Wednesday, January 28, 2009

One (of many?) pitfalls when criticizing economics

Criticizing economic theories is dangerous. One false step and you are lumped in with one or another of the anti-economics camps. When that happens – when the reader can “label” you – then the rest of your arguments get interpreted through the perception that you are “one of those anti-math/leftist/ignorant/whatever” guys who don’t understand economics and its methodology, and who can be brushed aside and ignored. For instance, you are…

  • Anti-mathematics and anti-formalism – As Krugman wrote in “Two Cheers for Formalism” (Economic Journal, 1998):

Attacks on the excessive formalism of economics – on its reliance on abstract models, on its use of too much mathematics – have been a constant for the past 150 years. […] much of the criticism of formalism in economics is an attack on a straw man […] when outsiders criticise formalism in economics, their real complaint is often not about method but about content – in particular, they dislike “formalistic” arguments not because they are formalistic, butr because they refute their pet doctrines.

  • Biased and ideological. Put simply: You don’t like the way reality works, and reject economics for the same reason that Intelligent Design people reject Darwin: It’s not how you want the world to be. You hate free trade, or want to sharply increase minimum wage rates, or ban drugs without getting higher prices that cause financing crimes. Since (some) economic results contradict your world-view, you reject economics.
  • Afraid of simplification. You don’t understand that all theories need to simplify, and you believe that any deviation from the fully detailed world around you is sufficient to throw out a theory. Whereas we economists understand that it is by abstracting away from irrelevant details that we can uncover the main determining factors and the characteristics of the underlying mechanisms at work.
  • Afraid of human nature. You don’t want people to be selfish, you want to live in a Pollyanna world where everyone cares about each other and people are warm, empathetic beings – whereas we economists are able to face the truth that we are (also) influenced by cold, hard cash, and the desire for selfish gratification of own desires.