10

A Troubled Relationship: Modern Economics and Us

Most of us have a troubled, confused relationship with economics. We find it easy to ridicule. News reports frequently refer to some economic forecast which turned out to be completely wrong, or economic policy which is not delivering on the promises made by the economists who recommended it. And yet, as I’ve shown in the course of this book, a large part of recent history is our increasing deference to the ideas of economists. Once-controversial ‘economistic’ ways of thinking have become embedded in everyday life. Our relationship with economics is love–hate.

And it is deeply unequal. Many economists appear to see themselves as outsiders, scientific observers of society, looking down on ordinary people with the superior, disinterested gaze of Charles Darwin looking at squashed beetles through a magnifying glass. Some economists openly admit that they regard ordinary people as stupid. MIT economist Jonathan Gruber claimed that a recent healthcare law was deliberately drafted ‘in a tortured way’ in order to make it unintelligible, ‘given the stupidity of the American voter’.1 One UK economist concluded her book aimed at the public with ‘ten rules of economic thinking’, one of which is ‘Where common sense and economics conflict, common sense is wrong.’2 The libertarian economist Bryan Caplan goes further. He devotes an entire book to The Myth of the Rational Voter, alleging that non-economists repeatedly suffer from ‘antimarket bias, antiforeign bias, make-work bias, and pessimistic bias’.3 Caplan even holds that undergraduates taking introductory economics courses should be kept in the dark about the assumptions and limitations behind textbook economics. He advises their teachers to tell students, ‘I’m right, the people outside this classroom are wrong, and you don’t want to be like them, do you?’4

Although Caplan’s views are extreme, many mainstream economists are frustrated that, despite their best efforts over many decades to teach basic economic principles to the general public, the public never seem to learn. Top of the list is usually the principle that free trade is better than protectionism. A quick search in the blogosphere is enough to uncover many serious economists complaining about the public failing to appreciate the merits of free trade. Economists often blame ‘the media’, or the wilful misrepresentation of economic ideas for political ends, for the public’s woeful ignorance. Only very recently have a few economists begun to consider another explanation: ordinary people may be well aware of the views of economists (regarding free trade, and so on), but have good reasons for disagreeing with them. It is simple: many people knowingly reject many of the assumptions and theories which mainstream economists take for granted.5

Of course, academics and experts in many fields are privately dismissive of the views of laypeople. But what is distinctive about economists is that they also have relatively little interest in the views of other experts and academics. In the preceding chapters we have seen many instances of economic imperialism: the colonization of non-economic areas of life and academic subjects by economic ideas. And the traffic is mostly one-way. Modern mainstream economics has learned little from relevant disciplines, including law, psychology, sociology and history. In a paper modestly titled ‘Economic Imperialism’, published in one of the most prestigious economics journals, Harvard economist Edward Lazear implies that this colonizing strategy has been successful because, unlike other social sciences, economics is ‘a genuine science’.6 Evidence of economists’ distinctive belief in the superiority of their discipline to other subjects comes from a survey of US academic economists, historians, psychologists, sociologists, political scientists and business-school professors. Most of them sensibly believe that ‘interdisciplinary knowledge’ is better than knowledge ‘obtained by a single discipline’. Uniquely, the economists disagree.7 Accordingly, economists are more insular: they cite research from outside their subject less than academics do in other subjects.8

Clearly, we need a new relationship with economics, one that is more equal, more open, more questioning, less deferential. We should be able to challenge economic orthodoxies – especially those discussed in previous chapters, which function to reshape our notions of value and morality. But before we explore this new relationship further, we must confront economists’ standard reply when faced with criticism: ‘We’re not like that any more; economics has moved on.’ Economists point to two reasons why past problems with economics have now been fixed. First, there has been a data revolution: economics research is now much less theoretical, and more grounded in quantitative data. Second, economic theories are now more realistic, notably the models of human behaviour emerging from behavioural economics.

This defence of economics is so ubiquitous that it demands discussion. Forging a new relationship with economics would be much easier if economists accepted that they haven’t already fixed the problems.

