Economics – all around DSGE mainstream orthodox macro

dismal economics

all around ortho macrode facto, debate, diverse (self)critiques, defense, delusion, denial + disagreement

see also  > history of economics, economics as social science  2021 Fake Economics: How Friedman mistook Walras for Marshall  by Victor Beker

…”…Friedman considered that the monetary chapter was the weakest one in Keynesian argu-ment and decided to center his attack on it.With this purpose, he started by restating the quantity theory of money. He emphasizedthe distinction between the nominal and the real quantity of money. For the holders of money–he argued– it is the real and not the nominal quantity of money what matters. He argued that Keynes´s assumption of short-run price rigidity removed this distinction that he considered tobe at the heart of the quantity theory. Misleadingly, heattributed to Marshall the Walrasian adjustment process. He maintainedthat Marshallassumed that“prices adjust more rapidly thanquantities”(Friedman1970: 207),turning upside down Marshall´s view. In fact, the issue is what variable is in charge of themarket adjustment process in the Marshallian analysis.Friedman went on then asserting that Keynes deviated from Marshall, reversing the rolesthe latter assigned to price and quantity (Friedman 1970: 209). How could Friedman mis-take the Walrasian adjustment process for the Marshallian one? How could he ignore thatKeynes strictly followed his teacher´s supply and demand analysis? How could he includesuch mistakes in a peer refereed journal? We know what fake news is, but fake economictheory?…”…  gmcopy   5/11/2021  Marginal Prophets – The anthropology of magic explains economists better than economists explain the economy – Matthew Walther

…”Once upon a time, two learned men lived in a city of legends hard by an ancient river. The first of these was a magician of sorts, whose incantations have been passed down through the ages more or less unchanged: “supply and demand functions,” “marginalism,” “utility,” the “costs of production.” Even at the remove of more than a century, the hocus pocus of Alfred Marshall is enchanting.

Marshall, a professor at the University of Cambridge, published his Principles of Economics in 1890. It would go through eight editions over the next three decades and served for generations as the dominant textbook on the topic. Before his assembled totems and fetish-objects (revered, if only half-understood, by his present disciples) we are helplessly spellbound; the testimony of our senses retreats before the formulas and mystic mummery of neoclassical economics.

In the same year, Sir James Frazer produced an even longer work; one that was met, in its day, with scarcely less acclaim. The Golden Bough: A Study in Comparative Religion, catalogued and classified the superstitious traditions of the human race, revealing the universality of certain beliefs, which we would now call “non-empirical,” around which societies had been formed. Frazer and his masterpiece are today the exclusive province of literary scholars, consigned to footnotes in the history of high modernist verse. But while Frazer was indeed a gifted prose stylist, and both Eliot and Yeats pilfered endlessly from his great study of magic, it is, I think, a mistake to dismiss him as a dilettante or, worse, an anthropologist whose conclusions merely betray the unfortunate influence of his age.

Which of the two Cantabrigians has aged better, the Clapham prophet of margins or the Scotch debunker of the Wotjobaluk superstitions? …”…  gmcopy here 

>>> economics equilibrium mainstream – crit of, as religion, Alfred Marshall vs James Frazer, Homo oeconomicus’, magical thinking  2011 Behavioral Economics: Toward a New Paradigm  by Amitai Etzioni
Abstract: This article discusses the challenges behavioral economics poses for neoclassical economics and the ways in which the young field may move forward. After reviewing some of behavioral economics’ accomplishments and the responses to these accomplishments, the article asks whether its findings can be incorporated into the neoclassical paradigm and suggests additional steps behavioral economics may consider undertaking in order to expand its reach. – KW behavioral economics, neoclassical economics, economics   14/11/2021  Mises’s Regression Theorem, Bitcoin, and Subjective Value Theory  by Emile Phaneuf III 

…”…The regression theorem was an attempt to solve a problem which puzzled the economists of his day – something they saw as illogical: how to “explain the purchasing power of money by reference to the demand for money, and the demand for money by reference to its purchasing power. …

One interpretation highlighted by Laura Davidson and Walter Block proposes that Mises’s regression theorem “is relevant only when a new medium of exchange arises out of a pure barter economy.” 

However, despite the present author’s careful rereading through Mises’s classic works The Theory of Money and Credit and Human Action for any statement from Mises’s own words establishing this barter limitation for his regression theorem, it seems there is no evidence for it. Further, Davidson and Block both concede in a podcast that they are also unaware of any such limitation from Mises himself. What we do have from Mises are his sweeping claims, quoted above, which (in this author’s view) seem, if anything, to clearly apply broadly – with no such barter limitation of scope. …

