Fed Economist: Ignore Macro Bloggers
Economics is Hard. Don’t Let Bloggers Tell You Otherwise by Katrik Athreya, a research economist at the Fed can be summarized “Kids, don’t try this at home. Economics requires adult supervision.”
The following is a letter to open-minded consumers of the economics blogosphere. In the wake of the recent financial crisis, bloggers seem unable to resist commentating routinely about economic events. It may always have been thus, but in recent times, the manifold dimensions of the financial crisis and associated recession have given fillip to something bigger than a cottage industry. Examples include Matt Yglesias, John Stossel, Robert Samuelson, and Robert Reich. In what follows I will argue that it is exceedingly unlikely that these authors have anything interesting to say about economic policy
The reason for this is that economics is hard, or, to quote Athreya, “not, by any reasonable measure, simple”, “very complicated”, “far, far, more complicated than most commentators seem to recognize”", “takes enormous effort”.
Athreya’s critique of non-professional bloggers is primarily the field is so complex and subtle that no one without specialized Ph.D.-level training from “a decent economics department” is likely to even understand the terms of debate correctly, not even to make a contribution to it. In contrast to bloggers who have no external checks on what they write, the self-identified scientific community of economists rigorously enforces high internal standards through peer review:
The punchline to all this is that when a professional research economist thinks or talks about
social insurance, unemployment, taxes, budget deficits, or sovereign debt, among other things, they almost always have a very precisely articulated model that has been vetted repeatedly for internal coherence. Critically, it is one whose constituent assumptions and parts are visible to all present, and can be fought over. And what I certainly know is that to even begin to talk about the effects of unemployment, debt, deficits, or taxes, one has to think very hard about many, many things. .. Comparing, even momentarily, [the careful work of certain economists] its explicit, careful reasoning, its ever-mindful approach to the accounting for feedback effects, and its transparent reproducibility, with the sophomoric musings of auto-didact or non-didact bloggers or writers is instructive.
What Athreya is saying is not so different from the view of Murray Rothbard , who said, “It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” People who write about economics should first become educated about the subject matter.
Many of the writers and bloggers on this site have a Ph.D. in economics (although I’m not sure whether the institutions where they studied would qualify under Athreya’s standard to enter the select who can “meaningfully advance the discussion on economic policy.”). But I can cite numerous examples of writers in the Austrian camp who do not have economics doctorates who have meaningfully advanced the discussion: Henry Hazlitt; Lew Rockwell; Thomas Woods (a historian). Some other non-Ph.D.-accredited economic writers in the financial sector that I follow are David Tice and Doug Noland, Sean Corrigan, Doug French, Fred Sheehan, James Grant, and Gary North (a Ph.D. historian). I like Stossel as well.
Athreya is probably right to the extent that he is saying that the models taught at most university economics departments are so complex and specialized that anyone who has not taken the coursework probably does not understand them. But where I think that he goes wrong is to identify the study of university macro with learning economics. Economics, as we see it, is the understanding of human action under conditions of scarcity. Many of us in the Austrian camp believe that the field of economics, macro in particular, went off the rails in the mid-30′s under the influence of Keynes. By Keynesian thinking I mean the meta-model underlying most modern macro models: the focus on very high levels of aggregation, the focus on consumption, the lack of capital theory, the lack of an explicit model of inter-temporal coordination through the interest rate, and the obsession with sticky prices. Athreya defines a meaningful advance in the discussion of economics in terms of the models that are taught at university economics departments, which for the most part inherit the problems with the Keynesian meta-model.
Those of us who have been influenced (to a greater or lesser extent) by the original thinkers of the Austrian school need a place on the net to discuss what is going on in the world according to our view of how things work. The general lack of availability of university training in Austrian economics ensures that most of the commentary in this area is going to come from non-university trained writers. Some of the time we may take on the mainstream, but other times we only want to have our own internal discussion among people who share the same starting point for analysis.
I have no reason to doubt that he is correct the self-appointed priesthood of macro enforce high standards when it comes to a discussion within their own frameworks. Writing at length, as Athreya does, about how difficult it is to master those models, does not address the point that the intellectual framework underlying those models may be fatally flawed for reasons that are not nearly so difficult to understand as the models themselves.
I also would fault Athreya for not making a clear distinction between pure economics and policy analysis. Mises wrote“There never lived at the same time more than a score of men whose work contributed anything essential to economics.” Mises would no doubt agree with Athreya that making an advance in fundamental economics is hard. But many of us who blog as not trying to make make an original contribution to the field. We are trying to apply the thinking of Mises and the other great original thinkers of the Austrian tradition to current events. But most bloggers are not trying to make fundamental advances in economics (at least not in our blog posts); we are usually observing the world around us and attempting to explain some features of it using our understanding of economics.
Update (Jul 5 2:46 pm)It occurred to me after I wrote this that one reason many people have opinions about economics, compared to other specialized fields such as cancer research and geology is that the economic thinking is very influential in the choice of economic policies, and economic policies affect us all. Geology, while it may affect us all, is not influenced by policies and cancer research affects a relatively small number of people. Mises wrote that everyone has a share of responsibility for the direction of society.