Want to understand the economy? Don’t study economics!

Peter Radford has a hard hitting piece and one has little choice but to agree on most points.

One of the most nervous moments one faces as an economist is when one is crowded by families/friends asking you for suggestions to improve their well-being. After all, this is an impression economists have created over the years that “they are the ones”. The bombard of media has also strengthened the impression when so many economists come before the box to tell us about state of economy/investments and so on. We are seen as these magicians. So it is but natural for people to ask you to improve their well-being.

However, here is irony of it all.  It is one thing to talk on TV about things and completely another when family/friends ask for suggestions. One realises how inadequate economics training has been all these years. If one has any suggestion, it either comes out from work experience (say in financial markets) or plain observing/reading about  things outside of economics (following newspaper for local news). The disconnect between modern economics training and reality is so wide (and continues to widen) that it is perhaps one of the biggest Houdini acts that public continues to believe in power of economics.  The crisis has dented the image for sure but given lack of alternatives economists continue to dominate.

Radford sums this dilemma. Don’t study economics to understand economy:

There comes a point when we all have to stop banging our heads against the wall and just step back. Why, we ask in such moments, are we wasting our time? The wall is immoveable. It is indifferent to our efforts. It is solid. It has the appearance of permanence. It just won’t shift.

So walk away.

Do something else.

In the case of economics go and study the economy instead.

Too many people are wasting far too much time talking about economists as if they study the economy. They don’t. They really and truly don’t. They live in a post-fact world. Indeed before it became fashionable to toss that phrase around — Trump and his regime pretty much define “post-fact” — economists had been steadfastly denying fact, ignoring reality, and living in a wonderland of their own creation.

Economists study economics. And economics is not the economy. It is a self-contained set of ideas, models, theories, mathematical intricacies, and axioms, that are designed to provide exciting intellectual sport for those so inclined to busy themselves with such activity. It is carefully constructed to look as if it touches reality. It still contains words that make it look as if it relates to reality. Economists intone cogently about real-world topics. And economists fill all the key policy positions that relate to steering, regulating, and measuring the economy.

But that’s all illusion.  

Poke at what they learn in school. Take a peek at the content of what they believe. Look at what it takes to be a respected economist.

Then try to connect that with what you see around you.

There is little or no connection. It’s as if the weather forecasters predicted the weather without ever looking out the window. Or as if physicists insisted that gravity threw things straight up in the air despite the contrary evidence. Alice and her looking glass have nothing on the ability of economists to defy the world in which they live.

But perhaps it isn’t defiance.

Another attribute of economists is their portrayal of the dispassionate observer of society gravely describing the “deep laws” humans are foolish to push back against. They project the air of sober analysis. They attempt to inject a discipline and rigor into the messy pool of human interaction. They want us to believe that what they describe is inevitable. So they take it upon themselves to act as caretakers of what ought to be.

No, it isn’t defiance. It is activism.

So what to do? Study other subjects:

So: my advice is to study the economy by taking classes in politics, sociology, philosophy, business or organizational theory. Get steeped in information theory. Build those agent based models. Go and talk to workers, shopkeepers, and all the other people in the real world.

But stay away from economics.

Especially if you’re serious about the economy.

Well staying away from economics will not help but do supplement it with other readings to escape the narrowness of economics. And yes add history and geography to the list as well….

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