To emphasize the central point to this article’s thesis, we can still consider the regression theorem useful without accepting the logical contradiction that, on one hand, a good can be subjectively valued for any reason, and on the other hand, that a good could not possibly be valued for a specific purpose (as a medium of exchange) unless it was first valued for some purpose other than that purpose. Empirical evidence that bitcoins were first valued for direct use value does not refute this. Bitcoin may indeed have emerged with perfect accordance to the theorem. There are, as of the time of this writing, roughly 12,000 digital assets listed on Do we really cling tightly to subjective value theory (as we should) whilst simultaneously clinging to a belief that not one of these could have been valued as a medium of exchange before some other purpose? Value is either subjective, or it is not.”

caw gm: 2021  Read this article for stunningly sophisticated armchair abstractions on the the commodity “theory” of money. No worries about zero evidence for the bartering myth. This is one of those deductively axiomatic truths emerging from divine revelation: “A most important truth about money now emerges from our discussion: money is a commodity.” Who was Rothbard having discussion with? Himself or the invisible hand, perhaps? Menger&Mises – the dumbest duo ever? Hayek might have agreed?

drodrik.scholar.harvard.ed  10/2021 A Note on the Global Distribution of Authorship in Economics Journals – by J Greenspon J, D Rodrik  

Abstract:  Using Fontana et al.’s (2019) database, we analyze levels and trends in the global distribution of authorship in economics journals, disaggregating by country/region, quality of journal, and fields of specialization. We document striking imbalances. While Western and Northern European authors have made substantial gains, the representation of authors based in low-income countries remains extremely low — an order of magnitude lower than the weight of their countries or regions in the global economy. Developing country representation has risen fastest at journals rated 100th or lower, while it has barely increased in journals rated 25th or higher. Fields such as international or development where global diversification may have been expected have not experienced much increase in developing country authorship. These results are consistent with a general increase in the relative supply of research in the rest of the world. But they also indicate authors from developing countries remain excluded from the profession’s top-rated journals.

gm/ 2016 German macroeconomics: The long shadow of Walter Eucken Peter Bofinger

At first sight, it is difficult to explain why the macroeconomic debate and macroeconomic policy in Germany differ considerably from other countries, despite the same academic textbooks and models being used as elsewhere. This column explains how a specific paradigm of macroeconomics, developed by Walter Eucken and diametrically opposed to Keynesian economics, is behind the German formal theoretical apparatus. The success of German macroeconomic policy can be attributed to the openness of the German economy, which allows it to benefit from macroeconomic policies pursued in other major countries.   7/9/2021   What’s worth knowing in economics? A global survey among economists
Peter Andre, Armin Falk 

Research shapes policy. But what we choose to study is subjective. This column uses a global survey of almost 10,000 academic economists to find their opinions on what economic research should look like. Many economists think that economic research should become more policy-relevant, multidisciplinary, and disruptive, and should pursue more diverse research topics.

Economists’ views are heterogenous :  Weber’s insight that any answer to the question of what is worth knowing is subjective and value-driven is empirically reflected in the substantial heterogeneity of views among economists. Importantly, this dissent cannot simply be attributed to a generic inability of economic experts to agree on certain issues. Past research shows that economists agree on many policy issues (Dahl and Gordon 2013), Hence, consensus among economic experts is possible, yet the question of which research objectives economics should pursue remains fundamentally disputed.  Moreover, by far the strongest predictor of the importance a scholar assigns to a topic is the extent to which their own work is within that field. Thus, economists tend to value their own fields most. We believe that this is an important insight to keep in mind when evaluating other researchers’ work, whether as seminar participants, referees, or editors. Our own views about ‘what is interesting’ are valuable and irreplaceable, but also subjective.

Dissatisfaction with the current state of economics : Despite the large disagreement, economists are unified in their dissatisfaction. Across the ten research objective questions, only 13% to 31% of respondents reply that the current practice in economics is “about right”. Moreover, a majority of economists agree on the direction of change. Economists want more policy-relevant and risky research with a broader scope and stronger multidisciplinary orientation. Moreover, they put less weight on the most popular JEL topics and would prefer a more diverse set of research topics. The findings reveal a systematic dissatisfaction with the current state of economics. As a field, we do not appreciate and work on what we collectively prefer. …

The data also show that female scholars disagree more with the objectives and topics of economic research. …

… sustained change is needed to reduce the mismatch noticeably. For example, multidisciplinarity is still the research objective for which we document the highest degree of dissatisfaction today, with almost 80% supporting a continued shift towards more multidisciplinary research.  6/2021  The Triumph of Economists – Macroeconomists in government came to the right answer, without a playbook, and saved us  Joshua Gans

It has been a while since I posted which is something you should take as good news. It means things are calming down even if they are far from over. But two pieces — one by Marc Andreessen and another by Noah Smith — appeared this week that motivated me to write about something good that happened that has received little to no attention thusfar: economists in government did their job in March and April 2020 and, in so doing, demonstrated economics’ greatest triumph: avoiding what could easily have been an economic and societal collapse. And what’s more, they did it based on skill rather than utilising some existing playbook.  2020  When the facts change – Economics sometimes changes its mind – The science may be dismal but it is flexible, too

