Beware economists bearing PhDs

A footnote on Joe Studwell’s

. He writes:

“At the industrial policy-making level, what stands out with the benefit of hindsight is that there was almost no role played in Japan, Korea or Taiwan by economists. Meiji Japan blazed its trail by following the Prussian, and early American, model which rejected the classical economics that began with Adam Smith and David Ricardo. … There was a strong prejudice against the theoretical approach associated with modern economics and in favour of practical problem-solving.”

Studwell goes on to say that at the height of its 1960s triumphs, MITI had just 2 PhD economists (although I’d note that far fewer economists bothered with PhDs in those days). Taiwan’s equivalent bureaucrats were all engineers. The intellectual tradition on which North East Asian industrial policy was based runs from 

and 
and includes, in the 1960s, Walt Rostow’s influential
.

There were other development economists who focused on the specific and the practical rather than the general and theoretical – in their different ways 

and 
– but they were a minority until recently. It’s interesting to see the intellectual tide turning, with the backlash ranging from the emphasis on randomised control trials to Dani Rodrik’s wholly sensible caution in his 2005 paper Why We Learn nothing from regressing economic growth on policies (download pdf from his home page or here). Here Muryat Iyigun ponders the intellectual tyranny of generalisable results when case studies can be so valuable as evidence.

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One thought on “Beware economists bearing PhDs

  1. If an economy is made up of myriad flows of activity which we attempt, with little success, to measure by money counts, then it is likely to be a constantly changing entity where the future is unlikely to be predictable on the basis of even the recent past. So which flows matter most and which will be critical in the futures? Given that economists and politicians have been a hapless bunch of chancers even in free market conditions, what hope is there for various forms of command economies?

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