Before railing against economics, read this

By Matt Nolan 16/01/2014

I had trouble getting out of bed this morning, so to help get me going I decided to read an essay about economics.  And I ran back into a treat of an essay I think we should all read.  This is Modern Economics and its Critics, 1:  by Partha Dasgupta.

His focus is explicitly on what economists actually “do”, noting that economists tend to focus on small questions we can actually go someway to answering – and that economists through economics, in no way, try to derive sweeping universal rules for society.  Furthermore, the focus of economists, and the assumptions economists make, are a product of their times and the questions that “matter”.

My favourite quote though:

I said earlier that modern economics treats people with respect; it does not regard them as mere dupes and foils of Business and Government.

Note, I largely agree with the essay, even though I personally fall in a different camp – I find myself having to look at economics issues in the way he stated his father did:

My father, Amiya Dasgupta, lectured on both advanced economic theory and the history of economic thought. In later life he often told me he wouldn’t have known how to proceed on one front without keeping a look-out on the other.

I don’t think the two styles are in conflict, they just offer different attributes to “answering a question” – in fact this makes the disciplines of economic history and economics complementary, even if the individuals involved have to specialise in one or the other!

Dasgupta’s essay nicely discusses why many of the compelling criticisms we hear currently about ‘economics’, that we heard in the 1990s (when he wrote the essay), and that we heard in the 1970s, are really the product of not understanding what economists do mixed with poor historic analysis.

He also makes the point that there are many things to criticise and argue about, but appeals to the “Masters” and “paradigm shifts” are often vacuous.  This supports the point made by Chris House recently.

Note:  Before those on the left criticise him out of hand, look at the highly interesting (left-leaning) concepts he writes about.  Read the essay, and you’ll notice him talk about how very high inequality is related to lower economic activity, and how this is the result of stratification.

Before libertarians criticise him, recognise that his essay pushes us to think about individuals, incentives, and individual choice – he is rallying against the lazy, and impersonal, way that many will clump things into “government”, “business”, GDP” etc.

Unlike politics, in economics we are willing to admit that these issuses, and trade-offs, are hard – and that there is no “silver bullet” to improving welfare in society.  Incremental change to go with incremental improvements in knowledge make sense.  To pretend we know more would be the height of arrogance, and I think Dasgupta’s essay indicates that economists realise this!

Update:  CPW just sent me this, it is relevant.  I am surprised to hear Noah Smith state that microeconomics is a dismissive term though, the one I always hear is “microeconomics is economics, macroeconomics is just applied micro”.