On the ‘data revolution’: it is true that pure economic theorizing, far removed from the real world, carries less weight than it once did among academic economists. Moreover, ‘big data’ and improvements in information technology have allowed theories to be tested in a way that was previously impossible. So yes, economics research focused on empirical evidence has recently become more common.

Yet economists are still reluctant to ‘get their hands dirty’ with the messiness of real life. Most contemporary economists mainly use just one type of empirical evidence – large statistical datasets – which can be accessed without leaving your office. Nobel laureate Robert Shiller describes the problem as ‘an attitude in the profession that collecting data is for lesser people’.9 Before ‘physics envy’ led mainstream economics from the 1960s onwards to become dominated by mathematical modelling, economists had drawn on a broader mix of evidence including case studies and interviews – often involving going out and talking to people in the real economy.

Even if we ignore this problem of the narrow evidence base of modern economics, historians have shown that empirical research in economics today is still rarer than it was in the 1950s.10 So the ‘data revolution’ claims made by recent economists are misleading. In fact, the history of empirical research since the 1940s has been one of permanent revolution – or, at least, a constant increase in the scale and range of economic data available, with economists perpetually complaining that research in economics was failing to make use of all the new data. As for the genuine revolution in information technology in recent years, the contrast between its impact on the self-styled ‘science’ of economics and on sciences like physics and biology is revealing. The IT revolution did not simply enable more empirical research in physics and biology. It transformed the theories being tested and stimulated the development of different kinds of theories. In economics there has been no analogous transformation. The core theoretical framework used by most economists most of the time remains unchanged.11

This point needs to be emphasized. Just because economic theories are now subject to more comprehensive testing against data, it does not follow that theory which fails to match up to the data is thrown out. The image of homo economicus (or, at least, a calculating individual who acts as if they are ‘optimizing’ something) still casts a long shadow. The theory being tested almost always takes this kind of optimizing behaviour as the norm, the starting point, even if exceptions are later admitted. It shapes the questions asked of the data, and how the answers derived from the data are interpreted. Throughout this book we have seen how economic theories and their transformation into formal mathematics shape what we see – and what we don’t. At least two Nobel laureate economists have noted the problem. In Paul Krugman’s words, ‘we just don’t see what we can’t formalize’.12 Similarly, George Akerlof argues that economic analysis is ignored unless it is written up in a research paper, and that can only happen if the analysis is mathematical: ‘What I am worried about most of all, is what we don’t see … the analysis that is never seen, that never becomes a paper … And it can’t become a paper, because that’s not what a paper in economics is all about … we know such vacuums exist.’13

To be fair, some economists have been more radical. They haven’t merely tried to test theory against data. They have abandoned theory altogether. This is the hottest trend in economics research today, and it shows no sign of abating. These economists are the data geeks. The data geeks’ main method is to identify a ‘natural experiment’ – two parallel sets of real-world circumstances which are in all relevant respects identical except for one crucial difference. By comparing outcomes in these two parallel worlds, the effect of that difference can be observed.

For example, we might be interested in whether doing military service reduces earnings in later life. We cannot simply compare the earnings of those who served with those who didn’t because the two groups are not otherwise identical. People with a low level of educational attainment may be disproportionally attracted to military service: for them, lower earnings later in life may be due to their education (and hence the jobs they can get) rather than their military service. But one of the pioneering data geeks, Joshua Angrist, found the perfect ‘natural experiment’ to avoid this problem. Angrist relied on the random process used to draft US men for service in the Vietnam War. Those who served earned less in later life.14 Natural experiments have exploded across economics research, claiming to prove beyond doubt that, among other things, changes in abortion law influence crime levels a few decades later, and watching Fox News makes US citizens more likely to vote Republican.15

