Recently I went to a discussion called “What’s wrong with economics?” organized by the New York Review of Books. I wasn’t sure what to expect – instinctively I imagined most NYRB readers would dislike economists.
The best panel featured Nobel prize winning economist Paul Krugman, Robert Skidelsky (an economic historian most famous for his very good biographies of Keynes), and Benjamin Friedman a leading economist and author from Harvard University. Friedman said he thought that since the financial crisis economists have had little constructive to say about what went wrong and what to do about it. He thinks economists have blind spots driven by their obsession with mathematics and formalization. The most obvious blind spot he said is the finance sector, which has very obviously been failing at its primary job of allocating resources efficiently. Krugman felt there is nothing essentially wrong with economic theory – used properly, it predicted the crisis and offered the right fixes – but he thinks schools have become so mathematical and “teched up” that the new generation of economists can’t see the wood for the trees and the older generation has sold out to politics and ideology. Skidelsky said methodological authoritarianism in economics had closed minds. Mathematics as a check on theory is fine, but not as a driver. Or as one later speaker put it, economists are mistaking beauty for truth. Skidelsky felt economists do their profession much harm because they are prone to hubris. They turn people off because they are seen to rate efficiency more highly than justice.
Later speakers included philosophers, lawyers, anthropologists, and sociologists and got the most applause from the crowd. Here the criticism of economics was constant and included: that economists are so obsessed by theory and that the profession has lost its purpose; there is too much inbreeding and group think (e.g. over 60% of Harvard economic professors are Harvard or MIT graduates); economists are losing track of reality because very few are employed in business now and most are in academia or institutions they can make resemble academia; and economists have an intellectual monopoly on an area with huge social welfare implications.
