Spotted on the excellent WUNC (North Carolina public radio) this afternoon in the “Talk of the Nations” show: an interview  of Randy Olson on his book “don’t be such a scientist. ” The talk is titled “explaining science with substance…and style.”

Randy Olson is a former marine biologist from the university of New Hampshire turned into a film maker. In the bits of the interview I got in my car, I understood that he’s been sitting in hollywood acting, performing and/or directing classes for several years and that he subsequently realized how this kind of formation would be useful for scholars.

Among the subjects tackled  during the fifteen minutes I was listening

-his fellow scientists’ reaction: “Olson is saying that we should abandon part of our scientific accuracy for the sake of communicability, that’s a shame.” The author retorts that he of course doesn’t say so, and that it is possible to reach 100% “accuracy” (that’s word used in the talk) while presenting result is a more “sexy”/appealing/”funny” ways

-as a former member of a community where scientific expertise deals with hot current issues (namely climate change), he constrast two documentary on this subject, one made by scientist whose title I couldn’t catch and Al Gore’s “An Unconvenient Truth,” of which he says no scientist was involved in. The inattention for the former and the success of the later calls for a reexamination of how scientists communicate, and  also  part of scientific inner culture. All the problem is which film would you prefer to have done: the accurate unknown or the unscientific successful one.  I guess similar questions may have been raised after Sylvia Nasar issued “A beautiful Mind” and have it turned into a Hollywood blockbuster, although I was not yet interested in
HET and therefore have no idea of the discussion raised by the book in our community.

-a comparison of the situation some scientists currently found themselves and the communication issues faced by the military a few years ago in Irak. The comparison appeals to me (with all its limitations), not only because economists may face a crisis situation today in which they prove unable to react to the attacks of those, insiders or oustiders, willing to change the contents and methods of their science, but because I know from private experience how the military in some countries are concerned with communication and are having at least some basic seminars on how to talk to journalists in the ground in periods of crisis (whatever the results).

-a reference to the new media scientists can afford on the web (twitter, blogs). He doesn”t see scientists as understanding the benefits they can draw from such opportunity. I’m not sure this would apply to the economists community.

All in all, I have no idea about the quality of the book, and this is merely a sketchy account of a sketch of an interview. And I haven’t checked on the reactions of the scientific community before writing the post. But since I don’t how long the podcast of the interview will stay online, better give the information the sooner.

Here is the page of the interview, where you can listen to it, and here is the podcast homepage (it is not on yet). Have a good ride.

The author was Roger Backhouse. And the book was The Penguin History of Economics (UK ed., US ed.).

I teach with Harro Maas, a course “Contemporary Economic thought in a Historical Perspective” at a new venture, modeled on a liberal arts curriculum, the Amsterdam University College. They require the first year courses to have a textbook and since we both admire Roger’s Penguin history we chose that one. It was Harro’s great idea of inviting Roger for a meeting with the students. After discussing the book for 5 weeks, they could ask questions of expansion or clarification or make suggestions to the author on what to write in future editions.

From the 25 students came questions like: what is the best form of economic organization, markets or the state? what works best capitalism or socialism? should we adopt sociological approaches to risk analysis instead of relying on mathematical models? That’s right! Students querying the historian on what economics to believe, and if the past could arbitrate on these dilemmas. Roger did his best to answer and not answer the questions, but not far into the conversation he was politely labeled a Keynesian. The tone was always interested and there was no disappointment from either side, and some questions were properly historical such as why some ideas developed in some countries (often their own) and not somewhere else…

To conclude, a student spoke of a concern that many had voiced before. Roger’s text has too many names, too much happens and it is hence difficult to summarize. The student asked for the ten most important economists of history that would make a summary. Roger gave us then a “Hamlet without the Prince”. The history of economics as the history of its identity, as subordinate to morality, breaking out as a subject in political and moral philosophy, finally in the twentieth century the economic becoming its field of professional and academic expertise.

It was all good! A perfect way to motivate students giving them a sense of ownership of the content… they are on first name terms with the author, and they even drank a beer with him.

