Why We Shouldn’t Trust (Most) Economists

A long piece that collates research showing the economists are untrustworthy, selfish ideologues, in general:

William Mitchell,  We always knew it – their brains are thinner!

We already know that economics teaches students to be non-cooperative, more selfish and less honest. We learn that “students of economics are indeed much more likely to free-ride in experiments that called for private contributions to public goods” (see Marwell, G. Ames, R. (1981) ‘Economists Free Ride, Does Anyone Else?’, Journal of Public Economics, 15, 295-31).

Further, economists were found to be more selfish and less co-operative than others (see Carter, J, and Irons, M. (1991) ‘Are Economists Different, and If So, Why?’, Journal of Economic Perspectives, 5).

In an interesting 1993 study – Frank, R., Gilovich, T. and Regan, D (1993) ‘Does Studying Economics Inhibit Cooperation?’, Journal of Economic Perspectives, 7(2), 159–71 – download we read that:

Economists appear to behave less cooperately than noneconomists along a variety of dimensions.

See also this synopsis of the research.

Frank et al. then tried to work out whether “this difference in behavior” was the result of “training in economics” or “might exist because people who chose to major in economics were different initially” or whether it was “some combination of these two effects”. After appropriate controls in their experimental analysis they concluded that:

Thus, for students in general there is a pronounced tendency toward more cooperative behavior with movement toward graduation, a trend that is conspicuously absent for economics majors. On the basis of the available evidence, we are in no position to say whether the trend for noneconomists reflects something about the content of noneconomics courses. But regardless of the causes of this trend, the fact that it is not present for economists is consistent with the hypothesis that training in economics plays at least some causal role in the lower observed cooperation rates of economists.

They also considered the question of honesty. They concluded that

… students completing an introductory course in mainstream economics were far more likely to be less honest at the semester’s end than were students completing a course in astronomy.

So economists tend to be less honest.

Frank et al did a follow-up study in 1996 (“Do Economists Make Bad Citizens”, Journal of Economic Perspectives, 10(1), 187-192) –Download which

As well as their previous findings they re-iterated that economists gave “less to charity than others with similar income” and were “more than twice as likely as members of any other group to report giving no money at all to private charity”

So economists are meaner than other groups.

You also might be interested in reading the papers that were given at the Third Conference on Law and Mind Sciences which had the theme – The Free Market Mindset: History, Psychology, and Consequences.

The Conference sought to “explore why free markets have been so alluring to economists, scholars, and policy-makers even amidst the current financial turmoil”.

The paper by Stephen Marglin – How Thinking Like an Economist Undermines Community – was very interesting.

Marglin wrote the 1974 classic article – What do bosses do? which undermined the neo-classical theory of the firm. You can also read the 1975 follow-up – What Do Bosses Do? Part II.

In his 2009 Conference paper, Marglin is talking about the resurgence of neo-liberal thinking after a brief (40 year) Keynesian lull. He wrote:

Economics has since reverted to its market-friendly form with a vengeance. Since my own student days, graduate study in economics has focused more narrowly on technique, on making students ever more sophisticated in terms of mathematical ability. In the process, students are taught to put aside large questions, which inevitably take them beyond mathematics, in favor of smaller, more manageable problems. The narrowing of the economic mind has approached its inevitable limit: the present generation of economics students, I fear, doesn’t even begin with large questions. Students’ eyes are focused on the prize of career advancement from the get-go, and large questions would only get in the way.

Marglin then argued that by relying on “value judgments implicit in foundational assumptions about the self-interested individual, about rational calculation” etc, and “it is these assumptions that make community invisible”:

In arguing for the market, economics legitimizes the destruction of community and thus helps to construct a world in which community struggles for survival.

So mainstream economists actively promote policy agendas that undermine what other social scientists have found to be binding constructs for happiness and social stability – families, collectives and communities.

But as I noted above, in addition to all these foibles, economists just plain missed the boat on predicting the crisis.

As Paul Krugman noted in his article (September 2, 2009) – How Did Economists Get It So Wrong?:

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy.

The reason for this blindness?

Krugman, echoing Marglin’s point about being slaves to mathematical models of little substance, said:

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations … Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.

There is a debate about whether all this “ignorance” was due to their desire to impose ideological values supportive of the power elites onto the rest of us. In other words the entire neo-liberal agenda has been a deliberate strategy to provide authority to the power elites (capital) to appropriate ever increasing shares of real income for themselves.

How better to achieve that than to promote the self-regulating free market myth which then leads to policy positions that attack and weaken (if not destroy) the very institutions that protect vulnerable workers’ rights (for example, welfare systems and trade unions).

I have sympathy with that view and see it manifesting in the blind loyalty to fiscal austerity at present when it is clear that this policy approach is likely to be highly destructive (and is demonstratively so in Ireland, Latvia, Greece, etc). It is clear to be that the mainstream economists are right behind the austerity push because it will undermine and/or eliminate regulative structures and the protective institutions and allow more real income to be redistributed to the elites.

But it is so destined to fail and leave millions impoverished and angry and more likely to eschew IMF-style interventions and other “free market” solutions that one also cannot dismiss the ideology being blind – like a religion.

I don’t care to comment on religious beliefs here other than to say that they seem to suspend all the precepts of knowledge accumulation that we accept elsewhere. When it comes down to a debate about “belief” logical and evidence-based argument is abandoned and we are told “it is all a matter of faith”. Okay, that style of reasoning reflects stupidity in my view and a desire to fill in what we don’t know (yet) with a bunch of assertive statements that have no empirical or logical backing.

I see mainstream economics in a similar light. The training that economists receive via the mainstream schools – and the characteristics (noted above) that economists demonstrate in public life – provide support for the conjecture that they are actually not very bright at all.