On Economics: Interview with Social Sciences in China Press

Today, Social Sciences in China Press (http://www.csstoday.com/), an academic news and publishing agency affiliated to the Chinese Academy of Social Sciences (http://casseng.cssn.cn/), published an article in Chinese on the state of the economics discipline, based in part on an interview with me. Below, in English, are the questions that were asked to me by journalist Wang Youran, and my responses in brief (slightly edited for clarity) [The English version of the article has since been published and is available here]:

“- What are the major trends and characteristics of economics studies in the past decades? What are the factors that have shaped them? Has there been any important event or shift?”

Referring to the mainstream of the discipline: In the mid-twentieth century, economics underwent a phase of mathematization.   That was driven by the idea of its becoming more scientific through this process.  During that period (mathematical) economic theory gained great prestige. Empirical statistical methods in economics (using econometrics) also underwent a lot of development. However, over time there developed some scepticism about whether either economic theory or econometrics could  deliver definitive results. Its very ability to describe everything (for instance, through diverse applications of game theory, general equilibrium theory and so forth) became a reason to think that it could not explain anything, at least not decisively.  Similarly, the possibility for deriving reliable results from econometric studies was questioned as a result of the demonstration that one could arrive at diverse conclusions about important economic questions depending on the models and data employed. In the last twenty years, as a result, there has been a shift, which has involved on the one hand a de-prioritization of theory and on the other hand the ‘identification revolution’ and the empirical turn in economics more generally, which has sought to pin down empirical inferences more precisely, but at the cost of narrowing the questions asked. In the process, both conceptual understanding and the ability to ask larger questions may have been sacrificed. But more recently, there are some signs of the big questions coming back in, especially as a result of the return to political economy and institutional analysis.

“- What does criticism levelled against economics focus on? Does it reflect problems that really exist or should economists should be wary of such criticisms?”

There are many different strands of criticism. Alternatively minded economists have often criticised what they view as the idealized character of economic models, for instance their emphasis on maximizing consumers and firms, equilibrium as an explanatory concept, and the use of various simplifying assumptions.  Many alternative strands of economics have focused on weakening these idealizations or building alternate foundations for models altogether, for instance through introducing the role of institutions, political economy, social norms and culture, models with heterogeneous agents pursuing not necessarily optimizing strategies, disequilibrium processes, and so forth.  These efforts are based on the conviction that economics needs a fuller range of theoretical concepts and empirical tools to make sense of reality. Since the idealized approaches have not performed especially well in many situations (for instance in the lead-up to the 2008 crisis) there is a broad agreement today about this direction. In this respect, mainstream economics may have come just a little bit closer to the alternative and critical traditions. 

“- In which ways has economics research influenced our society and economy over the half past century? What are the dynamics we should follow closely?”

Economics has played a crucial role in providing the advocacy (some might say ideology) that has defended private property and markets, understood in a very stereotypical way.  If course, it has also sometimes played contrary roles, but not so often in the last fifty years. We need only think about the form taken by the transition in many formerly planned economies , the rise of independent central banks, or the creation of the WTO to see examples of the influence of economic ideas in the world.  Today, the ‘neoliberal’ policy orthodoxies are being questioned but we still do not have a new economics that is fully adequate to understand economies differently and to examine the various policy options that are present.

“- How do you perceive the relationship between economics and other academic disciplines? Do you think interdisciplinary research, interaction and mutual reference between disciplines as well as between subfields of one discipline will become increasingly common and necessary?”

There is a vital need for such interchange going beyond what is sometimes called economic imperialism or the application of economics to other disciplines’ domains.  We need instead a trans-disciplinary dialogue that can in turn be disciplined — by the need to understand problems and issues in the world. This requires modesty and collaboration.   The rise of mixed methods research in political science and other fields (not so much in economics) provides an example of what may be possible, although it must go beyond individual disciplines and enter a trans-disciplinary space to be more fully effective. This in turn requires some re-organisation of our old ways of doing things (for instance that hiring, promotions and tenure decisions happen entirely within a disciplinary matrix). It is not, moreover, an excuse not to master individual disciplinary traditions. More is needed of us, not less, existentially as well as intellectually.  

– What do you think of the future of economics and its application to real-world issues? Do you have any suggestions for achieving high quality and high impact economics scholarship?

I personally believe that the best discipline for our thinking in the social sciences is to cut our teeth against real world cases, by undertaking examination of specific problems, with an applied orientation. This requires all the tools at our disposal, going beyond any one discipline, and it requires active collaboration straddling intellectual traditions, as well as theory and empirics. From this standpoint public policy analysis is not a stepchild to economics nor to the academic social sciences generally but rather is the mother lode, the true test of validity and relevance.  


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