What Do Academic Economists Contribute?

• Author: KLEIN, DANIEL B.

Rather than taking policy positions and engaging in intellectual challenges, they seek tenured positions, easy grant money, and influence over graduate students and the profession

PEOPLE USED TO COMPLAIN that 10 economists got you 11 opinions. (John Maynard Keynes had two!) Those were the good old days. In today's universities, 10 economists might not even get you one. Although the economists to be found in the media or bookstores do have opinions, few in academia take policy positions and engage intellectual challenges. Few do scholarship relevant to policy issues. Few even have opinions they are prepared to defend in serious debate.

Academic economists belong to a careerist club, and the club has official ways of performing. Only by excelling in those ways does an economist survive and prosper. The official ways are locked in at the "top" universities--MIT, Stanford, Chicago, and some others--and at the "top" journals. The journals are read by almost no one except other economists who are busy trying to excel in the club. Feeding on tax and tuition dollars, the club is incestuous: MIT produces Ph.D. members of the club, who then take over the university departments and journals and perpetuate the demand for recent MIT Ph.D.s.

Club performance doesn't contribute much to society. It is narrow, rigid, and artificial. In purporting to address a policy issue, all features of the real world that cannot be incorporated successfully in a formal model or statistical investigation are ignored. The club may be able to address many aspects, but each only in isolation, leaving a fractured series of pedantic twirls. Club performance does not--and cannot--generate overall understanding of an issue.

Club members have two official ways of performing. The more exalted is model building. Mathematical functions are called "consumers," "producers," etc., in a toy economy. Like solving a puzzle, the model builder solves for an "equilibrium," which is treated as the conclusion of the story. Of the many particulars of human institutions, just one or two can be modeled at a time. The other genre of performing is finding statistical significance. If data exist or can be created, economists hunt for patterns in it, hoping to show a statistical result that is too improbable to be the result of mere chance, hence supporting a hypothesis laid out.

Both model building and statistical significance are formalistic, and club performance tends to focus on technique rather than subject matter. Model building goes by the code word "theory," yet many models make no reference to real world happenings. Pointless work of this kind appears in Econometrica and The Journal of Economic Theory. Theory of what?, one wonders. Despite lacking connection to real issues, the official prestige of such journals is high. For the...