#FromMyReadings, Issue 6, 2021
On Correcting Misconceptions about Economics
1. On Correcting Popular Misconceptions about Economics (Noah Smith)
It’s good to see more folks speak out about misconceptions around contemporary economics. This piece by Noah Smith echoes points I’ve grown tired of repeating over the last few years:
- That public perceptions of economics is quite different from the way economists themselves frame their discipline.
- That major historical figures in economics (like Adam Smith), often held very nuanced positions on free markets and government intervention. Their works have been misrepresented in today’s public media.
(As an aside, I recommend reading the chapters on Smith in Benjamin Friedman’s 2020 book) - That economic practice has become much more empirical in the last 15–20 years. This isn’t the field of ‘unrealistic models’ that it was often criticised as.
That being said, here are my caveats to his piece:
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First Caveat:
Noah argues that poor public perception of economics stems from popular (American) conservative voices hijacking the field and turning it into a “pop version of conservative ideology”. He may be right about this to an extent, especially in a US context.
But based on my own experiences and interactions, I’d argue that a lot more damage to economics’ image comes from poor teaching, poor course design, and a lack of attention to good pedagogy. This is particularly true when economics is taught as a minor subject or as an optional elective in other programmes.
I’d ranted about this six years ago (see towards the end of that post). By and large, my position hasn’t changed too much since then (though I’d put it more politely nowadays). I still believe there’s a dearth of good pedagogy in introductory economics courses.
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Second Caveat:
There’s a lot of (justified) celebration over economics becoming more empirical. However, a naive turn to empiricism is almost as bad as refusing to move beyond theory. More data from the ground doesn’t automatically make better practice. Empirical studies will still need to engage with deductive and inductive models to improve our understanding of economic phenomena.
A lot also depends on how that data is collected. If economic practice blindly replaces “more deductive models” with “more Randomised Controlled Trials (RCTs)” or “more Panel Data”, we’ll only end up repeating our mistakes, just from a different direction.
A lot will therefore depend on careful research design, with studies customised to address the contexts of what’s being studied. Good research design is far more important than a turn to empiricism.
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Third Caveat:
There’s still a lot of bad practice in economics. For instance, a Randomised Controlled Trial (RCT)in Nairobi last year involved threatening to cut off water and sanitation services to observe if homeowners would repay debts.
This kind of unethical work does get criticised more frequently nowadays. However, it is still pretty rampant and needs to be checked.
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Fourth Caveat:
Major economic debates, particularly on theory, are still largely conducted in the west, mostly in the United States and the United Kingdom. They still mostly take place between western universities. There are very few instances of Asian, African, or South American work being reflected in ‘international’ debates on Economics (except when affiliated to a western university or an organisation like the IMF).
In fact, I suspect this disparity has worsened in recent years, as education systems in parts of the developing world have broken down. Opportunities for academics in countries like India have diminished, forcing them to move to western universities. This has pushed them to participate more in debates and discourse there, with less theory being grounded here.
When was the last time we saw someone from (even the elite) Indian institutions make a mark in international circles, without being affiliated to a western or international platform? The Azim Premji University in Bengaluru is doing some notable work (see their contributions to the CORE textbook), but that’s a rare bright spot.
This disparity needs to be corrected, and urgently. It’s not an easy problem to fix. In fact, with a turn towards empiricism and a heavier reliance on RCTs, economic research is becoming too expensive to be conducted by anyone outside the richer institutions of the west (see Subramanian and Kapur on this).
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Fifth Caveat:
My position on market-government relations hasn’t changed. I still think governments are most effective when they’re building public goods or addressing market failures, but are less effective when they’re trying to replicate the private sector.
Very simply, I say yes to governments in vaccination drives and no to governments in running airlines (except emergency air services).
This stance should be pretty obvious to most people nowadays. However, as we move away from privatisation’s sugar rush of the 80s and 90s, there’s a possibility we’ll head in another problematic direction. Sometime in the future, we may start demanding government intervention in places not needed. And governments may be more than happy to oblige.
Worse, we may deepen the unholy alliance of governments and big businesses, as governments try to intervene more, while also cutting expenditure, contracting out public services to large businesses in return for public resources.
This is something to watch out for. Economists increasingly favouring government intervention is a good thing, but only because it checks an older bias to privatisation. Their primary stance ought to be that there are no universal solutions to problems, only contextual ones.
PS — Apologies for a long delay. There was a lot happening in my personal and family life over the last few weeks which required my full attention. I’m slowly coming back to my routine.
Posts should be more regular in the coming weeks, although I’ll be restricting myself to one reading per post for the next few issues.
