Peter Martin Economics: "Economists are not like dentists"

Tuesday, July 19, 2011

"Economists are not like dentists"

So what are they like?

Concluding remarks from William Coleman at Thursday's Public Policy Symposium:

This Symposium has asked, ‘Is Public Policy Getting the Economics it Deserves?’ The answer that is implicitly presumed is (surely) “No”. But we are missing the point if we think that the frank badness of policy in contemporary Australia is sufficient for the answer. For the question is directing us - not to whether policy is good or bad – but how much good could economics do for policy; what is the most that policy could get out economics? And how might that ‘most’ be realized? Briefly, how is economics to be turned to good effect?

Both the broader public and policy elites share the same answer: economics is to make itself useful by providing experts to provide remedies to ills. In this position it is implicitly supposed that economists have access to some terrain of knowledge that is useful, objective and complex - the kind terrain that is the natural habitat of the ‘expert’- and the task of the economics expert to master and cultivate this terrain, and offer up its fruit in the form of policy advice and conduct. In this answer, economists might be compared to agronomists, or, to use Keynes’ comparison, to ‘dentists’

Here I will part from many in our assembly, and assert that this vision of the economist as the expert is badly wrong.

Why? For two reasons.

First, economists simply don’t have the grip on the quantitatively calibrated counterfactuals that are requisite for any reliable repertoire of remedies.

What economists know is highly conditioned, ‘partial’ propositions ,that freeze the operation of most of the economy by ‘ceteris paribus’ clauses. To put it another way, economists can shine a lamp on some parts of the economic machine, but most of the machine, in all its baroque intricacy, is wrapped in gloom. Thus all attempts to predict the response of the machine are fraught. Our difficulty in predicting this machine is compounded by the fact that economic system is integrated a still more mysterious political- economic system. These ‘general equilibrium’ behaviors of this system will mock any aspirations to control it.

The upshot is that we have little “how to” knowledge – which is the surely the adjunct of the acme of knowledge - but posses only a lesser order of knowledge: a “what” knowledge...

Economists can correctly distinguish things, they can rightly say what they are, and what they will become. (‘this is cost; this is a burden; this is a waste’). In medical terms, economists’ knowledge is diagnostic and prognostic, but not therapeutic.

So where does this leave the usefulness of economists?

First, let’s grant that prognosis and diagnosis, even the absence of therapy, are not wholly ‘useless’.

Second, even in the matter of therapy, there is a usefulness of the Socratean wisdom that we know that we don’t know. Economists, in other words, can be useful in the way medicine was most useful before the 19th century; by discrediting quacks, and the false and destructive hopes of their quack remedies.

But despite these two uses, the position I have outlined above appears to imply a quietism that is extreme and intolerable. Is there really no failure (either government failure or market failure) that is so egregious that economists cannot claim to know of some action that would be improving? To put the point more concretely, is there is no policy that so idiotic that economists cannot be said to know that its abolition will be for the good?

Here I have to concede; of course, there are such egregious failures, of course there are such idiotic policies. But I concede without inconsistency, because the kind of cases which irresistibly illustrate those egregious failures are ‘local’ in domain (rather than macroeconomic or ‘paneconomic’ in domain) so that the general system effects that mock our aspirations to control can be safely ignored.

So, yes: with such local egregious failures let’s identify them, deplore them, and crave their disappearance. Let’s do all this, quite sensibly, in the role of the social critic. But let’s not do this in the expectation that what we have to say will absorbed as ‘advice’.

For there is a second deficiency in the vision of ‘economist as dentist’. That vision assumes a dyadic relation: dentist and patient. But in the matter of policy advice the critical relation is (at least) tripartite; the public, economists, power elites. The critical point is that our power elites so ‘impoverished in consciousness’ there is incoherence in expecting our knowledge to be heeded. It is a bit like recommending to a lunatic Benjamin Franklinesque precepts of rational self-management. Or explaining to a thief the benefits to all of everyone observing an honesty box system. There is an incoherence here; if the advice was ever going to be listened to it, wouldn’t be needed in the first place.

I conclude that to hopefully advance our knowledge as ‘advice’ is a bit late in the day; it is trying to dispose of symptoms without dealing with the pathology. We have to go back a bit, or a bit further down. In that respect I will not pin any hopes on formal economics education; we have plenty of that, and what good has it done us? It is a sobering, even melancholy, exercise to enumerate the MPs with formal economics education in the current federal parliament. It is not the fewness that depresses, but the very number, and the particular individuals who can make the claim.

What the political elite is needs is not the drilling in some abstract curriculum, but ‘enculturation’ or even ‘socialization’. So I will conclude by exploring the suggestion that economics can makes it useful through economists constituting a socialising weather system in an otherwise hostile climate.

Socialization is a thing done in informal groups; it is not something that happens to you by reading a book, or by undertaking a qualification. It is often seen as a hierarchical process (from old to young), but has important elements of mutuality.

Think of economists, then, as comprising a group, with a degree of hierarchy (or gradient); at the apex are performers, descending to audience, and then to mere onlookers and passers by. The performances of the performers span the written word, the spoken word audience, the Facebook micro blog and the Twitter tweet. The audience and onlooker receive an impress from these performances. But at the same time the performer is also receives an impress from the reaction of the audience, and even from passers by. There is also a dynamism; there is a percolation inwards as some of the audience join the performers. More importantly, there is a dynamic in the opposite direction, as the passersby pass by, and soak into the wider world bearing their impress; and so silently and tacitly shape the ways of the wider world, and enrich that impoverished consciousness.

The ‘group’ in the above scenario is obviously not an arbitrary aggregate of individuals, but a community. The Economic Society of Australia is the leading example of such a community, and today’s Symposium exemplifies the process I have hopefully described.