profession’s elite levels could be higher; economists can be breathtakingly arrogant and disagreeable; the predictive power of many economic models is weak, and so on.
Yet many of the most popular criticisms reflect total ignorance of the present state of economics. One such critique is that economists’ analyses are based on the manifestly false assumption that people are selfish, money-grabbing robots. A related one is that economists are perpetually pushing a right-wing agenda. An additional claim is that economists study questions that are of no relevance to real world problems.
A brief look at the latest issue of the discipline’s flagship journal, the American Economic Review, illustrates the inaccuracy of such perceptions.
One of the papers by University of California at San Diego colleagues Dr. Marta Serra-Garcia and Dr. Uri Gneezy examines the phenomenon of fake news by demonstrating that people are poor at detecting lies, and that they are also overconfident in their ability to do so, leading them to inadvertently share fake news.
A paper by University of Chicago economist Dr. Michael Dinerstein and his Rand Corporation colleague Dr. Troy Smith studied the impact of increasing funding of public schools in New York. They found that it induced a substantial increase in public school enrollment, but that 20 percent of the rise was caused by a decrease in the supply of private schools, with the low value-added ones being the most likely to close in response to the funding change.
Finally, a paper by one of this year’s Nobel laureates, the University of California at Berkley’s Dr. David Card and his co-authors, analyzed the causes of the white/non-white pay gap in Brazil, by comparing the role of exclusionary hiring practices to other labor market factors.
All of these papers confirm the absurdity of the caricature that economics’ critics have in mind when they wave their pitchforks in the air. Their claims may have had merit in the 1980s, but the economics profession has evolved considerably in that time. As a result, the latest research is based on sophisticated models of human behavior, it seeks to answer important questions, and the goal is to advance knowledge rather than to push an ideological agenda.
The persistence of baseless criticisms – many of which are published in leading media outlets – suggests that this isn’t just a problem of random ignorance. Instead, jealousy is likely to play a role, since economists are fortunate in many ways: they have much higher salaries than other academics, they can more easily secure funding for their research, and they influence policy in a tangible way.
However, it is fair to say that economists are poor at collectively marketing themselves. Most academics are – due to their introverted nature, but their research is rarely in the headlines, in contrast to economics, which is usually a primary issue in any political campaign and a central pillar of any government strategy.
The mark of a pseudoscience like homeopathy is that over 30 years, the discipline doesn’t get any closer to answering the questions it poses. By this metric, economics is decidedly a science, as we understand much more about important issues such as the environment, unemployment, and trade tariffs than we did 30 years ago, even if definitive solutions remain elusive.
Part of being a scientist is getting things wrong, but then fixing those errors by gathering evidence. For example, the idea that if you just keep cutting taxes on the rich, everyone is better off (sometimes referred to as trickledown theory) has fallen out of favor because the data are inconsistent with the theory’s predictions.
Many non-economists didn’t like the idea when it was proposed based on a gut reaction, but economists who supported it didn’t change their mind until they saw actual data. That’s because non-economists still think many idiotic policies, such as rent controls and tariffs, are a good idea, despite clear evidence to the contrary.
This year’s Nobel Prize winners, Dr. David Card, Dr. Joshua Angrist, and Dr. Guido Imbens have made massive contributions to how we use real world data to improve our understanding of economic phenomena such as the impact of a minimum wage or the effect of immigration on unemployment. It is time for economics’ critics to take a leaf out of the laureates’ book and use real world data to improve their own understanding of economics, lest their critiques devolve into a pseudoscience.