Questioning One’s Views as Circumstances Evolve Can Be a Good Thing

The Need for Reflection and Reevaluation in Economics

Economics, like any field, is not immune to change and evolution. However, the recent financial crisis and the subsequent questioning of the profession’s predictive abilities have brought to light some fundamental flaws in economic thinking. As a practicing economist for over half a century, I have found myself reassessing my own views on various topics. In this article, I will explore some of the general failings of the profession and the need for economists to embrace humility, reconsider their assumptions, and engage with other disciplines.

Power: One of the main failings of economics is its tendency to overlook the role of power in shaping economic outcomes. While free markets and technical change are often emphasized, the influence of power in setting prices, wages, and political agendas is often neglected. Without a thorough analysis of power dynamics, it becomes difficult to understand inequality and other aspects of modern capitalism.

Philosophy and Ethics: In contrast to the economists of the past, today’s economists have largely disregarded ethics and the concept of human well-being. The focus has shifted towards efficiency and individual welfare, often equating well-being with money or consumption. This narrow perspective fails to consider the importance of relationships, family, and community in people’s lives.

Efficiency Over Other Ends: The emphasis on efficiency in economics often comes at the expense of other important goals, such as social justice and equity. Many economists argue that efficiency should be the primary focus, leaving issues of equity to politicians or administrators. However, this approach often leads to upward wealth redistribution and neglects the need for a fair distribution of resources.

Empirical Methods: While the credibility revolution in econometrics aimed to improve the rigor of economic analysis, it has also led to a narrow focus on local effects and short-term outcomes. This approach disregards slow-acting mechanisms and fails to capture the complexity of real-world economic phenomena. Historians, with their understanding of contingency and multiple causality, often provide valuable insights that economists may overlook.

Humility: Economists have a tendency to be overly confident in their views and to dismiss alternative perspectives. While economics can provide clear-cut answers, these answers are often based on assumptions that may not hold in all circumstances. Recognizing the existence of competing accounts and embracing humility can lead to a more nuanced understanding of economic phenomena.

Conclusion: As circumstances evolve, it is crucial for economists to question their views and engage in self-reflection. The failings in the profession, such as the neglect of power dynamics, the disregard for ethics, and the overemphasis on efficiency, call for a reevaluation of economic thinking. By embracing humility, engaging with other disciplines, and considering alternative perspectives, economists can contribute to a more comprehensive and nuanced understanding of the complex economic world we live in.