…”What does it take to change economists’ minds? New ideas are not enough. The theory of monopsony, which explains why a minimum wage may help employment, not hurt it, had been around for at least 60 years before mainstream economics accepted its use in many low-wage labour markets. Recent nonchalance about high levels of public debt may seem new and mould-breaking. But the fresh thinking rests on theories set out in the 1950s and 1960s…”…  2020   harry-potter-and-deliberate-ignorance-in-welfare-economics  Felix Bierbrauer 

…”As these vignettes have shown, deliberate ignorance can serve a useful purpose in welfare analysis. Dumbledore should not place too much weight on Harry’s and Draco’s social dispositions, for example; rather, he should split the cake fairly. So does this mean that ignorance is generally bliss? Not quite. More knowledge often leads to better decisions. But in some situations, additional information can stand in the way of justice, liberty, or social mobility. And that information is better ignored.

This article is a revised and shortened version of the chapter “Harry Potter and the welfare of the willfully blinded” from the book Hertwig, R., & Engel, C. (Eds.). (2020). Deliberate ignorance: Choosing not to know. MIT Press. The original chapter is available in PDF format.  3/0/2021/  On Eurocentrism in Economics

Branko Milanovic explores alternatives to the problem of eurocentrism in economics.

Sebastian Conrad’s book “What is global history?” is in many ways important for economists and economic historians. This is not only because Conrad illustrates the way in which global studies differ from other ways to look at the world (modernization theory, world-systems theory, post-colonial studies), but also because he takes many examples from economics. …

The approach we should avoid is to pay lip-service to non-Western thinkers by including one or two sentences from their work without any analysis or contextualization. I have seen this done in recent histories of economic phenomena: it is now de rigueur to quote a couple of non-Western authors, mostly (I would guess) by grabbing a few sentences from a Wikipedia entry. It makes a mockery of the entire idea, but it does (formally) satisfy the thought-police who look at the “diversity” requirement as a purely quantitative target: are there quotes from a sufficiently diverse crowd of authors?  (On the other hand, a good example of real substantive engagement with non-Western thinkers is Pankaj Mishra’s “From the Ruins of Empire” that I reviewed here.) …”…

theguardian    1/8/2021 What really counts? How the patriarchy of economics finally tore me apart – After 10 years of writing about capitalism I saw that the erasure of women is not only palpable, it’s bound to my own flesh and blood  by Jane Gleeson-White

“Is the economics profession a functionary and tool of patriarchy – or is patriarchy a functionary and tool of economics?”– Marilyn Waring

“Economically, the rupture of 2020 showed us two things: that our lives depend on care work, especially the unpaid care work still mostly done by women; and that another way is possible. …  The subject of women and economics is vast and ancient – but as a scholarly enquiry, it’s relatively recent, dating to the landmark 1988 book Counting for Nothing: What Men Value and What Women Are Worth, by Marilyn Waring, former New Zealand politician and founder of feminist economics. Waring has said of her research into the UNSNA: “As a feminist in the 1970s, discipline by discipline, we were uncovering the ways in which male experience spoke for all. I suspected economics would be the same, and yes it was.” When she finally read the UNSNA’s many volumes, what she found made her weep: a passage that “casually dismissed all the unpaid labour traditionally done by women as ‘of little or no importance’”. This value judgement was used to justify its exclusion.

If this begins to suggest the systemic magnitude of the problem, here are three more facts that bring it home. First, in Australia in 2020, women were paid an average of $242.90 per week less than men – women are still undervalued and underpaid, and our work is generally more precarious than men’s. Second, one in every 130 women and girls on the planet – 29 million people – lives in modern slavery, a term that includes forced labour, forced marriage, debt bondage, domestic servitude and human trafficking. And finally, men own over 80% of arable land on Earth. This shocking statistic was calculated by Oxford economist Linda Scott, author of The Double X Economy: The Epic Potential of Empowering Women. By cornering humanity’s main source of material wealth, men have been able to retain power over the world’s capital for hundreds, even thousands, of years.

Given this, it’s not surprising to learn that economics is still the most male-dominated discipline in universities across the globe – even more so than science, technology, engineering and mathematics. …

Just as my own lived experience inside the language and matter of economics has taught me that women and the Earth do count, it’s also taught me that relationships of care, not quanta of capital, are the things that we must maximise. Urgently. Now.

