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There has been a lot of recent discussion about where economists agree (micro) and where we disagree (macroeconomics.) Ryan Avent noted these findings, and then discussed a study showing that the public is skeptical of the more “scientific” aspects of our field.

I first became aware of this problem when serving on a committee creating a new MBA. I suggested the econ course should focus on micro, which I thought would be vastly more useful to MBAs than macro. The other committee members (from other departments) gave me a funny look. I eventually learned that noneconomists are only interested in what economists have to say on macro questions, and have utter disdain for our views on any and all micro topics:

1. They don’t care what we think of antitrust cases, they’ve already made up their minds. They don’t care about our views on predatory pricing, they’ve already made up their minds.

2. They don’t care what trade theory tells us. They just know that imports raise the unemployment rate, even when not at the zero bound. Or that low wages are an advantage in trade.

3. They are convinced that a firm will raise prices if its costs rise, but won’t pass lower costs on to consumers. You can use elementary logic, you can point out that this sort of behavior would actually reduce profits, you can argue until you are blue in the face, and it will have no impact.

4. They’ve made up their minds on carbon taxes, or any other taxes. It’s all about who pays.

5. They have made up their minds on product quality regulations. You can talk about the market giving firms and incentive to produce the optimal amount of defects, and it will carry no weight.

6. Labor unions . . .

I could go on and on. Non-economists couldn’t care less what economists think of micro questions. They think common sense is enough (it’s not) and hence they’ve made up their minds. When they hear our ideas they think we are a bit kooky.

In contrast, non-economists don’t have preconceived ideas on inflation vs. NGDP targeting, or the implications of a $1.2 trillion deficit. Just as they defer to physicists if the topic of quantum mechanics comes up at a cocktail party, they defer to economists for many macro questions (not all.)

Most of all they want us to forecast recessions. That of course is the one thing we cannot do. (Recall the Queen’s complaint.) Or forecast stock prices, or interest rates.

If we insist on focusing on microeconomic topics, they will only take us seriously if we become a heretic, telling them that the rest of economists are a bunch of autistic nerds, who don’t really understand the real world. Those heretical economists are very popular.

There was real excitement when behavioral econ burst on the scene. It’s by far the most common question I get from non-economists when the topic of on new directions in economics comes up. Non-economists are hoping that behavioral econ will some knock sense into all those idiotic economists, and a new model that takes into account actual human psychology will emerge. Of course the standard model isn’t going away, but don’t tell the general public—they’ll look crestfallen when they hear the news.

So yes, the good news is that macro is the only area of econ with an almost total lack of consensus on key questions. The bad news is that for most people this means economists cannot agree on anything useful at all.

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This entry was posted on January 16th, 2013 and is filed under Misc.. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or Trackback from your own site.