(on other reviews Backhouse gets three 4 star reviews on amazon.co.uk, and one 2 star and one 4 star reviews on amazon.com, the American shopper is less impressed)

I find it frustrating when in-text references read (Keynes 1973) or (Quesnay 1963). This leaves me to go and find the bibliographical notes to try and discover which works are being referred to and when they were written.  Often the when is significant to understand what is being said by Quesnay, or ‘which’ Keynes is writing – the 1943 Treasury Civil Servant or the young man frustrated with the Versailles Treaty in 1919. If an article then refers to Keynes several times from a ‘collected works’ edition, the time context is almost impossible to decipher as every reference is to 1973 and the reader needs to check page-numbers and chapters to find the original dates. Some authors add extra text before every quote and citation which reads “In year xxx, Dr. yyy wrote”.  I feel this makes the reading slow, tedious and I still have to double-check the years after reading a quote or citation. Such referencing, to me, does not work. But what might be the best practice for referencing translated and re-printed works in the text?

Having checked the brief Harvard guide (that’s the system I’m stuck with) there does not seem to be a rule… There is a rule for translated work in the reference section – using the original year first. Similarly for articles in edited volumes the original date is noted first, with the edited volume’s year of publication later in the reference. From this I infer that the reference in the text would be to the original year and not the edited work. So what do you feel is the best practice?

Let’s take an example: There is a poem by Voltaire written in 1736 entitled Mondrain, translated first by Tobias Smollet [as Man of the World] in 1901 and this translation is re-produced (ad verbatim) in a collected volume by Henry Clark in 2003, which I am using. All this detail is in the full reference at the back. The year of the poem matters to the exposition – as Voltaire will write for another 40+ years, so what do you feel is the best reference in-text? Is it (Voltaire 1738), (Voltaire 1901), (Voltaire 2003) or something fourth, or fifth with square brackets perhaps?

After removing all the historians of economics (and pluralist economists) from the economics department in 2003, Notre Dame University are now planning to shut down the department which they were all placed in. This at a time when the mainstream is ‘officially’ re-thinking its stance to pluralism seems like further indication that there is no such re-think going on. This has sparked comment from a previous faculty member, Teresa Ghilarducci and others like Fred Lee, the open economics blog and The Observer.

The original argument (if we ignore the in-fighting, politics, and bad feelings towards the pluralists-slash-historians) was that the Mainstream people were publishing in ‘better’ journals. Despite the fact that the pluralists and historians were more productive (in terms of research), their work did not go into certain star ranked journals. So the classification and ranking systems comes back to haunt us. We have already discussed the attempts to re-classify HET in Australia, and there has been some changes to classifications in Europe and Australia despite this (I seem to recall). But this is where the battle lines have been drawn. Not by us, but by economics departments who wish to appear to be doing ’serious’ work, and appear to be doing so to outsiders. The public debate on the value of mainstream economics will (eventually) die down again. Just as it did after the 1998 Financial Crash (which supposedly discredited the Scholes-Merton work), and after the 2001 bubble. When it does, we will be left with mainstream economists who are patting each other’s back for getting us ‘out of the crisis’, a public which evaluates the discipline on ranking metrics and a repeat of history once more. Or maybe there is something which can be done?

Paul Krugman’s New York Times article, How did economists get it so wrong? (September 6, 2009) was no doubt designed in part as a grenade to be lobbed at economics departments: to arouse anxiety and initiate discussion.  In that aim, if no other, it succeeded.  Last Friday, the grenade went off at Duke University, as the Center for the History of Political Economy hosted a department wide seminar to discuss the article.  The gathering was marked by a general sense of unease and unhappiness: some were annoyed by Krugman’s hypocrisy and tone and some were annoyed with the economics profession.  But many, as it turns out, still think that the greatest days of neoclassical economics are ahead of us and were very annoyed with Krugman for suggesting otherwise.

A macroeconomist, an economic historian and a historian of economics introduced the seminar.  The macroeconomist, clearly angered, promised not to speak for long, save to tell those assembled that the article demonstrated ignorance and vitriol: most of Krugman’s accusations were not true: macroeconomists were always trying to incorporate money and the financial sector into theory.  And as for Krugman’s argument that economists think that the more mathematically beautiful the model the better, nothing, we were told, could be further from the truth.  Testing theory against reality is all that matters to this macroeconomist.

