What Economists Know
(image by Tilemahos Efthimiadis)
Reprinted from neweconomicperspectives.org
The failures of theoclassical economists and economics are total and myriad. Many of their theories are long-falsified dogmas. Their methodological preference is econometrics -- which gives the worst possible results in bubbles and when accounting control fraud epidemics occur. Theoclassical policies are intensely criminogenic, anti-democratic, and grotesquely unfair. Their proudest creations -- their risk and price models -- proved to massively understate risk and overstate asset values. They betray the scientific method that they purport to exemplify because they are overwhelmingly mono-disciplinary, in thrall to their dogmas, driven by self-interest, incapable or unwilling to follow logical standards of internal consistency, and intellectually dishonest. They award Nobel Prizes to economists who fail what economists claim is the decisive test of truth and success -- predictive ability. Theoclassical economists are infamous for their arrogance, praising their field as the only social science worthy of the term "science" and celebrating its "imperial" nature while ignoring work in other fields that has proven to have far superior predictive success. Theoclassical economists are infamous for their lack of altruism.
But the gravest failure of theoclassical economists; and one that is the source of many of these other deficiencies I have just described is that they are basically unethical. The obvious aspects of this lack of ethics are that theoclassical economists act as if their conflicts of interest are so irrelevant that they do not even require disclosure -- much less avoidance. Theoclassical economists, however, are immoral in a more fundamental manner. They repeatedly advance positions that are profoundly unethical -- and bad economics and bad criminology.
Paul Heyne's Defense of Theoclassical Economics
I recently came across one of the primary efforts to defend theoclassical economists against the criticism that they are basically immoral. "Are Economists Basically Immoral?" and Other Essays on Economics, Ethics, and Religion (2008). The compendium was created after Heyne's death by the "Liberty Fund."
The desire of theoclassical economists for such a defense is easy to understand. Heyne was an obvious choice for the task because he was a theologian and then studied economics at Washington University, a bastion of theoclassical thought. Heyne was even more dismissive of other fields than was George Stigler.
"[L]ess than 1% of what is published by academics in the social sciences and the humanities has any value and 90% of it would have been rejected by any editor with a modicum of intelligence and a concern for the public interest and would thus not even have been allowed to compete for attention and survival; theology has absolutely nothing to contribute to the discussion of public policy issues".
"[E]nvironmentalism has become a dogmatic, fundamentalist, persecuting religion that will keep us from ameliorating our environmental problems (p. xvi)."
In sum, he was a theologian who came to believe that theology was irrelevant to public policy and that the social sciences and humanities were overwhelmingly unworthy of existence or study. Heyne concluded that Christian social teachings were not simply useless but actually harmful. The Liberty Fund editors that published the book of his essays on the subject of economists' morality say that Frank Knight, his greatest intellectual influence, and Heyne agreed on "the futility of Christian 'social teaching'" and that "'established' religion is likely to do more harm than good" (pp. xix-xx). Theoclassical economics became Heyne's one true religion in the social sphere. The editors state that Heyne shared their view that "Economics is a way of thinking."
Economics is not "a way of thinking"
The claim that "economics is a way of thinking" is bizarre. It cannot survive even the briefest examination. The "way" we "think" as humans is a fascinating question that we are just beginning to study with the aid of neurobiology and psychology. There is evidence that economists differ in values from the general human population. Most studies find that those that choose to study economics are less likely to be altruistic (presumably from self-selection) and that over the course of studying economics they become still less altruistic (presumably due to learning, socialization by their professors, and peer influences). But we have no good data suggesting that economists "think" differently than other humans, much less other social scientists.
It is true that we are increasingly learning that the human brain is plastic and that the way we use it rearranges the neural architecture. In this sense, if there were some approach to "thinking" largely unique to economists it could be that we could influence our students' "thinking" processes to be more likely to mirror our unique cognitive process of "thinking." There is, however, nothing remotely unique about economists' mode of "thinking" that one can readily discern from the actual teaching or practice of economics. Economists purport to use the scientific method, to rely on standard logic, and to engage in hypothesis testing using statistical techniques. The same could be said of many social sciences. While economists like to think of their statistical techniques as uniquely sophisticated, mathematicians and physicists think our statistical techniques are remarkably unsophisticated and unsound. In any event, I have never met an economist who claimed that econometricians "think" differently than statisticians. It would be profoundly disturbing if there were a scientific field -- any field -- in which the scholars had a "thinking" process unique among human beings. It would be equivalent to finding a new species of humanoid had long existed among us, but never been recognized.
The claim -- wholly unsupported -- that economics is the unique "way of thinking" is an astonishing arrogant claim of disciplinary exceptionalism. Only economists are purportedly capable of this (wholly unspecified) "way of thinking" that is purportedly (in a second, equally unsupported, claim of exceptionalism) uniquely capable of understanding the economy and human behavior in the economy. I have dealt closely with economists for forty-five years and I can assure the reader that their "way of thinking" is not unique. They are all too human. When they attempt to describe their "way of thinking" economists use the same terms everyone else uses (some mixture of logic and inspiration).
Economists simply have different tribal taboos and cultural norms
Economists are not just like everyone else, and theoclassical economists vary a great deal from most humans, but the reason is not that they have a different way of "thinking." The French and Germans have different cultures. They have been socialized to frame the issues that they will think about and the issues and the modes of analysis that are taboo. Economists have different cultures than other fields. The theoclassical culture is a powerful sub-culture within economics. I warn constantly about the risks of theoclassical economists' false implicit assumptions because these cultural taboos and dogmas are so dangerous and result in recurrent, disastrous errors to which theoclassical economists are blind.
Heyne Refutes His Thesis on Page One and Shows Why Theoclassical Economics Fails