Given the apparent power of the method, it’s easy to see why natural experiments have become so popular. The conclusions seemingly come for free, out of thin air; that is, no theory is needed to support the conclusions, and in particular there are none of the usual assumptions that economists make about people optimizing or being rational. Alas, knowledge rarely comes for free in this way. Often, the randomization crucial to the validity of the natural experiment turns out to be not so random after all. Yes, a random number was assigned to each man to determine whether he would be drafted to serve in Vietnam (the lower a man’s number, the more likely he would be drafted). But employers at the time knew this, so they were less likely to invest in training workers with low numbers – which in turn would help explain why these men were likely to earn less in later life.16

It is not just doubts about the ‘proofs’ supplied by natural experiments. In the last few years the statistical-significance tests of leading economics journals have been heavily criticized by, among others, statisticians.17 A key scientific criterion, replicability, is often not met: published empirical research cannot be reproduced by other researchers. The so-called data revolution has not led to new, indisputable data-driven economic knowledge but to deepening controversy over what the data can demonstrate.

Beyond the statistical controversies, there is a more fundamental problem with using the data geeks’ work to show how economics has changed for the better – because their work leaves out the economics. Once the data geeks have excluded economic theory, there is no distinctively ‘economic’ content left: their work is neither more nor less than statistical analysis. This exclusion of economics also helps explain the data geeks’ interests. Studying the impact of abortion law on subsequent crime levels – however interesting and important – does not seem like appropriate subject matter for economics. Privately, many economists agree. But there is an irony here because, as we have seen, over the last fifty years mainstream economists have progressively rebranded themselves as scientists of society, claiming wider expertise than simply knowledge of the workings of the economy. So it is difficult for contemporary economists publicly to criticize the data geeks’ work as not being economics – even though much of it clearly isn’t.

The view of economics from outside is disturbing. We learn that economic theories populated by homo economicus are frequently the basis of economists’ predictions about the real world. But how could anyone believe that homo economicus tells us anything about the behaviour of real people?

Economists nowadays present behavioural economics as the answer to these concerns. We are told it represents a major step forward in terms of realism. In truth, it is a minor tweak. The ‘people’ described by behavioural economics still bear no resemblance to real humans. They behave just as robotically as homo economicus but they also make mistakes. In essence, behavioural economics is just homo economicus with bugs. Notably, the error-prone robots of behavioural economics are, like homo economicus, predictable – they are ‘predictably irrational’.18 But real humans are not easily predictable because they are capable of genuine choices – choices which are not predetermined by their environment.

Behavioural economics provides no response to the ethical problems with mainstream economics. To begin with, behavioural economists are often blind to the dubious ethical assumptions and consequences of their policy advice, as we saw with Nudge. And the underlying message of behavioural economics is the same as that of Nudge – ‘ordinary people are stupid’. This is hardly a promising basis for a more respectful relationship between economists and the public. Not least because, in important respects, the reverse is true. People are much wiser than mainstream economics assumes. Our calculating abilities may be far inferior to those of homo economicus, but we have other talents. Computers – and homo economicus – need data to work with. In settings where data is scarce, they fall silent. As discussed in Chapter 8, humans in the real world must make many of their decisions in a setting of pure, unmeasurable uncertainty, so a calculating approach reliant on probability information is impossible. Instead, we tell stories. People whose job involves making high-stakes decisions in conditions of pure uncertainty – whether in the world of medicine, finance or natural-disaster planning – all agree that scenario planning is crucial. Different possible future scenarios are effectively different stories we construct, and we need imagination to attempt to envisage new or unfamiliar futures, so scenario planning needs humans rather than homo economicus.

Clearly, a more equal relationship between economics and the rest of us requires that economics adopts a more complete and realistic picture of humans, one which recognizes that we have more capabilities than legacy desktop computers. But that is just the beginning. We need to reset our relationship with economics and economists. Here are some guiding principles for seeing economics and economists in a new way.

a. Economists are not separate from the economy.