This is an edited extract from Griffith Review 73: Hey, Utopia! edited by Ashley Hay   24/6/2021 Economics needs to evolve – There has been too much focus on equilibrium
… The economy has evolved, in other words. Strangely, most economic models do not treat the economy as an evolving thing, undergoing constant change. They instead describe it in terms of its equilibrium: a stable state in which prices balance supply and demand, or the path the economy follows back to stability when a shock disturbs its rest. Though such strategies have sometimes proved useful, economics is the poorer for its neglect of the economy’s evolutionary nature. 2015  Raj Chetty on Empiricism Without Theory Arnold Kling

“Broadly speaking, Chetty makes two points. One is that behavioral economics has inspired empirical analysis that can be useful for policy. The other is that we do not have to care about theory. Although theory might guide us to try certain empirical studies and might explain why a policy will work, all we need is the empiricism to know that a policy will work. I found this view at best shallow and at worst not persuasive. …” …

Raj Chetty on Empiricism Without Theory

Macroeconomics fails because it does not follow the money   9/2019  In defense of economics  By Allison Schrager

For once in its famously fractious history, the field of economics has united everyone around a single issue: anger at economists. The profession has faced a lot of criticism lately … Economics has a great deal of influence compared with other academic disciplines. … But lately there is more criticism and skepticism of experts, and it appears to be having an effect when it comes to economic policymaking. The most salient and indisputable lessons from economics are being ignored, as mainstream politicians endorse trade and currency wars, and national rent controls.  The two main criticisms of economics are:

(1) Economists are slaves to groupthink that fetishizes free markets without recognizing their downsides. This caused the financial crisis. (2) Economists don’t know anything, they can’t agree on much, and they fail to spot the big, important economic trends.

They ignore inequality, oversell the benefits of global trade, and did not foresee the financial crisis. There is a grain of truth to each of these arguments, but mostly they misunderstand what economics offers and how it applies its tools.  Economics never promised good predictions  Bill Gates recently said that macroeconomists (the target of most criticism) “don’t actually understand” their field. This is a fair point: they don’t. But that is not necessarily a critique of macroeconomics, which is the study of the whole economy. … “  4/2021 s It Time to Overhaul the ‘Classic’ Economics Course? This Researcher Thinks So. By Sarah D. Sparks  2019 It’s time we tear up our economics textbooks and start over  by Robert J. Samuelson

Harvard professor N. Gregory Mankiw is one of the most influential economists in the United States. But the 61-year-old’s authority does not stem from advancing an arcane scholarly finding. Nor has Mankiw coined some catchy phrase that captured the popular imagination (see, for example, “The Affluent Society” by John Kenneth Galbraith). Instead, Mankiw’s power derives from his position as the author of one of the most widely used introductory college economics textbooks.

Chances are that if you decided to study college economics today, you’d start with Mankiw’s “Principles of Economics.” He has been writing and revising it for more than two decades. It’s now in its eighth edition, and the ninth is expected in about six months. Mankiw estimates that there are roughly 4 million copies of the book circulating in the world, with about 2 million in the United States. He figures that his book has from 20 to 25 percent of the market for starter economics books.

It’s a great time to be writing these texts, because the economy is in constant flux, and there is an undeniable hunger to understand how it works. Economists Samuel Bowles and Wendy Carlin, who have created an introductory e-book, estimate that about 40 percent of college students take at least one economics course. A long essay on introductory economics by Bowles and Carlin is to appear in the Journal of Economic Literature along with a similar overview by Mankiw. 

Mankiw is fond of quoting the most famous of earlier authors of introductory U.S. texts, the late Nobel Prize-winning economist Paul Samuelson, who once said:

“I don’t care who writes the nation’s laws — or crafts its advanced treaties — if I can write its economic textbooks.” (Note: I am an economic journalist with no known relation to Paul Samuelson.)

The obvious point is that you don’t get a second chance to make a first impression. There’s the rub. Mankiw’s introductory text, and surely some others, has been overtaken by events.

To be sure, in a book of roughly 800 pages, there’s a huge amount of useful, clearly presented information on many subjects: supply and demand; global trade; competition or its absence; wages; government regulation, spending and borrowing — and much more. When there are disagreements among economists, Mankiw does his best to summarize conflicting views.

But as a teaching device, “Principles of Economics” has fallen behind. There’s little analysis of the impact of the Internet and digitalization on competition and markets. I couldn’t find either Apple or Facebook in the index; Google gets a few mentions.

Likewise, little attention is paid to the 2007-2009 Great Recession, the worst business downturn since the Great Depression, which also receives scant coverage relative to its significance. (Together, the two recessions receive about three pages, from 725 to 727.)

There’s some misleading information about the Great Recession and parallel financial crisis. On Page 691, we have this: “Today, bank runs are not a major problem for the U.S. banking system or the Fed.” This would surely surprise the Fed, which poured trillions of dollars into the economy to prevent financial collapse.

Mankiw’s assertion can be defended on narrow, technical grounds. There was no run by retail depositors (people like you and me) against commercial banks. We were protected by deposit insurance. But there was a huge run — a panic — by institutional investors (pension funds, hedge funds, insurance companies, endowments) that withdrew funds from traditional banks, investment banks and the commercial paper market.

The modern era in economics textbooks began in 1948 with the publication of Samuelson’s first introductory edition. We now are at a similar moment. We need to tear up the existing texts and start over, adding what is relevant and discarding what is outdated or unimportant. Mankiw’s textbook needs more than a touch-up; it needs a major overhaul. It has very little history: for example, the industrialization of the 19th century. Nor is there much about the expansion of the global economy. China gets a few mentions.

