People and Curves
[This is the commentary promised earlier]
I’ve come across the phrase “Economics is about people, not curves” several times, and each time those repeating it have taken it to mean something different. Some have used it in criticism of the way economics is taught, others seem to mean it as an attack on the Neoclassical tradition itself. These interpretations of the statement vary in their validity and usefulness; some say more about the ignorance of the speaker than they do about economics.
In fact, this statement and the movement most often associated with it offer a useful case study for discussing how movements are often co-opted and the understood meanings of statements altered. It shows how a useful criticism can devolve into another front for socialism and other unsound ideas.The criticisms are often tied to a movement known as the “Post-Autistic Economics” movement, which began in France in 2000 with a petition protesting:
- The exclusion of non neo-classical theory from the curriculum
- The mismatch between economic teaching and economic reality
- The use of mathematics as an end in itself rather than as a tool
- Teaching methods that exclude or prohibit critical thinking
- The need for a plurality of approaches adapted to the complexity of objects analyzed
The movement since then has been adopted by a rather varied group of individuals, including many whose views differ significantly. If we consider the original complaint point-by-point, we notice that the first, second, fourth, and fifth points are more closely tied to a critique of the teaching the French students were receiving, rather than a critique of the discipline as a whole. The third point raises an ongoing dispute within economics. However, each of these points can be read in different ways. A reasonable interpretation might be as follows:
- The first point suggests that traditions other than the neo-classical be examined in the curriculum. This is a reasonable suggestion, as other traditions of thought have made valuable contributions– the Austrian school, for example, or New Institutional Economics. These schools do not, except perhaps in their most radical fringe incarnations, amount to a rejection of the Neoclassical tradition or its tools, nor do they sit far outside the economic mainstream. Some would disagree with this point, but take for instance Ronald Coase’s (generally regarded as a New Institutionalist) acceptance of the Nobel Prize in Economics– not something would occur were there a great chasm between the two schools of thought. For the most part, these alternative approaches overlap heavily, with the bulk of the Neoclassical tradition acting as a general point of agreement. If a discussion of these other systems of thought were lacking, this would certainly be something that should be changed.
- The second point critiques a mismatch between what is taught in the classroom and what is observed in the real world. Again, this is a serious issue that should be addressed if it is found to exist within a program. Good teachers do make an effort to bridge the gap between theoretical models and real-world circumstance, as this applied portion of economics is critical to understanding.
- The third point expresses the sentiment of many economists that the returns from the mathematical paradigm within economics are diminishing. It’s expressed in the point that mathematics are valuable as a tool, and surely the tools should be further developed. The problem many economists see with their mathematically-obsessed brethren is a tendency to create work that simply lacks any practical value.
- The fourth point complains of “teaching methods that exclude or prohibit critical thinking.” This is obviously not desired in any discipline, and if it exists in a program, it should be corrected. A teacher does have an obligation to correct errors in students’ thinking, but there is a difference between this an a faith-based approach to education. An education devoid of critical inspection is no education at all.
- The fifth and final point recommends that a variety of approaches be used to analyze complex interactions. This is simply a hallmark of good work. There typically exist multiple models that can be applied to a given situation, each of which highlights a different facet of the situation. Learning to use a variety of different tools and learning which ones yield the most useful results is a process that cannot be formalized, and must be a part of an economic education. If students aren’t receiving this experience as a part of their education, they should complain.
However, these same five points have been interpreted in a very different way by many individuals; they are typically socialists, certain environmentalists, and other left-leaning ideologues. Many of these people view economics as the academic arm of the form of capitalism practiced by the United States and distrust the trend towards a more integrated global economy. Take this piece of ignorance by way of example:
“There are two petitions. At the last count the one for students boasted over 800 signatures and the other for professors some 150. The campaign is actively supported in Belgium but is showing early signs of repression in the UK and the USA. This is not altogether surprising, London and Washington being home to the prime beneficiaries of monetarism and financial deregulation.”
Leaving aside the fact that Washington doesn’t represent a home of monetarism, given that the nation’s money supply is controlled in a decidedly non-monetarist fashion by the Federal Reserve, this statement shows the muddled thinking of its author. How, precisely, does the author expect the changes discussed above to threaten monetarism or financial deregulation? And further, by what mechanism does the author believe the petitions were repressed in the United States? Is it perhaps possible that, instead of repression, students in the United States haven’t seized upon the petition because they haven’t had the same negative experience with their economic education as the French students?
