“Years ago I noticed something about economics, and that is that economists didn’t get anything right”. Nassim Nicholas Taleb pointed this out in his book about finance forecasting “the Black Swan”.
And… 4,6,7,8,9… 9 years into the study of economics, I cannot but agree. Yet, despite their collective failure to predict the relevant and almost obvious economic phenomena observed in recent years, economists are still very influential.
More recently, Nate Silver reminded us that “in December 2007, economists in the Wall Street Journal forecasting panel predicted only a 38% likelihood of a recession over the next year. This was remarkable because, the data would later reveal, the economy was already in recession at the time”.
The Economist offers some explanations in an article about a new paper looking at how economists became so influential. One reason is that economists believe that they are superior…apparently, this is largely baked by the idea that economics is the most scientific of social sciences.
Here I must pause. Scientific? They mean mathematical, right?
A quote from the above mentioned book “The Black Swan”, can offer some new insights for those who fall into this trap of believing maths make a theory “science”:
“What has go wrong with the development of economics as a science? Answer: There was a bunch of intelligent people who felt compelled to use mathematics just to tell themselves that they were rigorous in their thinking, that theirs was a science. Someone in a great rush decided to introduce mathematical modeling techniques (culprits: Leon Wales, Gerard Debreu, Paul Samuelson) without considering the fact that either the class of mathematics they were using was to restrictive for the class of problems they were dealing with, or that perhaps they should be aware that the precision of the language of mathematics could lead people to believe that they had solutions when in fact they had none… Indeed the mathematics they dealt with did not work in the real world, possibly because we needed richer classes of processes-and they refused to accept the fact that no mathematics at all was probably better.”
Going back to article in The Economist, it seems that as economics has become more mathematical, economists have grown fonder of themselves. Furthermore, the fact that economic forecasts often have political purposes does not help the cause. According to Nate Silver, the economic forecasts produced by the White House, have historically been among the least accurate of all. But what is really worrying is, interestingly, “that we believe in economists almost as much as they believe in themselves.”
Not for nothing did John Maynard Keynes, arguably the most influential economist of the last century, say: “If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!”.
As a student of development and environmental economics, I’d like to think Keynes was talking about macro-economists and not applied micro-economist. I like to think I am humble like many other agricultural and natural resource economists I know. In fact, even when I am not being an economist, I like to think I despise people who think are better than others for whatever reason: because they are white, straight, christian, muslim, tall, rich, have a bigger car, a louder stereo, nicer shoes, or fancier purses, etc. I want to break that trend of arrogance and ” assholery” so prevalent among economists. I also want people to see me professionally as an economist and not as the social stereotype of what “economists are like”.
I will take somebody’s wise advise and start the first stage of my revolution with some humor.
I am used to hearing all sorts of jokes about how terrible scientists we are. I will leave you with some of my personal favorites:
–>”The first fundamental principle of economics is: for every economist there exists an equal and opposite economist. The second fundamental principle is: they are both wrong”
–>”Ask a question to 3 economists and you get 5 answers”.
–>”A chemist, a physicist and an economist were stranded on a desert island with no implements and a can of food. They all set out to find a way to open the can. The physicist and the chemist spent all day trying to devise an ingenious mechanism for getting the can open. But they didn’t succeed. At the end of the day, the three scientists were sitting by the fire contemplating their failure when suddenly, the economist said, “I solved it guys! Assume we have a can opener”
–>”The first economists was Christopher Columbus, because when he left, he didn’t know where he was going; when he arrived, he didn’t know where he had arrived… And all his trips were funded with the Crown’s money”
Silver, Nate (2012). The Signal and The Noise: Why Most Predictions Fail – but Some Don’t, Penguin Group.