The state of economics

Two upcoming events are prompting me to think about the state of economics. One is a talk I’m giving at a forthcoming conference on Rethinking Economics, organised by the the Stifterverband fur die Deutsche Wissenschaft and the Handelsblatt. Another is a conference that I’ve been organising, to be hosted by the Bank of England and the Government Economic Service, on the teaching of economics, and whether economics graduates have the capabilities their future employers need.

This opportunity to reflect led me to pick up this morning A Not-So-Dismal Science: A Broader View of Economies and Societies, edited by Mancur Olson and Satu Kahkonen. This 2000 book gathers some marvellous papers on institutions and their role in economic development (including Olson’s own brilliant paper, ‘Big Bills Left on the Sidewalk: Why Some Nations are Rich and others Poor’, which is about why opportunities for profit are so often apparently overlooked. The reference is the old economics joke about seeing a $100 bill on the sidewalk and being told by an economist that if it were really there, it would already have been picked up.)

Anyway, the introduction to the volume starts with a lovely metaphor about economics itself. Modern economics is like a large city, the editors write. At the centre there are some magnificent skyscrapers, brilliant work by universally acclaimed academics. But there’s a bit of a hollowing our around the centre, while the suburbs are expanding rapidly and thriving. These suburbs are the boundaries of the discipline, where economics overlaps with sociology, psychology, history, demography – and of course institutional economics.

In the not-too-distant past, this was seen by some people as economic imperialism, an arrogant and over-mighty subject marching all over other scholars’ disciplines. I now wonder whether it hasn’t been the result of many economists despairing of the increasingly narrow path (although its restrictiveness has been much exaggerated) that many leading academic departments have been marching down. Just recently,  I’ve been told that Cambridge University (Cambridge!) has an economics department that doesn’t really like to teach undergraduates any more (to the point that some colleges are considering not admitting economics students), and that the LSE’s economics department disowns inter-disciplinary work. I’ve got no idea if either is true as presented to me, but was startled that academic economists from two of the UK’s leading universities had this perspective.

Anyway, like Olson and Kahkonen, I welcome the scope for integrating the social sciences under a common umbrella of careful empirical work combined with analytical rigour. That’s what the honourable tradition of Enlightenment empiricism, dating from David Hume and Adam Smith, requires of us.

A Not-so-dismal Science: A Broader View of Economies and Societies

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