The systemic failures of economic methodologists

13 Jul, 2023 at 15:52 | Posted in Economics | 1 Comment

I argue that economic methodologists failed the economics profession by not actively pointing out to the economics profession or to the general public that, if an economist’s primary goal was to provide policy advice to society, then the standard methodology being used by applied macroeconomists had serious problems.

I see methodologists’ failure as a systemic failure because the reason they did not point out to the profession or to policymakers that the method macroeconomists (and applied economists generally) were using was problematic was systemic; they did not see doing so as their job. They did not see their job as trying to affect economists’ methodology or even to make judgments about whether it was good or bad. Instead, they saw their job as trying to understand that methodology.

Thus, when Solow bluntly stated that modern macroeconomics was best seen as a ‘rhetorical swindle’ that ‘seems to lack all credibility,’ we saw no organized group of economic methodologists either supporting or attacking Solow. His strong statements about fellow economists were seen as a breach of academic decorum, acceptable because of his wit and fame, but not an issue that methodologists should actively weigh in on. The systemic failure of the economics profession in the financial crisis and the systemic failure of economic methodologists reflect the same cause. Both groups see their primary role as detached scholars, or as scientists providing abstract understanding, not as engineers whose primary role is to provide insight and analysis for individuals attempting to achieve better real-world outcomes. Criticism of the economics profession’s failure in the crisis, and my criticism of economic methodologists in this paper, is based on the belief, which I believe is generally held by members of society, that the roles should be reversed – the economics profession’s primary goal should be achieving better real-world outcomes, and its secondary goal should be better understanding of the economy for the sake of understanding …

J.M. Keynes once said that he hoped one day economists would be thought of in the same way as dentists. You have a problem with your teeth – you go to the dentist to solve it; you have a problem with the economy, you go to an economist to solve it. The suggestions in this paper are very much in line with that view. Using an engineering methodology, economists’ suggestions about policy will be presented much more humbly than they currently are. The subjective and ad hoc nature of the engineering method would be recognized and accepted, and any model used would not be portrayed as representing the correct model, but simply as a useful model for one set of particular problems …

If more economists were doing what I am doing, I have no doubt that they would do it much better than I do it. But they do not do it because they have few incentives to do it. Were a young economic methodologist to do it, he or she would likely not remain an academic economic methodologist. That is why I argue that methodologists failed society, and why that failure is a systemic failure, not an individual failure.

David Colander