We should also examine other models, whether the Bowles-Carlin project or a recent text by John Komlos, professor emeritus at the University of Munich. (Some cynical readers may think I’m looking for a personal sponsor for such a book myself. Let me assure you: I am not. Aside from not wanting to do it, I am manifestly unqualified.)

The role of introductory textbooks is not to educate the next generation of economists. They will take many courses. For most of us, the purpose of studying economics is more modest. It is to make the world a little more understandable and, with luck, to force us to acknowledge what’s realistic and what’s not. But to play this constructive role, the textbooks must be up to date.

Read more from Robert Samuelson’s archive.

Read more:   6/2020   How Should Econ 101 Be Taught? By Donald J. Boudreaux

Harvard Economics wunderkind Raj Chetty hopes to change the way students are introduced to economics. Chetty wants there to be more analysis of data and less attention to economic theory. As described by Dylan Matthews writing for Vox, “If Chetty is an advocate for anything, it’s for the notion that economics is an empirical discipline, a science just as much as, say, medicine is.”1

Chetty does not say that mainstream economic theory is irrelevant and, hence, dispensable. Yet he clearly believes that this theory is overrated, overemphasized, and overused relative to analyses of empirical data. To help remedy this perceived problem, Chetty developed and teaches a new undergraduate course at Harvard: “Economics 1152: Using Big Data to Solve Economic and Social Problems.”2   2019   How Economists’ Faith in Markets Broke America  And what it means for our future  by Sebastian Mallaby  review

Transaction Man: The Rise of the Deal and the Decline of the American Dream  By Nicholas Lemann
The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society  By Binyamin Appelbaum 

A little more than a generation ago, a stealthy revolution swept America. It was a dual changing of the guard: Two tribes, two attitudes, two approaches to a good society were simultaneously displaced by upstart rivals. In the world of business, the manufacturing bosses gave way to Wall Street dealmakers, bent on breaking up their empires. Organization Man,” as the journalist William H. Whyte had christened the corporate archetype in his 1956 book, was ousted by “Transaction Man,” to cite Nicholas Lemann’s latest work of social history. In the world of public policy, lawyers who counted on large institutions to deliver prosperity and social harmony lost influence. In their place rose quantitative thinkers who put their faith in markets. It was The Economists’ Hour, as the title of the New York Times editorial writer Binyamin Appelbaum’s debut book has it.

Together, Lemann and Appelbaum contribute to the second wave of post-2008 commentary. The first postmortems focused narrowly on the global financial crisis, dissecting the distorted incentives, regulatory frailty, and groupthink that caused bankers to blow up the world economy. The new round of analysis broadens the lens, searching out larger political and intellectual wrong turns, an expansion that reflects the morphing of the 2008 crash into a general populist surge. By excavating history, Lemann and Appelbaum remind us that Transaction Man and his economist allies were not always ascendant, and that they won’t necessarily remain so. This frees both writers to ask whether an alternative social contract might be imaginable, or preferable.   3/2021 The Standard Economic Paradigm is Based on Bad Modeling    By Servaas Storm

The New Keynesian Dynamic Stochastic General Equilibrium (DSGE) is a straightjacket for macroeconomics

Mainstream macroeconomics finds itself in a deeply unsatisfactory state, unable to make correct predictions and incapable of providing meaningful longer-term analyses and advice. It clearly needs a major rethink. Regrettably, the dominant response of mainstream macroeconomists so far has been to defend the accepted paradigm: some version of the New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. People generally laugh when they hear that “after 1968 the restored communist regime required all Czech rock musicians to sit a written exam in Marxism Leninism” (Ferguson 2012, p. 248). But what they don’t know is that, in 2021, the Politburo of Correct Macroeconomic Thinking requires all Respectable Macroeconomists to frame their argument within the straightjacket of a DSGE model. Those who don’t, cannot be a member of the club.

Recognizing this deeply unsatisfactory state of mainstream macroeconomics, David Vines and Samuel Wills brought together a group of critical mainstream macroeconomists to explore the limitations and problems inherent in DSGE models and to consider future pathways for a more relevant macroeconomics. Professors Vines and Wills call their effort the ‘Rebuilding Macroeconomic Theory” project, with a second collection of papers coming out of this project recently published in the Oxford Review of Economic Policy 2020, volume 36 (3). 2019 If economics is a science, why isn’t it being more helpful? Economists know the price of everything and the value of nothing. Values are up to us  Richard Denniss  2019 The economic mainstream is biased: who’d have thought it? Richard Murphy

Mainstream (neoclassical) economics has always put a strong emphasis on the positivist conception of the discipline, characterizing economists and their views as objective, unbiased, and non-ideological. This is still true today, even after the 2008 economic crisis exposed the discipline to criticisms for lack of open debate, intolerance for pluralism, and narrow pedagogy. Even mainstream scholars who do not blatantly refuse to acknowledge the profession’s shortcomings still resist identifying ideological bias as one of the main culprits. They often favor other “micro” explanations, such as individual incentives related to academic power, career advancement, and personal and editorial networks. Economists of different traditions do not agree with this diagnosis, but their claims have been largely ignored and the debate suppressed.

