The problems of economics as an academic pursuit have a sociological origin

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The problems of economics as an academic pursuit have a sociological origin

from Gerald Holtham (originally a comment)

The problems of economics as an academic pursuit have a sociological origin. The subject matter of economics is of interest to nearly everyone who lives in a commercial society and has to make a living. Intelligent people develop opinions about it and advance opinions in a way they would not do about astronomy or quantum physics. Similarly every politician has a story about the economic policy to be followed. This situation has created a strong form of credentialism among academic economists, evidenced by the use in the USA of the term “PHD economist” i.e. distinguishing a “real” economist from an economic journalist or mere informed commentator. This desire to define and secure a profession of economists has led not only to credentialism but to formalism. There must be hoops to jump through, filters to pass, if “real” economists are to be distinguished. An emphasis on mathematical technique is just such a filter. From credentialism and formalism comes a self-referential approach that holds “economic problems must have economic explanations and economic solutions”. That makes it illegitimate to introduce “non-economic” elements into economic theory. Demarcation and the exclusivity of “economics” is thereby reinforced. Non-economic elements are often considered to include any form of “irrational” behaviour. Unfortunately some schools of economics at that point finalise their separation from the real world by failing to distinguish “procedural rationality”, which is a useful simplifying assumption, from “substantive rationality”, which assumes a never-never land of near-perfect knowledge and ubiquitous equilibrium. The distinction, due to Herb Simon, was apparently too subtle for the neo-classical school. Ideology also plays a part in promoting some schools of economics. Theories that depict a self-stabilising system in which everyone is doing as well as possible are remote from reality but convenient for the conservative interests in society that wish to resist change. Once this structure is in place it is difficult to pursue a career as an academic economist without going along with a substantial part of it.

The solution to a problem that is sociological and political does not lie in abstract discussions of methodology or trying to identify philosophical mistakes. It lies in being open-minded to insights from outside economics , in constructing theories that use appropriate formal methods not theories that are constructed to show off command of formal methods whether appropriate or not. It means defining the domain of theoretical propositions and accepting the verdict of empirical data relevant to that domain. In other words the answer to people doing it wrong is not to despair and retreat into philosophy; the answer is to do it right. No-one should claim that is easy.