Blogging and the Economics Profession

Insider-y post. Everyone has already rightfully beaten up Kartik Athreya’s essay where he is mad that bloggers are willing to discuss economics in the public sphere without having an economics PhD. I’d note Scott Sumner, Yglesias, and Mark Thoma. I’m largely in agreement with them, so I’m actually going to take the critique one step further and be critical of economics.

Never, and I mean never, during the financial crisis, where we’d leave work on Friday and wonder whether or not the world would collapse during that weekend or what kind of market we’d walk into on Monday, did I think “man I wish there were more academic economists around.” Academic economists had very little language with which to describe the crisis. Most of our narratives come straight from journalism or sociology. There are no “toxic assets” in economics, that evocative description comes to us from business world and journalism. Same with the culture and pitfalls of high mathematical finance, math predicated on the efficient markets hypothesis. Even now it feels kind of sad to see them try and shoehorn the entire financial crisis into agency problems. The last time we had one of these it changed economics completely with the Keynesian revolution. I am really rooting for INET to change some paradigms, but it’s going to be an uphill battle. You can barely move old-school Keynesian thought into academia, and I can easily see the journals publishing as if this crisis was just us “forgetting” some technology.

I think he took down the essay, but he mentioned how bloggers who haven’t taken the first year of Economics PhD coursework, and passed the prelim exam, shouldn’t be writing. I think I’ve pieced together the first year between some coursework and self-study, and here are my thoughts: My very first economics class ever was auditing a graduate macroeconomics class where we went through the Lucas/Stokey “Recursive Methods in Economic Dynamics” and Ljungqvist and Sargent “Recursive Macroeconomic Theory.” I still remember asking my classmates “no seriously, this isn’t what macroeconomics is, is it?” It was like they were training to be electrical engineers, but could do no actual engineering. I still am terrified of what macro graduate students are cooking.

And speaking as someone who has taken graduate coursework in “continental philosophy”, and been walked through the big hits of structural anthropology, Hegelian marxism and Freudian feminism, that graduate macroeconomics class was by far the most ideologically indoctrinating class I’ve ever seen. By a mile. There was like two weeks where the class just copied equations that said, if you speak math, “unemployment insurance makes people weak and slothful” over and over again. Hijacking poor Richard Bellman, the defining metaphor was that observation that if something is on an optimal path any subsection is also an optimal path, so government just needs to get out of the way as the macroeconomy is optimal absent absurdly defined shocks and our 9.6% unemployment is clearly optimal. (An unfair description perhaps, but I wasn’t an actual student. This is a better, though mathy, take on the problems.)

But getting back to point, I don’t see why having to know all that is necessary to being an informed participant in the current debate. As Greg Clark noted:

The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner.

The bailout debate has also been conducted in terms that would be quite familiar to economists in the 1920s and 1930s. There has essentially been no advance in our knowledge in 80 years.

And plenty of people have credentials that are saying bizarre and dumb things. At one point in my life I would tell employers how I had studied John Cochrane’s Asset Pricing book and replicated Eugene Fama’s research in SAS. And employers would be happy about this; my human capital was high though bound up with their reputation. And I got to watch in horror during the year of 2009 they both poured gasoline on my pile of human capital and did their best to torch it with mind-boggling nonsense and elementary, freshman mistakes. I wondered if I had cause for legal action.

More: It is worth noting that graduate microeconomics is the very math-y way of explaining Econ 1 concepts. You don’t learn new concepts, you just learn more sophisticated ways of explaining, say, revealed preferences. (Then you learn general equilibrium, which throws out a ton of what you thought.) This is why people are comfortable engaging the research but not necessarily producing it themselves – because if you took Econ 1, you know what the story of moral hazard is, even if you don’t create complicated models of it.

So yes, economics is hard, but I’m not certain it is harder than, say, chemistry. But economics is, for better or worse, a major language in terms of how we speak in terms of understanding our lives, and I would expect anyone who loves it to be excited that more, and not fewer, people are engaged in trying to expand that conversation. And frankly, I’d take the blogosphere any day.

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26 Responses to Blogging and the Economics Profession

  1. Andrew C says:

    I’m a high-level Econ undergrad major looking into grad school and I was disgusted by Dr. Artheya’s “paper”/ranting, nonsensical essay. I agree with most of what you say, except for the bit about high-level econ being ideologically indoctrinating. I think intro-economics is far more indoctrinating than the higher-level classes because it teaches what comes across to many young, malleable minds as a coherent, simple and somewhat perfect world-view. Only in higher-level econ classes do you really begin to learn how and why these models break down.

    This idea is pretty well summed up in this Baseline Scenario post from a few weeks ago:
    The last two paragraphs are particularly good.

  2. Mike says:

    Good points, especially with the baseline scenario post. I did it all backwards, and I bet I’d find the intro-level even moreso.

    Oh I forgot to mention it, but Artheya is the equivalent of saying that bloggers aren’t toilet trained, which was something that hit in other parts of the blogosphere recently. But anyone who doesn’t see the blogosphere as a major driver of explaining research is missing the picture. There’s an incredibly vibrant discussion that is ongoing on virtually any topic.

