This contribution will present my thoughts of the recent two months, being faced with the organization of the (informal) seminar on new econometric and statistical approaches at the faculty where I lecture, and at the same time being a member of the group writing this blog: a “heterodox” group. Two subjects, therefore, which can hardly be joined, or were at least considered as such in the (“traditional”) economics so far (I do know the references and discussions about classical and neoclassical economics, neoclassical synthesis, new neoclassical synthesis, etc. etc. but I will use this term, a subjective decision).
My own intellectual and career journey has taken me through many and very diverse disciplines: mathematics, arts (mainly, music and visual arts), many different social sciences and humanities, like philosophy, sociology, anthropology, cultural studies, the study of religions, even, to a certain extent, political sciences, and others. And, finally, and to a great extent, economics and management. Indeed, it is a hard endeavour to integrate all those into a joint “picture” and research orientation, but I will present a short reflection and plan of a future research program – probably a very (very) large one, I think, and opening up a lot of unexplored possibilities.
As it turns out, economics is a rather recent endeavour/discipline (the word science is contested as related to it, as surely many of the readers will know), starting formally with the work of Adam Smith at the end of 18th century. Recent, compared to e.g. philosophy, mathematics and, indeed, most of the humanities and many natural sciences, like physics. In one of his posts, influential economic blogger Noah Smith has claimed that despite the critiques, posed to it in the aftermath of the beginning of the Great Recession, economics is in a much better condition than other social sciences. When reading his blogpost, at the time I fully agreed. Now, indeed, I do not anymore... At least completely.
Mainly, the impression I have, and this could surely be easily proven and demonstrated with references and the existing debates, is that economics claims its privilege because of its (claimed) mathematical approach and, to put it directly and related to the present state of the art, econometric modelling, a lot of time policy oriented. But there are huge issues here which remain undiscussed, providing a justification for the dominance and hegemony of economics inside the social sciences and, even more pronounced, to the humanities. And, as will be claimed here, this dominance is almost completely unfounded, to put directly.
Firstly, as those who have dealt with, I will say, more serious mathematics in their lives, as I indeed have and am doing it at present as well, know that “the mathematics of economics” is simple – simply, most of the times it does not meet the standards of the contemporary development of mathematics. I am not claiming that economics is not almost suffocated with mathematical modelling, but it is highly repetitive and, indeed, a lot of times based on pure ideology – trying to defend some normative view of the researcher. Possibly, and as claimed a lot, this cannot be avoided, but, surely, it can be done significantly better and more correct.
Secondly, I think the contemporary dominance of economics is based not on “the power of the argument”, but on plain fear, physics envy, as Mirowski would call it (a reference from a colleague with whom I started to work on this recently). The argument of power, therefore. But, this has, unfortunately, serious and adverse consequences.
What I mainly claim and think, is that most of the approaches and streams of thought from the “disciplines” noted previously (sociology, psychology – we have not noted it before, anthropology, philosophy, and almost any discipline, related to “culture”, be it cultural studies or some other) have so far not been, on the one side, integrated in the economic thought properly, and secondly, and mainly, have so far remained almost completely unmodelled and not included in any way into something that I consider as (and surely is) a necessary part of economics, despite what has been said before: mathematical and econometric modelling (if for nothing else, for policy purposes).
I think large possibilities exist here. Presently, we are dealing with e.g. DSGE models (but they are used here merely as an example – I know many critiques have been posed to them and, surely, as with everything noted here, they (the critiques) can be proven unfounded as well), which are based almost completely on the assumptions of utility maximization, in one or another form. Utility maximization... Hmmm... Do we (people, as the micro background for the economic modelling) indeed act in any manner close to utility maximization?? I know utility is not a simple term in terms of economic theory and it has many theoretical background to support its usage in economics, but – clearly this assumption is strange, to start with. Very strange. But, it can simplify the work, as it does at present. But is this all that can be done here??
To replace it, the economists should go the libraries and search for, indeed – this will be humiliating, but, sorry, true... – the books in sociology, philosophy, other psychological theories than plain behaviourism (e.g. psychoanalysis in its many strands, but there are surely also more such streams in psychology as well – again, to only start with), anthropology, cultural studies, even religions, and “the rest”. Search for and through those books to be able to finally understand the economy better. How does it function? Could any of those approaches be used for the benefit of economics, and – as I know there is quite some literature which takes also such approaches into economics, but as far as I know, largely or even exclusively in a theoretical/descriptive sense – taken into econometric and mathematical models to significantly improve their performance. In a similar way, as RBC models came to the fore, when Kydland and Prescott simply observed the (significantly) better performance of those models compared to the previous ones.
I will end here. To resume: the present condition of economics could hardly be called in any way superior to other social sciences. What we have is a dominance, based on fear against new approaches, new views on the economic features, indeed, anything significantly new in general. At this point I will not go into the literature about it (it is only a blog post), but when you meet and discuss with colleagues, professors on some excellent economic conferences, you become stunned – people do not know anything about e.g. network analysis (which is there for more than 30 years...), when you present a SEM analysis, they say: “great, but this is not economics”.
What economics needs, to my opinion, therefore, is 1) significantly better understanding of its subject, in terms of theory; and 2) significantly improved mathematical possibilities and models. Both should of course go hand-in-hand.
I do hope this provides at least a short overview of my (personal) position to this problem. And, indeed, a research path worth to follow. But, surely, it needs to be verified and put to many literature and other verifications.
I do hope it will provide at least some ideas for the further work also to any of you.
Written by: Andrej Srakar.