I figured I’d put this at the front: I am not an economic expert. I do hold a Bachelor Degree in Economics and did work (for two years) in the field, but I am especially unqualified to opine on major shifts in economic thought. Since I am not an expert but do know some experts, I hope I might bridge this gap a bit. So lend me your eyes for a few minutes.
After the Great Recession of 2008, the public’s faith in economics was shaken. Nearly all of the “experts” failed to predict the damaging downturn, let alone propose strategies to prevent it. Yet somehow the discipline of economics has survived and even thrived since then! Even I chose to study economics in the heat of the recession, because I thought it would become more, not less important to understand.
I think the recent global political trends betray a different challenge to the field of economics. The dismal science and other statistical methodologies failed to predict both Brexit and the election of President Trump. In fact, most economists were vocal in warning about the negative economic impacts that would probably result. Now the experts are still scrambling to explain how and why these things happened despite their best advice.
The response from academic economics has been varied. One response has been to double down on econ as an important explanatory factor or to simply accept and lament the divide between experts and the “laity”. Others have called for changes in the way economics is done. I tend to fall in the latter camp and am particularly intrigued by a movement called “Rethinking Economics” which seeks to make econ more accessible to everyday people and revitalize political debate beyond the economic sphere.
I would like to highlight three problems in economics that ought to be addressed to restore trust between the people and economic experts: the domination of economics in politics; the assumptions of mainstream economic thought; and the lack of diversity in the discipline.1
Politics is not economics. There, I said it. Money and material goods are not the only things that people desire from social interactions, therefore there must be a realm of politics that is not governed by the rules of economics. This view has not been popular in recent decades when all political questions are boiled down to economic ones. I think this aggravates polarization because economics prefers to have simple answers to technical problems. “Policy X is good because my model says so.” There is no room for legitimate disagreement among people of goodwill. There are two groups of “experts” who are convinced that their models are correct and the other side’s models are flawed. Politics ought to be considered a moral discipline seeking the common good through the study of ethics, philosophy and other humanities in addition to economics and statistical sciences.
Certainly everyone has material needs. Most of us work 5 days a week to provide ourselves and our families with food, clothing and shelter. This is good and noble, but we, both individually and collectively, cannot allow our concerns to stop there. As individuals, but even more so as communities, we ought to recognize and address our spiritual needs for love, purpose, forgiveness etc. That is not to say that economics can or should adequately address the spiritual realm, but rather that economics should be held in perspective.
In reality, all economic models are flawed because human beings are extremely complex in our motivations and decision making. Often we make seemingly illogical or counter-intuitive choices, not to mention that preferences vary widely across cultures and individuals. To model our behavior economists must make assumptions. They assume that everyone behaves rationally and chooses what benefits themselves the most. Furthermore, most economics values parsimony: the idea that the simplest explanation for a particular phenomenon is the best. One need only to reflect on their own life to see how false these assumptions are.
Lastly, the study of economics has become homogenous in the past decades. What passes for economics in most universities is a highly formulaic and uniform method called neoclassical economics. Neoclassical economics emphasizes mathematics; theoretical modeling of supply and demand; and the self-interested individual as the basis of the economy. While other ways of doing economics exist, if you have studied any economics, chances are it was neoclassical and it was presented simply as “economics”. Many voices have criticized neoclassical economics for being out of touch with reality and amoral but there has been little deviation from this approach in academia.
The lack of a diversity of approaches within economics has led to increasing mistrust from everyday people. Economics has evolved into one way of understanding and talking about the world which has diverged from how most people see it.
President Trump has appointed relatively few economists to major positions in his cabinet, likely reflecting a perceived skepticism of economists among his supporters. If economists don’t shape up and reform the discipline it may lose its relevance.
I believe this would have tragic results for our society. Experts and especially economic experts are essential to a well functioning political community. But if we are to thrive as a nation and civilization, we need economists who are in touch with reality and are seeking a robust understanding of the common good.