Acknowledging that ideology resides quite comfortably in our economics departments would have huge intellectual implications, both theoretical and practical. In spite (or because?) of that, the matter has never been directly subjected to empirical scrutiny.

In a recent study, we do just that. Using a well-known experimental “deception” technique embedded in an online survey that involves just over 2400 economists from 19 countries, we fictitiously attribute the source of 15 quotations to famous economists of different leanings. In other words, all participants received identical statements to agree or disagree with, but source attribution was randomly changed without the participants’ knowledge. The experiment provides clear evidence that ideological bias strongly influences the ideas and judgements of economists. More specifically, we find that changing source attributions from mainstream to less-/non-mainstream figures significantly reduces the respondents’ reported agreement with statements. Interestingly, this contradicts the image economists have of themselves, with 82% of participants reporting that in evaluating a statement one should only pay attention to its content and not to the views of its author.

Moreover, we find that our estimated ideological bias varies significantly by the personal characteristics of economists in our sample. For example, economists’ self-reported political orientation strongly influences their ideological bias, with estimated bias going up as respondents’ political views move to the right. The estimated bias is also stronger among mainstream than among heterodox economists, with macroeconomists exhibiting the strongest bias. Men also display more bias than women. Geographical differences also play a major role, with less bias among economists in Africa, South America, and Mediterranean countries like Italy, Portugal, and Spain. In addition, economists with undergraduate degrees in economics or business/management tend to show stronger ideological biases.

I strongly recommend the whole article, but there are a number of important things to note.

The first is that, as the authors note, this outstanding and original research has not been published by an academic journal. …” …

youtube  2014    Pluralismus in der Ökonomie – Eine wissenschaftstheoretische Perspektive  Jakob Kapeller – über den erkenntnistheoretischen Monismus in der Volkswirtschaftslehre und die Notwendigkeit von Pluralität .  2019  Ideology is Dead! Long Live Ideology!  By Mohsen Javdani and Ha-Joon Chang

ideological probabilities

“Once you admit the existence of ideological bias, the widely-held view that “positive economics is, or can be, an ‘objective’ science, in precisely the same sense as any of the physical sciences” (Friedman 1953) must be rejected.” 2019 Economics is a failing discipline doing great harm – so let’s rethink it Andrew Simms – Our global economy should serve rather than dominate people – and that includes factoring in the climate crisis, too – Andrew Simms is co-author with David Boyle of  Economics: A Crash Course

Bill Gates: “Economists don’t actually understand macroeconomics”

By Kevin J. Delaney & Allison Schrager

Bill Gates takes a dim view of economists’ ability to know what’s going on in the economy.

“Too bad economists don’t actually understand macroeconomics,” the Microsoft co-founder noted during a recent interview with Quartz. Asked what he meant by that, Gates continued:

“It’s not like physics where you take certain inputs and you predict certain outputs. Will interest rates ever return to normal, and why aren’t they returning to normal? You won’t get a consensus between economists quite the way that if you dropped a ball out your window and called up physicists and asked, ‘What the hell happened?’ There’s so many factors including what [economist John Maynard] Keynes called ‘animal spirits’ in the economic equation that we don’t have predictability. Even today, people are still arguing about what happened in 2008. So it’s even harder to look forward. [Look at] the role of the bond rating agencies in 2008, which is completely unreformed. Why would that be? Well, there must be a lack of consensus.”

Gates is right, in a way: Economists don’t understand much about the macroeconomy. No one does. Any responsible economist is the first to admit that.

As opposed to microeconomics, which looks at the economy at the level of individual businesses and consumers, macroeconomics aims to explain the interaction of different factors that affect the economy as a whole, such as how interest rates impact macro variables like unemployment, inflation, and economic growth.

As Gates points out, the economy is complex and ever changing. Economists try to make sense of it by developing mathematical models that describe how the different factors relate to each other, and test the accuracy of those models using past data. But the macroeconomy has millions of moving parts that affect each other. Knowing what to include or exclude, and if the economy has changed from when data were collected, is never straightforward—which is why economists tend to disagree on almost everything.

Economic models are always incomplete, but it’s hard to argue that we’d be better off without them. Economists’ research has contributed to fewer people living in poverty, low predictable inflation, and less risk and uncertainty. Macroeconomic models offer a logical, consistent framework to help policymakers understand how people and different factors may respond to a new tax, benefit, or regulation.

