Has economics grown up?

Neoclassical economics no longer dominates a mainstream economics as it once did. Is the neoclassical economics research programme breaking down, being supplanted by other research programmes - or are we simply seeing a new maturity in economics?

John Davis considers the issue in the latest Journal of Institutional Economics. His article The turn in economics: neoclassical dominance to mainstream pluralism? (PDF) is available to download. Here is the abstract:

This paper investigates whether since the 1980s neoclassical economics has been in the process of being supplanted as the dominant research programme in economics by a collection of competing research approaches which share relatively little in common with each other or with neoclassical economics. A shortlist of the new approaches in recent economics includes game theory, experimental economics, behavioral economics, evolutionary economics, neuroeconomics, and non-linear complexity theory.

Two hypotheses are advanced – one regarding the relation between economics instruction and economics research and one regarding the nature of the economics research frontier – to describe social-institutional practices that contribute to the replication of economics as a field. Two further hypotheses are advanced – one regarding the boundaries of the field and one regarding how the field appraises itself – to create a historical–methodological framework for evaluating the question of change in economics and change in recent economics in particular. Finally, the paper distinguishes three leading explanations – the ‘breakdown’ view, the ‘takeover’ view, and the ‘maturity’ view – of why neoclassical economics no longer dominates a mainstream economics.

I am old enough - just - to remember the very heated arguments over monetarism and the polarised Keynesian/post-Keynesianism versus Neoclassical/Supply Side set-piece debates. Those days are over, which is no bad thing. Younger economist appear less ideological, more concerned with solid empirical analysis, and more willing to question the established wisdom. Less dogma, more pluralism and an openness to new ideas? Sounds like greater 'maturity' to me.

Comments

[A. PERLA]

^"Younger economist appear less ideological, more concerned with solid empirical analysis, and more willing to question the established wisdom. Less dogma, more pluralism and an openness to new ideas? Sounds like greater 'maturity' to me."

Couldn't agree more.

One of my favorite quotes, from Karl Marx, applies generally, I think, to economics whether practiced or as an academic subject: De omnibus dubitandum (Doubt everything).

NB: In fact, the origin of Marx's motto is interesting. If interested, go where google found it: http://www.marxists.org/archive/marx/works/1865/04/01.htm

[Curt Doolittle]

".....less ideological, more concerned with solid empirical analysis, and more willing to question the established wisdom..."

Unfortunatley, while this sentence may seem intelligent to an econometrician who is ignorant of analytical philosophy, it is a fairly obvious error to an analytical philosopher who is knowledgeable in economics.

This quote is actually a form of skepticism whose origin is a lack of understanding of the limits of causality in mathematics, and a lack of understanding of existing empirical tools, which together mean that the basic principles by which we judge the veracity of theories is so little understood by the community of economists, that the population of economists is no longer able to concentrate activity in pursuit of a theory set. In other words, this diversity is a sign of a widespread failure of education rather than the development widespread wisdom in economic theory, or widespread failure of previous economic theory, and instead, belies an inability of any theory to be dominant enough to promote research by a majority. It may well be (and I think it is so) that the number of useful economists, like that of mathemeticians and philsophers, is fixed, and that the increase in economists is concentrated in the lower quintiles, not evenly distributed among them.

While it may be true that empirical tools can help empirically explore and empirically justify existing theories, it is yet another thing to say that they are the source of new inductive theories, or that, the theories that they confirm were not apodictically justified in the first place, or that the refinement of the theory is substantive. Instead, the progress of economic thought over the past two hundred years is categorically similar, and expresses a singular explanation of human cooperation. And the early twentieth century simply an attempt to subvert those categorical rules.

If one's objective is to game commodities, game investments, or to determine the best way to tax a populace into conformance with political will, or to redistribute wealth with maximum impact and minimum damage, or to determine the incentives and interests of poplations for the explanation of untestable human behavior, then these methods are indeed useful for those purposes. But economic theory as to what will happen when one does so appears to be immutable. The underlying laws governing the econoimics of human cooperation seem to be consistent over time, and it is our attempt to game those laws for temporal benefit that we are studying, not econonomic theory itself. We are studing market timing, not the structure and optimization of markets.

Diversity of explanation is indicative of something. The questions is WHAT? It is not necessarily good or noble, and lack of certainty can simply indicate a preponderance of error.

Perhaps a better analogy: Teenagers often adopt a confident optimism in when they lack the knowledge by which to comprehend the world they newly venture into. It is only after gaining wisdom and experience that they understand the wisdom and failures of their parents, and by virtue of that experience

Perhaps this new generation of economists simply needs to mature. It is not that they or the field are mature or "grown up". It is that new generation is optimistic and ignorant, and the existing generation is ignorant, disillusioned and skeptical. But the upper quintile is simply consistent, and dilligently working away regardless of the sinusoidal generational motions of those less able to grasp issues of such import and significance, or who are inspired or dedicated to find alternatives to such natural laws.

Cheers

Curt

[A. PERLA]

Curt : "It is only after gaining wisdom and experience that they understand the wisdom and failures of their parents, and by virtue of that experience"

It would be nice if econometric models "learned" by error. Still, the projections of most are still statistically inexact in forecasting something as "simple" as GDP. This happens consistently.

Why? Mathematics is a means for solving a problem within the known limits of the mathematical functions. (Example: The hypotenuse is the square root of the sum of each side squared. This is invariable.)

Within economics this factor of invariability of principal functions does not exist, because the model is describing human behaviour. This latter can vary based upon unknowns that affect its conduct immeasurably. Unless one introduces some sort of probability theory. (What is the probability of a hurricane seriously impacting petroleum pumping and refining in the Bay of Mexico, which in turn affects prices at the pump, which in turn affects consumer propensity to purchase? Or that an electric grid failure in the northeast of the US will not have the same effect over a period of weeks?)

One cannot base economic forecasts, I suggest, upon probability theory. That simply will not hold with public institutions or even business decision makers that must commit themselves based upon an economic forecast. In fact, what prevails in thier consideration is a list of forecasts by different agents and the range of forecasts produced.

A group of forecasts predicting 7 to 10% economic growth in China will have far more influence in directing FDI there than to France or Germany where the growth is predicted at 2 to 3%. Methinks.

Admittedly, the GNP forecasting has been around for a donkey's age. But, it is one of the more prevalent forecasts considered. Econometric modeling on a microeconomic level is far less followed by the public. It interests mostly academics who like to build a reputation publishing papers. ("Publish or perish.")

And, finally, decision-making based upon economic forecasts is a bit light military strategy by which army generals fight a present war based upon strategies that worked in a previous war. Economies change and what is important to forecast is that change. (For instance, productivity is an important element to forecast within an economy. Who does it well, however?)

[Arthur Eckart]

NeoClassical Economics will always be the foundation of orthodox economics, with its rich history of universal laws, theorems, lemmas, etc. However, there's much more to discover in economics (unlike statistics, which is a "dead field," where everything has been learned). New specialties will be found, while economists become even more specialized. These new sub-fields will continue to contribute to a better understanding of mainstream economics, which is certainly dominated by the Scientific Method of NeoClassical Economics, at least in the U.S.