A more equal relationship is impossible while economists cling to their self-image as scientists outside society, gazing down on us from above, like Charles Darwin observing some beetles. The analogy is wrong because the beetles don’t change their behaviour in response to scientific theorizing about them. In contrast, as we have seen, economic ideas and theorizing alone can change our behaviour. And again, the weather forecast does not influence the weather – whereas economic forecasts move the economy. In promoting their subject as a science akin to physics or chemistry, economists imply an objective, arm’s-length understanding of the economy, which they cannot deliver. It is a risky strategy which can easily backfire. For example, when economics is presented as a science, people are more likely to take economic forecasts seriously. If (when) those forecasts prove inaccurate, the credibility of economics more widely is questioned. In this way, promoting the ‘scientific’ image of economics can damage, rather than elevate, its standing among the wider public.

That economists and their ideas operate within, rather than outside or ‘on’, the economy, is not a new insight. The classic introduction to the history of economic ideas remains Robert Heilbroner’s The Worldly Philosophers, a multimillion best-seller which remains in print nearly seventy years after its first publication. Heilbroner’s core argument – convincingly illustrated in his discussion of Smith, Marx, Keynes and other great economists of the past – is that the evolution of capitalism is inseparable from the evolution of economic ideas. Causation runs in both directions. Capitalism is shaped by the ideas of great economists, as well as informing their thinking. It is time to abandon the fantasy of ‘outsider’ economists, above and beyond the economies and societies they study.

b. There are few ‘facts’ in economics.

Another consequence of economists’ obsession with seeing themselves – and being seen – as scientists is their denial of the political and ethical ideas woven through economics. Many economists are fond of quoting from a letter Keynes wrote to a close colleague in which he asserted, ‘Economics is a science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world.’19 But what they leave out is how Keynes concludes the letter: ‘economics is essentially a moral science and not a natural science. That is to say, it employs introspection and judgements of value.’

As I’ve shown, ethical presumptions and value judgements are comprehensively embedded in economics, in many varied and often subtle ways. At the risk of losing some of these subtleties, we can boil down the ethical stance of contemporary economic orthodoxy to two core ideas. First, market transactions work as a kind of moral bleach, leaving outcomes ethically whiter than white and blemish-free. The argument that both parties to a voluntary transaction must be better off, otherwise it wouldn’t take place, is used to wash away all considerations of justice, fairness, responsibility, exploitation, and so on. Second, if a judgement of value is required, a market transaction – hypothetical or actual – provides the answer: a thing is worth just what someone is willing to pay for it.

While many economists concede the influence of political and ethical judgements in large parts of their discipline, they also assert the objective and ‘value free’ nature of some core principles such as the ‘law of demand’, which states that when the price of something rises, demand for it will fall. But unlike the laws of physics, there are few objective economic facts on which to base economic laws. Even if we specify a unique time and place, most goods and services do not have a single price. The seemingly objective measurement process dissolves into a series of subjective judgements about which goods are truly the ‘same’ as other goods, for the purposes of determining their (average) price. Moreover, much raw economic data is simply conjured into existence by diktat, often on the advice of economists, such as when an interest rate change is announced. And for many complex financial products such as derivatives, the usual ‘scientific’ relationship between theory and observational data is reversed: if the observed market price and the price in economic theory differ, the former moves to align with the latter.20

Ultimately, most economic numbers are in some way constructed by economists, rather than simply being observed in the world like the variables of Newtonian mechanics. Again we see that economics is not a neutral set of ideas and tools for observing and analysing the economy from the outside. Instead, it operates within the economy, shaping and influencing it.

c. The economy is not separate from us.

We should reject those, economists and others, who present economic ideas and the economy as beyond our influence. The economy is not like a natural system, with laws and forces over which humans have no control. The economy is not a monolithic other thing.

It is true that pernicious economic ideas have become deeply embedded into our everyday thinking but, as we have seen, this transformation is relatively recent. Escape from the influence of subtle, taken-for-granted ideas may seem impossible at times, yet another way of seeing the world lies within living memory. And we have more power than we often imagine. The economy is the sum of the choices and activities of billions of people. Its future is in our hands. We can decide the kind of economy we want. Nevertheless, of course, we need expert advice.

