The Changing Nature of Economics

The New Economist has a link to John Davis's recent paper on the changing nature of economic discourse. Thanks to Tyler Cowen for the pointer.

Davis argues that "recent economics" is decidely moving away from the neoclassical hegemony and that a new era of economic pluralism is upon us.  Davis's paper is worth reading for all Austrian economists.  In my experience, many who are inspired by the Austrian economists are confused about the current state of the debates among economists.  They fall into one of two categories. First, some want to insist on the apriori status of economic laws and view their main target as the German Historical School of the late 19th century or the American Institutionalist School of the early 20th.  Second, others want to battle with the General Competitive Equilibrium Theory of the 1960s and 1970s and stress the process versus end-state perspective.

Let me be clear, in my mind there is absolutely nothing wrong with these two intellectual positions except that they reflect a failure to understand where the argument in the discipline of economics currently resides.

In a paper I wrote with Chris and Pete, "Man as Machine: The Plight of 20th Century Economics" we detail the trajectory that economic argument has taken.  What Davis refers to as "recent economics" we refer to as "formalistic historicism."   The relevant point for Austrian economists is that they have not seriously engaged these new developments, yet that is the world that our current graduates are entering in terms of economic discourse.  If we are to train economist to take their place in this intellectual universe, then they better understand the terms of the debate and what is at stake.  However, important apriorism and market process analysis are (and I believe we cannot do sound economics without either) the critical issue is that to be relevant to the conversation today --- in both the academic world and the way academic arguments are filtering into public policy discussions --- they must be conversant in these different developments in theory and empirical economics.

So read Davis's paper and get your head around the new pluralism being ushered in by game theory, experimental economics, neuroeconomics, evolutionary economics, behavioral economics, and non-linear complexity economics.  Perhaps it is the new opportunity for intellectual growth and evidence of maturity of the discpline (as the New Economist spins it), or it is an example of how thinkers can be led into bedlum when technique substitutes for substantive propositions (as I might be inclined to conclude).  Either way, you ignore these developments at the risk of being completely irrelevant and uninformed about the state of the current conversations among economists.  And to my mind the last thing we want is Austrian economists that are completely irrelevant!

Comments

[Rafe Champion]

The Post Autistic Economics group is supposed to be keen on pluralism as well but I am not convinced.

http://catallaxyfiles.com/?p=2107

[Rafe Champion]

It is probably essential to march towards the sound of gunfire but the noise may turn out to be a distraction and not the real battle. A big question is whether the various approaches are really focussed on real problems or whether they represent a desperate grasp at novelties.

The discussion of disciplinary boundaries, imperialism and import/export of ideas appears to be fundamentally misconceived. The pursuit of problems should drive people over disciplinary boundaries - which boundaries in particular will be a function of the problem and the ingenuity of the student, and the company you keep. Dont take lunch with the same people every day. The danger is to put the cart of interdisciplinary research before the horse of problem solving, so committees and courses get set up to satisfy the quest for interdisciplinary work rather than starting with the problems and then deciding what kind of committees and working groups are required (if any).

On mathematical game theory. Almost certainly the wrong model. Start again with more realistic games like cricket and baseball to check out the way that decisions are made in an evolving situation under various constraints, some of which also change over time. Cricket is better because you can play for a draw if a win is out of reach.

The retreat from the history of ideas means that there will be a risk of making old mistakes over again. But methodology and history should not be the domain of specialists, everyone should have some kind of grip on methodology and history without need for courses. Frustration with methodology reflects the failure of the philosophy of economics to get anywhere despite a lot of muttering in the outhouse by the likes of Blaug, Latsis and Hands. Get with the strength and read Larry Boland!
http://www.sfu.ca/~boland/wien02.htm
http://www.sfu.ca/~boland/