Why the best economists are not ‘economists’

The forefront of economic research is coming from outside economics. This is quite interesting, and highly suggestive of a deeper problem.

Why do we continually get advances in economic thought from psychology, biology, neuroscience and law?

Apart from the fact these professions obviously have a whole body of literature which we can appropriate, there’s something else going on.

The benefit is not necessarily their content. It is their way of thinking.

By analysing through the lens of a biologist, psychologist or lawyer, we step outside our constricting neoclassical shoes.

If we focus on equilibrium, we are engineering away from disequilibrium. If we are maximizing functions, there must a calculable function. If we assume rational choice theory, then unexplained decisions are irrational.

What if ‘disequilibrium’, ‘function’ maximization, and ‘irrational’ decisions are the norm, not the exception?

We’ve already framed the problem before we look at the evidence. 

If we stay in the neoclassical school of thought, we are blinded.

Unfortunately, public policy and school curriculum tend to be behind the times.

Credit: Richard Murphy Murphy on Tax and Economics
Credit: Richard Murphy: Murphy on Tax and Economics

If we teach economic undergraduates (and even high school students) neoclassical economics for their first years of education, of course they will be biased. If they learn that the key is engineering the economy, or maximizing functions, nothing else will live up. If they learn that decisions are rational, they spend their productive time rationalizing irrational decisions.

Decades of research have shredded the neoclassical doctrine.

I’m not denying our young students need to learn the intricacies of technical economics (although, this is mainly for signalling). Yet, this should not be given as the only solution to our problems (let alone the fact they’ve been introduced to the wrong problem)

I’m sure we could have a budding new flow of economists if we got them to read new institutional texts (such as Institutional Economics: Property, Competition, Policies by Kasper, Streit and Boettke).

Or, an even more radical suggestion, maybe young economists could be taught to read books that are not textbooks. Crazy times.

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