The problem, naturally, is a failure in definition by many of the people who have jumped on the Post-Autistic Economics bandwagon. These failures to actually define the core elements of their critiques are harmful in three respects: they result in ethereal critiques or appeals to a general sense of malaise that do not contribute to a rational discussion of issues and serve only to crowd out legitimate criticism; as a result of this, they hinder through crowding-out the development of pathways to positive change; and finally, in their most potent form, they can actually lead to retrograde movements as a result of harmful policies. These poorly defined ideas can be easily identified, as they tend to be objects of pseudo-intellectual fashion, appearing in publications that consist of more style than substance. the lofty rhetoric behind AdBusters’s “most urgent campaign” for “True Cost Economics“. The campaign is now over a year old, but their efforts for revolution did not progress past the first issue to mention it. One can, however, engage in a capitalist transaction with them by subscribing to the magazine or purchasing items from their online store. The easiest way to identify these fashionable yet substance-free ideas is to ask two questions: “Do I understand what the authors are saying, or do I just sympathize with the way they feel?” and “Do the authors offer an alternative to the system they are attacking?”
As these critics cannot express a coherent alternative system, they resort to calls for openness and sloppy critiques of the current system. They read the five points of the previous petition as follows:
- Non-neoclassical theory, like Marxist and Anarchist theories, should be included in the curriculum.
- Neoclassical economics has little to no predictive value.
- Mathematical abstractions cannot accurately describe human interactions. The curves economists use are alienating and don’t really mean anything.
- Teachers should be more open to alternative ideas.
- Other disciplines, like sociology, psychology, and philosophy should be used in answering economic questions.
The first item asks for openness not simply to non-Neoclassical traditions, but typically to specific traditions, which are often demonstrably bad ones, like Marxism and Anarchism. Marxism uses the “labor theory of value” and Anarchism an “energy theory of value“, both of which are horribly flawed, as the links explain. The study of economics should certainly be open to all traditions that have something useful to offer, but should not be cluttered with every idea that comes along, or even highly popular but worthless ideas.
The second item assumes that the alternative systems have better predictive value. This has never been demonstrated. Unfortunately, Neoclassical economics has proven itself as an extremely valuable tool– the policies that have been borne out of the tradition have resulted in a level of stability and prosperity unknown to any other period in history. Further, while different models vary in their reliability and their suitability to different cases, many Neoclassical models enjoy extremely high predictive values.
The third item springs from a poor understanding of models, and is the source of the refrain, “Economics is about people, not curves.” Models, by their very nature, do not seek to explain everything about a situation. In fact, a good model isolates only the most important information. A good model is a useful tool because it helps separate the good facts from the bad ones. It’s a process very similar to what Robert Pirsig described in “Zen and the Art of Motorcycle Maintenance”. Consider the origin of basic supply and demand curves described here: the curves describe only the essential facts, and are descriptions of collective human decision-making. Each point on a curve represents an individual human decision. Thus, economics is, in fact, about people, not curves. It is inescapable; the curves themselves are about people. Anyone who questions this does not (not necessarily through any fault of his own) understand economics.
The fourth item is simple: yes, teachers should be open to alternative ideas. They should evaluate them as they evaluate all ideas, and they should reject the bad ones. Openness to consideration is a virtue; openness to demonstrably bad ideas is not.
The fifth item is true to some extent. Disciplines like psychology and sociology should certainly be considered when looking at problems within economics– that’s why fields like behavioral economics have been developed. This openness to the insights of other disciplines, however, should not be allowed to undermine the rigor of economics– if the insights offer no predictive ability and only an untestable ex post explanation, they should be unwelcome. Philosophy, for its part, has no place in the mechanics of economics, but an important place in the application of its insights. Economics is, like the hard sciences, amoral. It seeks to describe the world objectively, and in its applied form, to offer useful grounds for decision-making. When it is being applied, however, there exists the important caveat that an economically efficient answer is not necessarily a moral one. Thus, the need for philosophy and ethical theory. Likewise, as a discipline that describes the world, it can contribute to philosophy, as in the political philosophy of Friedrich Hayek.
These criticisms of economic teaching in the French academies, twisted into criticisms of Neoclassical economics, are certainly not the only case in which a legitimate effort to bring about specific, rational changes has been co-opted by one or more movements that seek to spread old, discredited ideas under new guises. Marxism is famous for this; even Marx had serious disagreements with this breed of followers, hence his famous quote, “Je ne suis pas un Marxiste” (“I am not a Marxist”). Were the ideas of these parasites coherent, they would have no need for this sort of activity. Let us identify them by inspection and eradicate them with logical argument. A good start is always to demand firm definitions– let language be a tool for truth, not obfuscation.
As for economics… it has always been, and may it continue to be, about people. We can keep the curves; they’re powerful tools– powerful enough that ideologues despise them.