  3. csissoko says:

    In the days when I was teaching college, my view was that Intermediate Micro should be taught so that students are impressed by the elegance of the math and have a sense of the coherent structure of a general equilibrium model. That is, economics majors should leave intermediate micro with a good understanding of how seductive the general equilibrium framework is. And then, all the advanced economics courses should be focused on teaching students why intermediate micro is just plain wrong. I did not however have much influence on the curriculum when I was teaching.

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  5. el coronado says:

    can’t remember the guy’s name to give him the proper credit, but a commenter over at ZH did the best evisceration of the good DOC-tor athrey’s elitist and asinine notions: (to paraphrase) “if economists are so smart that nobody but them should be allowed to even *comment* on the subject, then how come
    1) nobody at the fed, including their legions of **accredited** economists, saw the housing collapse and credit crunch coming?
    2) if **accredited** economists are so smart and wonderful, then how come the fed – who presumably employs more economists than anybody in the world – how come the fed has stood by, seemingly helplessly, as the value of the dollar has plunged 96% in the 97 years the fed has been charged with ‘lprotecting’ (LOL) our ‘sovereign’ (LOL) ‘currency'(LOL)???

    with all those economic doctors strewn about, how’d that happen? hmmmmm, DOCtor athreya??

    • Ben says:

      The short answer to point #2 is that the Fed system has never been charged with ‘protecting’ any ‘sovereign’ ‘currency’, no matter how many scare quotes you put around the words. The Fed’s actual mission statement is here: This leaves aside the question of whether or not a stronger currency would help the economy (as always in economics, the answer is that it depends). Ron Paul does not pass for insightful economic analysis, regardless of what your opinion is of economics bloggers.

      With regards to point #1, I don’t think any economist is claiming to be perfect, although certain macroeconomists did make claims which were much too strong about how successful they have been. One of Athreya’s points that everyone can agree on is that doing economics at a high level is not easy, and this holds especially true in the timing of policy actions. I agree that economics bloggers are useful, but if the collected wisdom of the economics blogosphere had seen the crisis coming, economics bloggers would be very rich right now from shorting all sorts of things. It’s easy to pile on afterward when some economists were boasting without merit, but very few non-economists saw the housing crisis coming either (such as all of those people defaulting on their ridiculous loans given to them by everyday bankers under commands to originate as many loans as possible).

      Also, FWIW, there are easily as many economists who don’t spend a minute of their work week thinking about the macroeconomy as there are economists who do. Let’s not paint all economists with the same brush because one school of one field of economics gained too much prominence — it’s likely that even if they’d seen the crisis coming they wouldn’t have been able to do a thing to stop it.

      • el coronado says:

        ahhh, so the fed’s job *isn’t* to protect the currency. so let’s recap: they print the stuff, disperse it according to their own criteria, set the rates at which it can be borrowed, track the money supply, and add/subtract from that supply at – again – their own discretion.

        so you’re saying the fed is like the engineer of a speeding express train, demanding high wages and power because of the “enormity of their responsibilities”, but….when the train derails or breaks down DUE TO OPERATOR ERROR, they then claim merely to be disinterested observers who who have no responsibility whatsoever for the ensuing calamity. even though they know WE know they’re lying, because they themselves admitted it awhile back. (“regarding the great depression. you’re right, **we did it**. we’re very sorry.” – ben bernanke, 2002)

        helluva deal there, ben. for them. for us, of course….not so much. BTW, it’s interesting (and rare) to find someone willing to defend an corporation that’s allowed the commodity it manufactures and controls to degrade 96% in less than a mere century, ben. you wouldn’t be THAT ben, would you?

  6. matthew says:

    yes, grad econ is extremely indoctrinating, especially (freshwater) macro. i swear every time i was presented a fiscal model this last year, it was assumed a priori that the government was useless, then, after applying the rigors of mathematics, you could demonstrate that the government is, yup you guessed it, useless.

    at least one professor made his biases transparent by assuming that government threw all of its tax revenues in the ocean…

  7. Phil Rothman says:

    No doubt I’m a brainwashed lemming who, at least in his deep subconscious, wanted to be an electrical engineer but had to settle for becoming an econometrician, but I can’t say that I agree with you r.e. the indoctrinating-role played by either the undergraduate or graduate econ courses I took.

  8. ginandtacos says:

    Economists are among the most intelligent and least useful people I come across in academia.

    Even compared to the social sciences, economists are hamstrung by their adherence to factions and ideologies. They didn’t predict the current calamity because they are generally uninterested in doing objective analysis. They are interested in writing papers to justify/glorify/provide tortured evidence for their “camp.” You don’t really have, for example, a bunch of Austrians writing papers that forecast what may happen in the short-term. You have a bunch of Austrians writing papers about why Austrian Economics and the ideals of St. Hayek will explain what is about to happen, complete with numerous fantastical assumptions without which the argument collapses quickly.