This brings us to a key question. What should we ask of economics and economists?

1. Economists must communicate better, taking care to explain the reasons behind their conclusions. Mention of ‘economists communicating with the wider public’ might summon up a caricature of hesitant academics struggling to explain convoluted theories using abstruse jargon and qualifying every statement with several caveats. Yet nowadays the opposite is all too common. Economists entering public debate make clear, confident claims and back them up with a sketch of the argument behind their conclusions. What could be wrong with that?

A big problem is that economists fail to explain crucial bits of their argument. Often, a black box is produced – ‘economic theory has shown that’, or ‘a statistical relationship has been proven’, and so on. Such shorthand is not an attempt to deceive us but usually reflects economists’ belief that the relevant theory or statistics are too complex for non-economists to understand. In a few cases there is some truth in this, but it is also true that, within academic economics, technical wizardry is too often prized for its own sake. So economists have usually had little incentive or practice in attempting to explain complex ideas in simple terms. Sometimes they simply have a warped perspective of what is complex. As we’ve seen, many economists see behavioural economics as a set of ‘deviations’ from the textbook mathematical model of homo economicus. From this perspective, behavioural economics can be understood only if you already know that mathematical model – along with some harder maths on top to incorporate the deviations into the model. The effect is to make the simple ideas underpinning behavioural economics seem too complex to explain to the public.

Whatever the reasons, economists must try harder. If they want us to heed their analysis, we must trust it – and that requires it to be broadly intelligible. Being told at a crucial step in an economic argument that ‘X has been proven’ makes us feel patronized and inclined to ignore the argument altogether.

Another difficulty is that economists’ public recommendations or conclusions are sometimes over-simplified, leaving out the nuance and the caveats.

Take free trade versus protectionism. Harvard economist Dani Rodrik acknowledges that many economists have been guilty in public of over-simplistic advocacy of free trade. Yet in private, Rodrik reports, most economists are well aware that the answer to ‘Free trade or protectionism?’ is ‘It depends.’ The reason for economists’ dogmatic public pronouncements, Rodrik argues, is their ‘zeal to display the profession’s crown jewels … market efficiency, the invisible hand … in untarnished form, and to shield them from attack by self-interested barbarians, namely the protectionists … The economists who let their enthusiasm for free markets run wild are in fact not being true to their own discipline.’21 Rodrik is right that economic theory does not justify free-market zealotry: it must therefore come from the political ideology of some economists. But that is still a big problem. It is no use to be told that economists hold nuanced views in private, if their public statements default to simplistic endorsement of free markets out of a misguided desire to avoid confusing us. This simplification strategy is even less helpful when it is biased: economists’ simplistic endorsement of free markets is much more common than their simplistic rejection of them.

Besides, the strategy usually backfires. For economists to have any hope of regaining our trust, they must be completely open about the limits of their knowledge. Most people realize that economic policy choices are rarely clear-cut because they depend on the relative priority we attach to conflicting objectives. (Which is more important: the increase in GDP from the removal of tariff barriers, or the rise in unemployment in industries suffering from greater foreign competition?) If we get economists’ simplistic dogma, we just stop listening.

2. Economists should state their political and ethical judgements openly and explicitly – allowing us to argue with them on equal terms when we disagree. In previous chapters we have seen that economists are often silent on the political and ethical assumptions implicit in their arguments. One recurring reason has been economists’ desire to appear scientific. A more prosaic explanation is their unease in discussing such matters, which is understandable enough: mathematically trained economists prize precision, but when it comes to verbalizing their core ethical judgements – such as basic principles of welfare economics – they are often inexperienced and can become vague and imprecise.fn1

Unfortunately, there is a less innocent explanation too. Some economists try to conceal their political loyalties – or the vested interests who might be funding their research.

