In the wake of INET’s conference in Berlin, Executive Director Robert Johnson poses a profound question during this interview with the German foundation Stiftverband. Who does the economist serve: powerful interests or society?
The answer seems clear-cut. Economists today primarily serve the needs of powerful interests at the expense of society in general.
To answer this, Johnson peals back the surface of overt corruption to explain how the problem goes far beyond that. It was not that economists were all on the take leading up to the global financial crisis, Johnson says, but that those whose visions aligned with powerful financial interests “were used as marketing vehicles, and they were not adequately skeptical as scientists of what the flaws in their vision might be.”
“The world is always uncertain,” Johnson continues, “so when people become anxious, they want the expert to tell them what is going to happen.” The problem is that these experts don’t shoulder much of the risk of being wrong – or of selling confidence when humility is called for - and it is society that ultimately pays the full price of their deception.
Yet many economists don’t even see the problem. They don’t know – or don’t want to know – that they are selling snake oil and that the abstract precision of their finely tuned mathematical models doesn’t hold up to the many contingencies of the real world.
In this regard, “economists are the victim of the Thirty Years War,” Johnson says. “Economists now worship at the altar of abstract theory which was the product of the fear and anxiety that followed the Thirty Years War 350 years ago. It’s time to reexamine our methods very fundamentally.”
The problem is exemplified by David Colander’s study of the economics profession, Johnson says. Colander found that of economics Ph.D. students “85% say they need to know a lot about mathematics, while only 13% say they need to know anything about the economy in order to become an economist,” Johnson notes.
To remedy this deficiency and prevent the influential and misguided advice of economists from helping to cause another financial crisis, Johnson calls for a change in the way economics is taught.
First, the basic paradigm through which the economics profession sees itself and presents itself to society needs to change. “Rather than teaching economics 101 as an indoctrination in method, they should teach it as a course in philosophy of science where the subject is economics and its assumptions, and the tradeoffs and the flaws as well as the strengths are explored on behalf of the student,” Johnson says.
Second, economics must lose its fascination with deduction and reincorporate context into the profession. “Understanding the context of institutions, understanding economic history, and particularly the history of economic thought (where the subject is economic thinking embedded in the real context of the problems and vested interests of the day, the various challenges, the state of technology), would help people to develop a more humble and realistic of what economic thinking is all about,” Johnson says.
These changes will make it much more difficult for economists to forget that economics really is about “politics, politics, and politics,” Johnson says. “At the core, economics is about politics and about power, and the question for the economists is whose power are you going to serve as an expert.”
To Johnson, avoiding the methodological and professional hubris of the recent past will help the economics profession and its constituents remain ever mindful of the central question they face: “Are you going to serve institutions of power or the people more generally?”
Economists. What – and who - are they good for?