Gates’s critique of economists follows several decades of rapid expansion in the field’s influence on policymaking and popular culture. His comment came during the interview as he discussed concerns about a global recession:

“The idea of negative 10-year rates, or now in Germany’s case, negative 30-year rates, this is macroeconomically uncharted territory. As Warren Buffett says, go through any economics textbook and find a reference to negative interest rates—you won’t find it. And yet, almost half the government debt in the world today, if you take out US debt, the majority of government debt bears negative interest rates. And there are certain reasons why that should not be the case, but it is the case. There’s always the risk of an economic recession, and trade wars increase that risk, and the [recent] macroeconomic figures increase that risk quite a bit. But I’m not in control of that. I get to pick which HIV scientists to fund and I get to pitch which malaria drugs to go after, or new ways of killing mosquitos. I don’t have some global economic levers up here in my foundation office.”  2019     Why Can’t Economists Agree?  By MARC DAVIS
Celebrated playwright, George Bernard Shaw, once famously quipped: “If all economists were laid end to end, they would not reach a conclusion.”  So, how is it that two experienced, knowledgeable economists study and analyze the same data, and each comes up with a different forecast for the nation’s economy? Why do these experts so often disagree with one another? As we will see, there’s no simple answer; there are many reasons for economists’ differing opinions.

Two Competing Schools of Thought – The principal disagreement among economists is a matter of economic philosophy. There are two major schools of economic thought: Keynesian economics and free-market, or laissez-faire, economics.

Keynesian economists, named after John Maynard Keynes, who first formulated these ideas into an all-encompassing economic theory in the 1930s, believe that a well-functioning and flourishing economy may be created with a combination of the private sector and government help.

By government help, Keynes meant an active monetary and fiscal policy, which works to control the money supply and adjust Federal Reserve interest rates in accordance with changing economic conditions.

By contrast, the free-market economists advocate a government “hands-off” policy, rejecting the theory that government intervention in the economy is beneficial. Free-market economists—and there are many distinguished advocates of this theory, including Nobel Memorial Prize winner Milton Friedman—prefer to let the marketplace sort out any economic problems. That would mean no government bailouts, no government subsidies of business, no government spending explicitly designed to stimulate the economy, and no other efforts by the government to help what the economists believe is the ability of a free economy to regulate itself.

Both economic philosophies have merit and flaws. But these strongly advocated and conflicting beliefs are a major cause of disagreement among economists.  … 

Although economics deals with numerical data and well-established formulas that work to solve various problems and provide insight into economic activity, it is not completely empirical science. As mentioned, too many x-factors occur in the complex world of economics, thus surprising the experts and defying their forecasts.   1998  Why Economists Disagree The Role of the Alternative Schools of Thought    by David L Prychitko   1991  Why Economists Disagree: The Political Economy of Economics Hardcover by Ken Cole, John Cameron,  Chris Edwards

In this revised and updated edition, the authors argue that there are several theoretical perspectives, each offering a plausible logical explanation to economic phenomena. The three theories discussed are: subjective preference theory; cost-of-production theory; and abstract labour theory. The theories are subject to non-mathematical analysis, and the authors show the links between economic theory and political practice for each. The book aims to provide a broad understanding of a wide range of economic theory and new material has been added, including the economic experiences of Chile and the global economic situation. Flow diagrams illustrate the text, and notes on further reading give additional guidance. 

journals.sagepub  review   by S H Heap   review by  L. A. Duhs

goodreads reviews


‘This is an economics book with a difference. It is highly distilled logic. Students at all first degree levels can gain an enormous amount from this book. Even the most dedicated proponent of economic orthodoxy will find value in its ability to present mainstream arguments clearly and concisely’ Paul Ormerod, Times Higher Education Supplement

‘I have no hesitation in recommending [it] for its original style and format … Students and lecturers alike will find it both amusing and informative’ Capital & Class

Economy-Environment-Development-Knowledge  book cover  1999 Economy-Environment-Development-Knowledge  by Ken Cole

As we approach the end of the second millennium, we find ourselves in times of radical social change. Orthodox explanations of the economy, the environment and the development process are unable to provide coherent policies for such issues as employment creation, environmental degradation and social progress.
Economy-Environment-Development-Knowledge provides alternative perspectives on these fundamental aspects of human existence. Economists, environmentalists, and development theorists have so far been unable to agree on the most successful prescriptions to address problems. To understand, contrast and compare alternative understandings of economic, environmental and development issues, we need to be aware why theorists conceptualise the process of social experience so differently.
Part 1 of Economy-Environment-Development-Knowledge addresses the subjective preference, cost-of-production and abstract labour theories of values in economics; Part 2 explains egocentrism, ecocentrism and socioecocentrism as competing theoretical perspectives in environmental theory; Part 3 highlights modernisation theory, structuralist theory and class struggle as ways to account for the process of development and Part 4 examines the generation of knowedge through positivism, paradigms and praxis, legitimating competing perspectives in economics, environmentalist and development. The book concludes by considering why different people find alternative explanations more or less plausible.
By addressing the disagreements between theorists, Economy-Environment-Development-Knowledge provides a unique basis to contrast and compare the plethora of theories of, and policies for, economic prosperity, environmental sustainability and social progress.