This is not just the cynicism of outsiders. Mainstream economists, in their blogs and other candid moments, admit that one reason financial economists failed to criticize the deregulation of the financial sector in the years before the crisis was an unwillingness to ‘bite the hand that feeds you’.22 Eighty-two economists testified before Congress in hearings concerning the 2010 Dodd–Frank Act which increased regulation of the financial sector. A third of them failed, under oath, to declare their consulting income from firms that would be hit by the regulations.23 Similarly, there is clear evidence that some economists publishing in prestigious academic journals are overly relaxed about conflicts of interest: financial economists’ shyness in disclosing their consultancy work for the financial sector;24 empirical research on ride-hailing platforms, which is overwhelmingly dominated by economists sponsored by Uber, or using data selected and provided by Uber, or both.25

What about the relevant professional code of conduct covering these activities – the ethics code of the American Economic Association (the world’s largest association of professional economists)?

Until very recently, there wasn’t one.

Doctors, engineers, sociologists, anthropologists and statisticians have long had formal ethical codes. Yet the impact of economists’ activities is potentially even greater. In the early 1990s economist Jeffrey Sachs was advising Poland and other former Soviet Bloc countries on the painful transition to a market economy. Sachs wanted the transition to happen very quickly, before political opposition could mobilize: ‘figure out how much society can take, and then move three times quicker than that’.26 The complete absence of historical precedent for this ‘shock therapy’ did not prevent a strong consensus emerging among mainstream economists that it was the best strategy. Subsequent research – published in the leading UK medical journal the Lancet after rejection by several economics journals – revealed a 41 per cent rise in male death rates between 1991 and 1994, immediately following the shock privatization programmes in Russia, Kazakhstan and the Baltic states.27

In 1994 the Executive Committee of the American Economic Association was asked to consider introducing a code of conduct. One Committee member joked, ‘Sure, we’ll have a code – its first rule will be “Don’t predict interest rates!”’ Everyone laughed, and there was no further discussion of the matter.28 In 1998 the hedge fund Long-Term Capital Management collapsed, threatening to destabilize the global banking system as it went down. Until the end, LTCM economists blamed their downfall on sabotage by rivals, and refused to accept that their bell-curve thinking was fundamentally flawed. Again, after the financial crisis Nobel laureate macroeconomist Tom Sargent, who had not once warned about imminent problems in the financial sector, asserted, ‘it is just wrong to say that this financial crisis caught modern macroeconomists by surprise’.29 David Miles, a macroeconomist who served on the Bank of England panel setting UK interest rates, took the opposite view, insisting that the crisis was inevitably a surprise, with no more clues in advance than the number on a winning lottery ticket: ‘Any criticism of economics that rests on its failure to predict the crisis is no more plausible than the idea that statistical theory needs to be rewritten because mathematicians have a poor record at predicting winning lottery ticket numbers.’30 And so it goes on. Recent austerity policies pursued in several countries were explicitly based on the research of Harvard economists Carmen Reinhart and Ken Rogoff, showing that economic growth falls sharply once the government debt-to-GDP ratio exceeds 90 per cent.31 Except it didn’t: in April 2013 a graduate student discovered a crucial error in their spreadsheet. It turned out that slow growth causes high debt, not the other way around, as Reinhart and Rogoff had implied. Reinhart and Rogoff did not apologize, trying instead to blame politicians for exaggerating their research. But Reinhart and Rogoff had not complained publicly before, at the time the politicians had been doing the exaggerating; rather, Reinhart and Rogoff had aggressively promoted debt reduction in Washington and elsewhere.32

3. If economists want to regain the trust of the public, then they must be less arrogant, take responsibility for their advice and admit their mistakes. If they don’t, then a professional association or similar body should publicly censure them. In April 2018 the American Economic Association at last introduced a code of professional conduct. But it stands in sharp contrast to the codes of other professions: the AEA code is under 250 words long, with just eight words referring to conflicts of interest. It is a small first step. Economists should encourage and welcome dialogue with the public, not just about conflicts of interests (where the problems in many cases are too obvious to merit discussion), but also a wider conversation about their place in society and the responsibilities which follow from that.