The economic historian was less personally offended.  Krugman had raised some fair questions.  After all economists had not been sufficiently vocal in alerting the world to the unsustainable nature of the past few years and perhaps the emphasis on modeling had produced a certain selective blindness.  Finally, the financial sector had clearly not played the role in economists’ models that it should have done.  Still, the question remained: what is the ‘real’ problem here for economists?  Is this about the reputation of economists, a little bit of hurt pride; or is the economics profession actually part of the problem?  After all, the question was posed, how much influence does university economics really have on policy anyway?

Well, of course, I don’t know the answer to this question.  But judging from some of the comments from the room, it seems that most economists have a pretty high regard of their profession.  Not least of all Krugman himself for, as the panel member representing the history of economics pointed out, Krugman’s tone did not lack in arrogance.  For a start Krugman had placed himself above the profession even though he himself is as much implicated in his complaints as anyone else.  Moreover, were economists really to blame for the financial crisis: wasn’t the real problem with failed regulation, rather than economic theory?

Now it’s a funny thing.  Neoclassical economists working within the mainstream, either general equilibrium-ites or Chicagoans wouldn’t, I suspect, profess much love for Krugman, but they certainly do share his opinion when it comes to the importance of economics.  Thus we were told: if only the incentive structures for risk managers had been right, then these managers would have flagged up the risks to their bosses that were, apparently, all too evident in the value-at-risk models.  So the problem, it turns out, wasn’t the models (based as they were on only a few years data), but that economist hadn’t ALSO designed the internal management incentive structures.  But if you remain unconvinced by this then there was even more hubris to come.  It’s only a matter of time, we were told by another attendee, before the neo-classical approach can truly meet its destiny and provide a unified theory of everything (in the economy, just in case you wondered).  House values, financial sector leverage and option pricing, just three problems that will in time be solved.

So there you have it.  Perhaps those who thought that economists (including Krugman) were overstating their role in causing the crisis were right after all.  But, never fear, in the future ‘the general neo-classical theory’ of economics would be there to guarantee that things could never get of control again.  Well, that’s a relief.  Alternatively of course, some might suggest that the real battle in the room was between relative delusions of grandeur: the delusions of those who think that economists had caused this crisis and those who think that economists will in the future ensure we have no more.

To be fair, there were some dissenting voices in the room.  One contributor argued passionately that economics had reached such a level of arrogance that almost no economists were now taught basic skills, like how to read a balance sheet, a skill that would apparently have alerted many to the impending problems at the banks.  Another contributor suggested that economics could never be equipped to be able to definitively say when an asset was overvalued.  Modern economics after all is based on the idea that value is a function of the buyer’s personal assessment of value and utility.  How could economics ever say for sure that someone was overestimating what something was worth to them?  Were not questions about inflated asset prices moral and social questions beyond the realm of economics?

Still one suspects these comments fell on deaf ears.  As another contributor pointed out, the incentive structures in the profession were all wrong.  Such was the structure of modern universities that graduate students were so invested in current ways of thinking that they were always going to be unlikely revolutionaries in the discipline.  Economists misunderstanding incentive structures, institutions do play a role after all?? Never! I refuse to believe it!

This job offer has come to my notice and might interest some of the post-doc who are reading this blog. This might be an interesting opportunity for broad-minded historian of economics.

http://h-net.org/jobs/display_job.php?jobID=39212

http://www.ias.umn.edu/quadrant.php

A Duke maling-list message just made me aware of this article from the University of Chicago magazine, “Chicago Schooled: the visible hand of the recession has revitalized critics of the the Chicago School of Economics.” It offers an interesting and quieter counterpart to the Krugman debate which is turning into a settling of old scores, but the bottom issue is the same. How much is the Chicago genealogy, from Murphy and Cochrane back to Heckman, Pelzman Fama, Becker, Stigler, and, of course, Friedman (how comes? ) among many others, and its market enthusiasm responsible for the present crisis.

Even more interesting is the use made by the author of recent works by historians of economics, mentioning Ross Emmett and Phil Mirowski.

Here’s the extract:

“The 2008 market collapse shocked the global economy like nothing since the Great Depression. Given the breadth of the failures involved, casting blame at a single school of thought may seem overly simplistic. But the Chicago School’s ardent championing of market forces, says Ross Emmett, a Michigan State University economist who studies the Chicago School and heads an oral history of it, makes it “a convenient locus” for anger.