‘As a lecturer teaching Development Studies – I have been waiting for this book, there is nothing like it. It is an incredible analysis – quite brilliant.’ – Ian Yaxley, Queen Margaret University College  2021   ECON 306: History of Economic Thought    E A Tonak

Click to access tonak_econ306-02-sp21.pdf   2015  Refreshing Incoherence in Neoclassical Economic Theory    Zahid Siddique

“Interestingly, despite all these criticisms, economic theory has not only been able to survive but also dominate the academic intellectual world. The concluding section will argue that the answer to this puzzle lies neither in the fact that there is ‘some deeper truth’ hidden behind economic theories nor that these theories have been shown to explain the empirical realities of capitalist order, rather major reasons for the sustainability of neoclassical economics rests on the facts that (i) it continues to provide a justification for the agenda of liberal capitalism against religious social order and (ii) there is no grand alternative competing theory to microeconomics.”


Evolutionary economics seeks to explain real-world phenomena as the outcome of a process of continuous change….

Fittingly, the habits of the economics profession today can be understood only by examining the field’s own history. In the 19th century the discipline that would become economics was an evolutionary science in several senses. Thinkers of diverse backgrounds vied to offer theories which best explained economic activity while, at the same time, its practitioners saw the object of their study as an extension of the biological sciences.
Indeed, social-science thinking informed the views of naturalists such as Charles Darwin. The Reverend Thomas Malthus, who explained how population growth must lead to a life-and-death competition for resources, influenced Darwin as he sketched out how natural selection might lead to the emergence of new species. And while Alfred Marshall—among the figures most responsible for setting economics on its modern, mathematised course—analysed economic behaviour using systems of equations which could be solved for an “equilibrium”, he did so as a necessary expedient. “Mechanical analogies” were useful, he reckoned, but, “[t]he Mecca of the economist lies in economic biology.”

As the 20th century began, an intellectual tug-of-war took place between more evolutionarily minded figures and their equilibrium-focused peers. Thorstein Veblen complained that economists wished to treat the individual like a mindless particle. He thought instead that people’s choices were informed by complex emotions, and the history and traditions of the communities around them. “An evolutionary economics must be the theory of a process of cultural growth,” he ventured. Joseph Schumpeter was perhaps the most famous exponent of an evolutionary worldview: an outlook shaped by his observations of entrepreneurial activity. He described creative destruction as a “process of industrial mutation—if I may use that biological term—that incessantly revolutionises the economic structure from within.”
In the post-war West, the neoclassical approach built around equilibrium models won out. Such models shared a mathematical rigour and elegance with high-prestige fields like physics, and lent themselves more readily to making the forecasts governments required. Milton Friedman argued that it did not matter if the models made unrealistic assumptions about the behaviour of people and institutions. So long as the economy looked, in aggregate, “as if” individuals made rational decisions, and models thus yielded accurate predictions, that was good enough.

Because they very often did not do so, an evolutionary approach crept back into the profession. One important contribution came in 1982, when Richard Nelson, now of Columbia University, and Sidney Winter, now of the University of Pennsylvania, published “An Evolutionary Theory of Economic Change”. Neoclassical models of economic growth failed to capture the forces—like Schumpeterian creative destruction—which played an essential role in generating technological change, they thought. Theories often supposed, for instance, that executives knew and would immediately adopt profit-maximising strategies. In reality, practices might differ widely across an industry, reflecting distinct beliefs and the persistence of firms’ unique cultures and habits. As these approaches competed, some ways of doing things became more widespread across an economy—until some other “industrial mutation” changed the competitive dynamic again.

Messrs Nelson and Winter inspired an entire literature on corporate structures and competition across industries. Empirical work across other parts of economics seems increasingly to reflect an evolutionary influence. Recent, influential studies of innovation, for example, focus on things like exposure to inventors in childhood or the beliefs imparted by academic mentors, as contributors to individuals’ creative output (in addition to factors which have previously received more attention, such as educational attainment and the financial incentive to innovate).

Modification with dissent
Perhaps most intriguing is recent work on culture’s role in shaping economic outcomes. To accept that culture influences behaviour is to allow that people are not foresighted utility calculators, but rather social creatures who rely on norms and traditions when taking decisions. But culture—which changes slowly and is often transmitted across generations—cannot be understood outside an evolutionary framework. Evolutionary economics, having got a foot in the door, may prove difficult to push back out.

This is all to the good. Theory built on unrealistic assumptions has proved less illuminating than economists a century ago might have hoped. Trying to understand the world as it is could yield insights and perhaps, eventually, better predictions. Economists still working with equilibrium models out of habit should consider the disruptive potential of a new, yet old, approach.

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