As a starting point, we could begin with John Maynard Keynes’s remark: ‘If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!’33

What would an economics inspired by dentistry look like?34 Dentistry is entirely focused on solving the problems of real people in the real world. So the research agenda of economists would be determined by such problems, not by theoretical developments within economics. And the methods and tools used to address these problems would not be restricted by the prevailing culture of economics: there would be no requirement to express all analysis mathematically in an attempt to be more ‘rigorous’ or ‘scientific’. We have seen this culture at work in the development of postwar microeconomics. It has had an equally powerful impact on macroeconomics. Here is Roger Farmer, a leading mainstream macroeconomist: ‘The macroeconomics of the last thirty years has consisted of rediscovering truths that were known [to economists] in the 1920s … Whereas 1920s theory was verbal, the macroeconomics of 2011 is formalized with a rigour that was not possible in 1928 because the mathematical tools did not exist.’35 Translated, without the hyperbole: recent ‘progress’ in macroeconomics has been limited to devising mathematical proofs of what we already knew almost a century ago. Some behavioural economics suffers from the same limitation: with framing effects (Chapter 7) economists showed in experiments that people make different decisions depending on how the alternatives are described.36 Who knew?

Economics as dentistry would have no interest in proving what we already know because that is of no use to its clients, real people with real problems. Instead, economists would use whichever methods and tools are most helpful in addressing these problems. Some mainstream economists have recently argued that modern economics does just that: it consists of a smorgasbord of tools (models), and good economists are adept at picking the right one for the task in hand. But this is a misleading description: yes, economists are open to using different tools in different contexts, as long as the tools are those of mainstream economics. A genuine ‘what works’ approach would not restrict the smorgasbord to current orthodoxy. It would also draw on the rich diversity of ideas from outside the mainstream, in schools of thought ranging from Marx to Hayek. This brings us to education.

4. Educating economists. 37 This is not the place for detailed discussion of economics curriculum reform – but it is important because, compared to many subjects, a relatively high proportion of those with a first degree in economics draw on it in their subsequent careers. So undergraduates should learn ‘what works’. Since economics is not an experimental science like physics or chemistry, it should not be taught like one, with textbooks presented as describing the economic laws of nature. The history of economic ideas is one of cul-de-sacs and false starts: economics does not make smooth and steady progress towards the truth. Therefore, current orthodoxy does not automatically incorporate all the best ideas from the past. At present, almost all undergraduate economics courses and textbooks focus exclusively on the orthodoxy. Instead, courses should introduce students to the breadth of useful ideas and theories in different schools of thought, probably via the history of economic ideas – which shows how different schools emerged to address particular problems in particular times and places, rather than one theoretical approach being best placed to solve them all. And if we step outside the orthodoxy there is the pleasant surprise of finally discovering economists with a healthy scepticism about economics and economists. The tone of Joan Robinson, a friend and friendly critic of Keynes, is refreshing: ‘The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.’38

Another implication of the vocational role of economics is that undergraduate economists should learn about economies. Remarkably, in most existing courses, they don’t. With the focus in most courses overwhelmingly on economic theory and learning mathematical and statistical skills, there is little time to study real-world economies and their constituent parts, let alone the relevant history and politics of these economies.

The effect of this gaping hole in the training of most economists was seen in the financial crisis of 2007–10, which exposed how little some financial economists, whether working in academia or regulatory agencies, knew about the actual operation of financial institutions and financial markets. It was left to financial historians, journalists and other commentators to explain how these institutions and markets really work. (Allegedly open-minded mainstream economists are still reluctant to acknowledge this point. Dani Rodrik should drop one of his ‘Ten Commandments for Non-economists’: ‘economists don’t (all) worship markets, but they know better how they work than you do’).39

A closing message. Many critics of economics have invoked Keynes’s comment about economists as dentists as part of a plea to economists to show more humility. But the critics seem not to have noticed that the rest of us have an active role here too. If economics needs deflating to a more humble and modest position in our culture, then we need not wait for economists to let the air out. Ultimately, we have the power to put economics back in its proper place. We should not delay.