|Peter Boettke|
Paul Krugman early in the self-evalution of economists in light of the financial crisis of 2008 claimed that one of the reasons that economists got it wrong was because of the intellectual penchant for confusing beautiful mathematical systems to truth about the economy. The focus of Krugman's critique wasn't the heyday of the Neo-Keynesian synthesis, but the rise of New Classical Macroeconomics and what he terms "Panglosean Finance." That essay was published in 2009.
Just this month, Simon Wren-Lewis, an economics professor at Oxford, has revisited the issue and asks why economists were led to turn away from certain evidence, and why they focused instead on some puzzles rather than others. The first essay is Microfoundations and Evidence: The Street Light Problem, and the second essay is Microfoundations and Evidence: Ideological Bias.
Wren-Lewis counters the beauty myth and instead focuses on puzzle selection, and ideological bias. While both essays are written in a reasonable tone, and the argument is made in a straightforward manner, the accusation is made I would argue without a hint of self-awareness that all contending perspectives in economics might be so accussed. In fact, I'd argue that in puzzle selection, that economists choose puzzles to work on that excite their intellectual imaginations and among those, they work on those they think they can solve with the tools and techniques they deem as scientific. A lot of presuppositions (some explicit, some tacit) go into that exercise. Furthermore, ideology (or what Schumpeter termed our pre-analytic cognitive act of vision which provides the raw material for analysis) exists across all economists, even those who believe themselves above such biases. In fact, it is probably the case that ideological bias is strongest in those who think themselves most immune from ideological influence.
The economist as social engineer is different from the economist as student of society, and the perception of the state as an active player in the economic game is different from the perception of the state as a referee in the economic game. The (tacit or otherwise) presuppositions of political economy matter for the puzzles one works on, and the evidence one finds telling. Rather than economic debate being so easily settled by reference to the "objective facts", the economic conversation is an on-going contestation of differing perspectives each attempting to provide clear and logical argument and marshalling evidence. It is necessary for economists to develop the skill to think within the alternative frameworks, as well as to question the coherence and the evidence marshalled for the different perspective. This is our challenge.
In my new book, Living Economics: Yesterday, Today, and Today, an attempt is made to articulate what I consider to be enduring and what I consider to be fleeting in the teachings of economics. The teachings of Smith and Hume, Say and Bastiat, Mises and Hayek, and more contemporary thinkers such as Alchian, Buchanan, Coase, Demsetz, Kirzner, North, Ostrom, and V. Smith, among others reflect that mainline of economic thought, even as the "mainstream" of scientific economics often gets caught up in fleeting fads and fashions. As Lord Acton wrote long ago: “But it is not the popular movement, but the travelling of the minds of men who sit in the seat of Adam Smith that is really serious and worthy of all attention.” That is not a conclusion that follows from mistaking beauty for truth, nor from a puzzle selection bias, let alone from an ideological bias clouding the objective assessment of the 'facts'. But it is a conclusion that follows from a recognition of the mystery of the mundane; of the sheer wonderment of everyday economic life in a modern society; and of a deep exploration of the wealth and poverty of nations.
