Thursday, July 26, 2012

Economists Idea Bag Seems Empty

BigThink asked some great young economists about big ideas in economics. I'm not very sanguine about any of these guys finding something important very soon. It starts with Paul Krugman, lamenting that
the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.
Krugman got his Nobel Prize for a mathematically elegant model of international trade. There was no new, true and important insight of that model, it was merely an elegant rationalization of some stylized facts that has zero predictive power and is 99% orthogonal to anything he himself actually discusses about economics. I glad to see he sees the pointlessness of such parochial models. Will he give back his Nobel Prize?

 Here are some great insights or projected intellectual trends, from young star economists.

people in developing countries are poor because wages are low, and wages are low because firms are very unproductive, and firms seem to be unproductive in large part because of bad management.
[We need to] identify the determinants of intergenerational mobility, with an eye towards finding policies that increase equality of opportunity. Should we be focusing on increasing access to higher education? Changing the structure of elementary schooling? Revamping the tax code?
[We will see] the study of traditional questions, such as how to use monetary and fiscal policy to eliminate unemployment and control inflation.
The modeling of agents with bounded rationality will help us build economic models (in particular, macroeconomic and financial models) and institutions that better take into account the limitations of human reason
In an increasingly globalized world, the search for answers will necessarily require a much deeper understanding of three areas that interest me. One, we need a better understanding of the interlinkages across countries in trade, finance, and macroeconomic policy.
I stopped, but it continues in this way. If BigThink asked me, I would say:
I see a big payback to integrating psychology, anthropology, and history into economics more directly, using real-world data to understand how prices, output, and inequality relate to institutions, norms, education, and taxes. And vice versa.
Of course I'm being a bit snide because I find these answers as vapid and trite as any politician's platitudes.


  1. Anonymous1:51 AM

    Exactly the kind of thoughts I had after reading that article. Something is very drastically wrong with the Economics world. Maybe doing all the heavy math reduces the actual time these folks can devote to what real research is all about "Thinking"

  2. Eric,
    If anything you’re being too kind. It occasionally happens that the major innovations in a field come from people outside the field. Statistics in the last century was like that. Probably 80% of the biggest names in Statistics were from another field and only secondarily worked on Statistics. Mathematics in the 1600’s was like that, as is Philosophy during almost any period.

    I’m convinced Economics is going to be like that this century. A career in Economics seems perfectly designed to divert all ones genius away from anything of permanent value.

    Admittedly the only example of crossover so far is Econophysics, which actually seems to be a bigger waste of time than regular economics (if you can imagine such a thing). Still going forward, I’m convinced it’s the amateur economists who will do the heavy lifting.


  3. Another weird thing is that these economists are regularly referred to as “young”. Yet every one of them is actually middle aged and significantly older than Einstein was in 1905 when he published the foundational papers on Relativity, Quantum Mechanics, and Brownian Motion.

  4. If anyone's bored and curious, here is my big idea:

    I think there's a bit of fertile ground in these mass statistical simulations, I have at least demonstrated that emergent group phenomena does happen even amongst very simple agents. Also, small changes in factors such as the mobility of the individuals has large changes on the group dynamic.

    Of course, it is far from being directly applicable to real people, but could be potential for discovering robust principles. Also, cheap computers are now powerful enough for everyone to get involved -- you certainly can't trust the experts to get it right.

  5. The big difference is that those ideas are now backed by credible empirical methods. For example, Blooms' assertion is backed by randomized experiments.