The Great (Economist) Mortification | FT Alphaville

The Great (Economist) Mortification

Will Philip Mirowski be getting an invite to the next economist shindig?

Perhaps not.

The Carl Koch Professor of Economics and the History and Philosophy of Science at the University of Notre Dame has taken a flame-thrower to the post-crisis explanatory powers of his colleagues, in the latest edition of the Hedgehog Review (H/T Paul Kedrosky). The title of his piece:

The Great Mortification: Economists’ Responses to the Crisis of 2007–(and counting)

Thus follows Mirowski’s rather gleeful (but well-written) takedown of how and why economists failed to come to grips with the crisis. The whole thing is well worth a read — especially as a counterpoint to this — but we’ve picked out the basics of his argument for you here.

Mostly he lays the blame on a lack of of philosophy and history in economics, leading to rigid adherence to overly scientific economic theory (a view perhaps not surprising given his Notre Dame title and previous work).

That meant when the crisis struck . . .

Of course quite a few had premonitions that something had gone very wrong, but the sad truth was that they were clueless when it came to the analytical construction of an abstract philosophical argument in isolating just where the flaws in professional practice could be traced and assessing the extent to which they were susceptible to methodological remedies. Mired in banality, the best they could prescribe was more of the same. No wonder almost every economist took their philosophical perplexity as an occasion to settle internecine scores within the narrow confines of the orthodox neoclassical profession: MIT v. Chicago, Walras v. Marshall, mindless econometrics v. mindless axiomatics, New Keynesians v. New Classicals, Pareto sub-optima v. rational bubbles, efficient markets v. informationally challenged markets… This was all so boring one can’t help thinking it was being done on purpose, to lull the rabble back to sleep.

As Mirowski puts it:

. . .  it is striking the way that it could be taken for granted in the 1930s that the social position of economists might tend to lead them to exhibit biases in certain predictable directions, and that respected members of the profession could concede that those social structures would mount obstacles to serious analysis of economic breakdown. This was not flaming Marxism; it was just commonsense sociology of knowledge. Yet where are the comparable analyses today?18

Cue an economist exposé:

In any case, most conventional outlets for economic ideas have become willfully uninterested in the tangled conflicts of interest of the modern economics profession. Does anyone care that Martin Feldstein was on the board of AIG in the runup to its disastrous failure? Or that Paul Krugman once consulted for Enron (and got radicalized after the New York Times made him foreswear such perks)? Is anyone curious about the tangled history of the funding and organization of the Chicago School of economics? Does anyone care that Larry Summers worked for numerous hedge funds and investment firms before they had to be rescued by an administration that included…Larry Summers?

And finally — a question:

What set of social institutions has led us to accept that we have to keep getting exposed to this utterly predictable but uninformative stuff from economists? . . .

Thoughts/Theories/Answers on a postcard to:

400 Decio Faculty Hall
Notre Dame, IN 46556
574.631.7580

Related links:
Bloggers can’t do economics. Discuss – FT Alphaville
Eric Alterman calls out Nouriel Roubini – The Long Room
Day 475 in the Celebrity Economist House – FT Alphaville
The recalculation story: A summary – Arnold Kling