The dangerous cult of academic macroeconomics (and similarity to Physics academics of 1930s)…

Paul Romer’s paper has drawn some bit of comments and introspection.

Mark Buchanan a physicist and science writer, compares today’s economics to Physics of 1930s. We usually compare today’s economics to economics of 1930 for comparisons to Great Depression.

But there are parallels with Physics of 1930s as well when certain Physicists held sway over the profession:

Paul Romer, chief economist at the World Bank, has offered a controversial explanation for why the shocking experience of the 2008 financial crisis has had so little effect on academic macroeconomics. The field, he asserts, has devolved into a sort of cult in which loyalty to certain figures of authority matters more than the pursuit of the truth.

Could this really be true? Well, it certainly has precedents in physics.

Consider the early development of quantum theory in the 1930s. The late historian of science Mara Beller has described how the Danish physicist Niels Bohr acquired such extreme authority that many physicists deferred to his views, regardless of how incomprehensible they were. As Beller noted, the obscurity of Bohr’s statements were habitually attributed by puzzled physicists to a “depth and subtlety that mere mortals are not equipped to comprehend.”

One anecdote captures the phenomenon. The young but accomplished physicist Carl von Weizsäcker, after discussions with Bohr, found himself bewildered by what Bohr had said. “What had he meant?” he asked himself. “What must I understand to be able to tell what he meant and why he was right? I tortured myself on endless solitary walks.” His assumption was that, no matter how confusing and contradictory it sounded, it must be sensible and profound because Bohr himself had said it.

This is a human phenomenon. Good scientific practice is decidedly subversive, yet people have a weakness for authority figures. How many young economists are today looking at the work of their superiors in the academic hierarchy and asking: “How must I think in order to render this sensible?”

…Bohr’s authority had caused physicists to ignore crucial questions at the very foundation of their field.

Despite this, Physics continued to progress due to persistent efforts of certain scholars. How will economics fare?

One difference between the episodes in physics and economics: Physics was fortunate in that the theoretical impasse didn’t hamper progress in applying quantum theory practically, which brought about the invention of modern electronic devices, the laser and a long list of other technologies. In contrast, the advance of macroeconomic theory could help us all, as it is supposed to be among the most practical and useful of economic sub-fields.

What will happen to macroeconomics? Critics such as Romer have become more numerous and vocal, and the old guard is increasingly on the defensive. Consumers of research could do their part by demanding work built on more realistic assumptions, developed in keeping with normal scientific standards and having more practical relevance. If research funding agencies and central banks stopped supporting the creation of models filled with unrealistic assumptions — what Romer calls post-real economics — the discipline could begin healing itself.

Even in economics, some scholars are trying their bit to create changes.

But so far introspection is missing from the people who created and hold the fort. Till we don’t hear from them progress will be just limited…

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