Chicago’s market focus developed as the original Frank Knight/Jacob Viner Chicago School—also anti-Keynesian but skeptical of markets’ efficiency and mathematical models—waned along with World War II. The government’s influence on the University’s scientific-research funding disturbed then-president Robert Maynard Hutchins, according to Philip Mirowski, professor of economics and the history and philosophy of science at Notre Dame, and coeditor of the new book The Road from Mont Pelerin. (The Mont Pelerin Society was a Friedrich Hayek–led debating organization dedicated to advancing free-market ideals, including markets’ ability to efficiently show information.)

In 1946 Chicago already had a neoclassical presence: the Cowles Commission for Research in Economics, funded by Alfred E. Cowles III, scion of one of the Chicago Tribune’s owners. Cowles’s postwar staff at Chicago included nine future Nobel laureates, among them Kenneth Arrow and Tjalling Koopmans, who won Nobels in economics before Friedman. Cowles promoted an economics more scientific than the theoretical type that dominated the field at the time. But he was left-leaning. Hutchins wanted specifically anti-statist thinkers, Mirowski says, enlisting help from the now-defunct libertarian William Volker Fund to hire, among others, Aaron Director at the Law School, Friedman (Director’s brother-in-law) in economics, and Hayek at the Committee on Social Thought (the economics department nixed Hayek). Cowles would decamp to Yale in 1955. »

As an aside, there is increasing references (on the blogosphere) to the paper by Robert Gordon on the development of macroeconomics since the 70s in the light of the current crisis which was presented at the 1^st ISHET. It is viewed as a more balanced criticism of the current state of macro research than Krugman’s.

Is the next step the recognition of HET as useful knowledge for economists in a time of crisis?

Suppose you are going through a encyclopedia or a handbook trying to document yourself on the Chicago School of Economics.

You browse through the ‘monetarism’, ‘monetary history’, ‘Chicago macroeconomics’, ‘Chicago price theory’, ‘neoliberalism’, ‘Chicago methodology’, and ‘Chicago boys and Chile’ entries, all of which of course contain lengthy sections on Friedman’s works and beliefs.

In fact, you can reconstruct an exhaustive biography and bibliography from these various pieces.

Hence the two following question:

1) is there any need in such book for a specific ‘Friedman’ entry?

2) if so, what do you expect/want to find in it (although you may read my own tentative response in the formulation of the problem)?

In a previous post, Pedro told us about the two first rounds of the lynching of macroeconomics in these times of crisis: the Economist debate in which Lucas engaged, and a “letter to the Queen” bringing to light the dissent with the british economic community. What comes next, Pedro asked.

What comes next, of course, is Krugman’s article on “how did economists get it so wrong” in the NYT and the additional comments he made last week and today on his blog on “mathematics and economists.”

Essentially, economists got it so wrong, he says, 1) « because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth » and 2) because Keynes-like realistic vision of markets and especially financial markets was replaced by the « elegant, convenient, and lucrative » efficient market and rationality hypotheses, two hypotheses that even the skeptical pragmatic new keynesiens were unable to relinquish decisively. « Economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system ,» he concludes, arguing that economists should rediscover Keynes, and pay more attention to behavioral finance/economics.

He subsequently clarified/ qualified his position on his blog. He is not against mathematics, « they served an essential function — that of clarifying though », but against equating mathematical elegance with truth (like in these « silly », but « seductive » RBC models)

On unrealistic hypothese,« neoclassical economics radically oversimplifies both the individuals and the system — and gets a lot of mileage by doing that; I, for one, am not going to banish maximization-and-equilibrium from my toolbox. But the temptation is always to keep on applying these extreme simplifications, even where the evidence clearly shows that they’re wrong. What economists have to do is learn to resist that temptation. But doing so will, inevitably, lead to a much messier, less pretty view. »

An interesting exercise is to compare these statements with two biographical essays Krugman wrote for the American Economist in 1993 (“how I work and rules for research”) and for a book in 1995.