    A physicist, economist, and chemist are stranded on a desert island. They have ample canned food but no tools with which to open it. The physicist suggests constructing a lever and pulley system to pry the lids off the cans. The chemist notes that it will be easier to heat them so the contents expand and the cans burst. The economist scolds them both: “I have a much more efficient plan. First, assume a can opener…”

    That’s academic economics.

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  10. Eddie Constantinople says:

    Your About page says that you’re a former “financial engineer

    Gamblers and priests like to pretend their schemes are built on solid ground. The logic of the finance “industry” and of financial “products” is the fantasy transformation of the immaterial into the material. It’s transubstantiation for geeks, or should I say “quants”.

    Rorty lived his life like an ex-priest who never moved out of the rectory, depressed by a world without god. He was a poor excuse for a secularist.
    Maybe you should stop reading Rorty and Wittgenstein and start reading Proust. Wittgenstein ends where Proust begins.

    • Elstir says:

      Oh, I get it . . .

      You’re being deep — telling Konzcal he “should stop reading Rorty and Wittgenstein and start reading Proust” — insinuating there’s some kind of life-altering wisdom gained by reading Proust that’s unavailable to readers of Rorty and Wittgenstein, a perspective that (not surprisingly) you yourself enjoy and can tease others with acquiring with tantalizing come-ons like: “Wittgenstein ends where Proust begins.”

      Wow. That’s heavy man. Thanks, you’ve totally clarified matters, settled this debate, ended this discussion.

      [ btw: Who would be a good (as opposed to “poor”) excuse for a secularist, and why’s the distinction make a difference? ]

      We’re awe-struck by the breadth of your reading. (Who could possibly be knowledgeable of Rorty, Wittgenstein AND Proust? Nobody! It’s not possible…)

      Know that we swoon over your visage like Homer Simpson does over Arthur Fortune’s.

  11. Brian says:

    Economic research by those outside of the discipline can really shed some light. I’m thinking of anthropologists/journalists like Gillian Tett and Karen Ho. I’m sure there are others.

    • ripley says:

      possibly Elinor Ostrom?

      I think econ is one of those fields where a great many people who started out doing econ because they wanted to participate and broaden the debate, end up “outside the discipline” because of how narrowly and ideologically it currently defines itself.

  12. Jim Harrison says:

    The 19th Century intellectual historian Henry Thomas Buckle identified the abiding weakness of the economists as an unreasonable faith in deductive methods. Seems about right.

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  14. Basle says:

    Sorry, Mike, but this time I side with Kartik Athreya. A graduate and post graduate in economics from Columbia University and Princeton University, I am often annoyed by people who believe they understand economics while they ignore its most basic precepts. Then you get what I call the taxi driver’s economics. You ride a cab and the driver tells you what to do to fix the economy. It goes something like this: “let’s do this” and “we should do that”. It always sounds impressive. Except that after you stepped out of the cab and think back on the driver’s solutions, you realize that if you do “this” you can’t do “that” for the simple reason they are mutually exclusive!

    Economics is a baffling field with some concepts going against plain common sense. Timing often confuses the issue. The J curve effect is one example. You cannot speak about economics without knowing at the minimum the components of GDP, the quantitative theory of money and the drivers of exchange rates. Many people don’t! JLB

  15. Andrew says:

    One of my greatest sorrows over the last two or so years is that Tanta hasn’t been with us to elucidate, mock and explain everything she saw coming. Tanta wasn’t credentialed, to my knowledge, but she had experience, smarts, knowledge of how the suckers were being fleeced, and how those trusted to communicate with us (poor Gretchen!) were missing the forest for the trees. She made Calculated Risk the place to go to for housing, mortgage finance, and the trainwreck coming down the pike (the very first time I read about a CDO was her “Reelin’ in the Suckers” piece on pension funds being sold equity tranches of subprime-backed CDOs. When she died in November 2007, folks like Paul Krugman noted her passing.

    There’s a lot of noise in the internets, but there’s signal as well. You can have credentials up the wazoo, and not know what you’re talking about. Or you can have an eye, a brain and a keyboard, diploma optional, and help the rest of us make sense of what’s going on.

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  17. Good rip Konczal.

    I’m partial, of course, to my own rant on the Econ profession:

    I’ll have to admit that, if anything, my view of the profession has only declined since then. Only I no longer consider academic econ something which should be taken seriously enough to waste time writing a blog post about it…

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  19. Beth says:

    Is there a way to factor in the role of lawyers in developing the legal framework for our economic collapse? If their role is to constantly help their masters skirt the law, could it be that they not only saw what was coming, but designed it?

  20. Christian Marks says:

    Take yesterday’s article, “What You Don’t Get About the Job Search: Voices of the Jobless,” in The Atlantic. Some of the schadenfreude is directed toward struggling MBAs and Ph.D.s in economics, whose patronizing platitudinous advice to the millions of unemployed to become more competitive in the new globalized economy has neither been forgotten, nor forgiven. They helped facilitate the collapse, and encouraged the upper one tenth of one percent to win asymmetric zero-sum games against the middle class. Now they have to become more competitive in minimum wage jobs.

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