The Economist — Economics prone to fads and methodological crazes27 November, 2016 at 18:49 | Posted in Economics | 2 Comments
When a hot new tool arrives on the scene, it should extend the frontiers of economics and pull previously unanswerable questions within reach. What might seem faddish could in fact be economists piling in to help shed light on the discipline’s darkest corners. Some economists, however, argue that new methods also bring new dangers; rather than pushing economics forward, crazes can lead it astray, especially in their infancy …
A paper by Angus Deaton, a Nobel laureate and expert data digger, and Nancy Cartwright, an economist (sic!) at Durham University, argues that randomised control trials, a current darling of the discipline, enjoy misplaced enthusiasm. RCTs involve randomly assigning a policy to some people and not to others, so that researchers can be sure that differences are caused by the policy. Analysis is a simple comparison of averages between the two. Mr Deaton and Ms Cartwright have a statistical gripe; they complain that researchers are not careful enough when calculating whether two results are significantly different from one another. As a consequence, they suspect that a sizeable portion of published results in development and health economics using RCTs are “unreliable”.
With time, economists should learn when to use their shiny new tools. But there is a deeper concern: that fashions and fads are distorting economics, by nudging the profession towards asking particular questions, and hiding bigger ones from view. Mr Deaton’s and Ms Cartwright’s fear is that RCTs yield results while appearing to sidestep theory, and that “without knowing why things happen and why people do things, we run the risk of worthless causal (‘fairy story’) theorising, and we have given up on one of the central tasks of economics.” Another fundamental worry is that by offering alluringly simple ways of evaluating certain policies, economists lose sight of policy questions that are not easily testable using RCTs, such as the effects of institutions, monetary policy or social norms.