Paul Krugman’s New York Times Magazine article explaining the dismal state of the economics profession is itself an object lesson in what is wrong with the economics profession. While Mr. Krugman is one of the most talented economists alive, this article isn’t an example of Mr. Krugman at his best. Instead of trying to figure out what is wrong with the training and reward system for economists, Mr. Krugman uses the New York Times article as a chance to implicitly disparage his critics while proposing a solution to the problem which, coincidentally, is to become a believer in his view of economic theory and public policy. Mr. Krugman says that what economists need to do is to embrace modern Keynesian theory and admit that the Chicago School of free markets advocacy is wrong. Sorry Mr. Krugman, that is not why almost all economists missed the Great Recession and it really has nothing to do with why the work at economics departments, for the most part, is irrelevant.
The reason that economists missed the largest economic event in 80 or so years isn’t because they weren’t Keynesian enough. The problem is that most economists are out of touch with the realities of business, government and human behavior and they substitute mathematical models, statistical formulas and computer programs for the judgment that comes from actual experience and first hand field work. If economists want to restore their credibility they need to make their work reality based and stop rewarding economists for their mathematical prowess. There is another department that is supposed to reward great mathematicians and it is the math department.
The lack of real world experience and overreliance on mathematical and computer modeling causes economists to misunderstand how groups and individuals think and work in the real world. Economics is a social science but yet little time is spent by serious economists, or wanna be serious economists, doing hands on research. And, virtually no one who is a serious economist has actually had a real job in a for profit business. Economists quickly learn that time spent outside of the ivory tower of a university, research institute or government post destroys academic careers. Economists are just like any other group, they feel comfortable with and promote individuals who are like themselves. And, economists for the most part are professional researchers and reward a life dedicated to academic research and implicitly discourage real world experience.
One can quickly see the lack of diversity of experience by reading the bios of the faculty at Paul Krugman’s employer, the Princeton University Economic Department. I went onto the web site for the Princeton University Economics Department and wasn’t able to find a single tenured or tenure track faculty member who had a senior (or even middle level position) in a real business. With more than 300 million Americans and 6 billion global citizens, it is unbelievable that Princeton University wasn’t able to recruit a single qualified person who spent time running an actual business that “made stuff” for real people. Obviously, there is a selection system at Princeton that has a bias against real life experience. Unfortunately, Princeton University isn’t unique among economics departments.
When I was a young economics student at the University of Pennsylvania it was drilled into my head that the only economists who were going to be successful were economists that excelled at math and viewed economics as applied high level math. Other social science departments, like sociology and psychology, were looked down upon as inferior because they didn’t use the tools of “hard science” which, seemed to me, exclusively to be mathematical, statistical and computer modeling. When I suggested to my economics department advisor that I was considering a dual major in economics and sociology so that I would learn how to do field work to better understand how businesses worked as social units, he screamed at me for over an hour and told me that I was a failure and one of his greatest disappointments. I can only imagine what would have happened if I suggested that in order to understand business I thought working in business would be helpful. My professor surely would have had a stroke on the spot.
I was told by more than one professor to forget about sociology, management, marketing or other of the soft economics sciences. It was clear that these disciplines were for the intellectual lightweights who couldn’t cut it in a rigorous economics program.
The economics profession got what they wanted; a generation of economists who have little connection to what makes people, businesses and society tick but are pretty decent mathematicians, statisticians and computer wonks.
Instead of questioning the correctness of the qualifications and value system of the economics profession (and Princeton’s Economics Department), Mr. Krugman says that the problem is his fellow economists relied upon the wrong mathematical and computer models.
Mr. Krugman states Keynesian theory is “the only plausible game in town” which of course has nothing to do with why economists blew it over the last decade. However, Mr. Krugman is a Keynesian economist who is constantly criticized by economists who believe in monetary and efficient market theories. So, his article on why economists got it wrong turns into a justification for why he is right and others are wrong.
But, if Mr. Krugman wanted to write an article saying why he is right and his critics are wrong, then he just should have written that and not wasted everyone’s time thinking he was actually trying to explain why the economics profession almost totally missed the “rumblings” of the biggest economic event since the Great Depression.
I am a big fan of Mr. Krugman and believe he is a better economist, writer and thinker than his article indicates. He would be better served trying to figure out whether or not the work being done at Princeton University has any relative value and relevance. Merely saying “I am right and you are wrong” to people with whom he disagrees, no matter how many words he uses and where it is published, is beneath Mr. Krugman.