His rules for research were

1)“listen to the gentiles” (pay attention to empirical evidence). Nevertheless,

“ I have no sympathy for those people who criticize the unrealistic simplifications of model-builders, and imagine that they achieve greater sophistication by avoiding stating their assumptions clearly. The point is to realize that economic models are metaphors, not truth. By all means express your thoughts in models, as pretty as possible. But always remember that you may have gotten the metaphor wrong, and that someone else with a different metaphor may be seeing something that you are missing. “

2) question the question (try to get back to simple question so as to write not too “messy” models)

3) Dare to be silly (in your assumptions)

“What seems terribly hard for many economists to accept is that all our models involve silly assumptions. Given what we know about cognitive psychology, utility maximization is a ludicrous concept; equilibrium pretty foolish outside of financial markets; perfect competition a howler for most industries. The reason for making these assumptions is not that they are reasonable but that they seem to help us produce models that are helpful metaphors for things that we think happen in the real world.”

4) Simplify, simplify

In the NYT piece, it now seems that there are two silliness. The good one (using small-scale, but real examples), and the bad one (the RBC type ). And that economists should accept more “messy” models.

But OK, the rules for research were written 15 years ago. The problem is that Krugman did it again. Last year, in the middle of the crisis, during his Nobel prize speech. Published in the AER in June. There, as befits a Nobel prize, he attemps to “samuelsonize” his work, that is, to establish the historical canon for his own discoveries. And he tells a fairy-tale history. At the beginning there were empirical puzzles (the growth of similar-similar trade) which could not be explained by the “old” theory of trade rooted in perfect competition. When the first models of monopolistic competition offered the possibility to integrate increasing return to scale into models in the late 70, Krugman proved able, with simple models, to account for intrasectorial trade, drawing on comparative advantages and increasing returns. This “new” theory of trade was made possible by a whole generation of economists’ “new willingness to explore the implications of illuminating special cases rather than trying to prove general results”, e.g., focusing on “silly-seeming cases” (quoting the rule again). On the unrealisticness of his assumptions, he interestingly notes that “The use of deliberately unrealistic assumptions is, of course, common in much of economics. Nonetheless, I can report from early experience that the new style of modeling was met with considerable hostility at first. Some discussants dismissed the whole enterprise as obviously pointless, given the unrealism of the setup.” The same historical pattern is seen in his research in “new” geographical economics. At the end of the story, “the impossible complexity that had previously daunted economists contemplating a major revision of trade theory had vanished, replaced by a surprisingly simple and elegant structure.

Economists’ claim that their positive science is in principle independent from values have made them seemingly schizophrenic, and proudly so. So far, contemporary economists have coped with the pretty and elegant silliness of doctor Paul and the messy realisticness of Mister Krugman. Here is for instance how Ed Gleaser is coping:

“In his public role, Paul Krugman is often a polarizing figure, loved by millions but also intensely disliked by his political opponents. I still chuckle over an old New Yorker cartoon with one plutocrat saying to another that he gets some satisfaction from the fact that his vote will cancel out the vote of Paul Krugman. Within the less divided world of the academy, Mr. Krugman’s economic research has generated plenty of light, but far less heat. His papers are universally acknowledged to be immense contributions that helped to create two distinct fields.”

But how long will it last?

Edit: Sumner, Cochrane, and Altig responses to Krugman.

Edit 2: also of interest is Krugman’s 1998 piece in the Economic Journal, “two cheers for formalism.”

In the last few, summer, months I have been an unreliable blogger. It is going to get worse. One good reason is that I have set up a new blog that requires my attention.

For 7 weeks in September and October, I teach a class titled generically “History and Methodology of Economics”, which I have ambitiously re-named as “the politics of economics.” The course reviews literature on the place and role of economists in contemporary society from an historical standpoint. Because one of my goals for the class is to develop appreciation for the multiple interpretations of which economics is subjected to, and to the multiple uses given to economic ideas in public life, I asked them to participate in a course-blog. This will be 10% of their final grade. Their task is capture commentary on economics or uses of economics in unexpected places, notably in mass culture.

From my brief, hands in the air, survey, nearly none of the students had experience with the blogging form. So they are learning not only about the practice of observing economics in its historical drift, but also about expressing themselves in a blogging setting. I leave you here an invitation to visit, to comment and to encourage on “Observing Economics“.