I have been thinking about John Maynard Keynes’s observations on the mysterious difficulty of being a first-class economist that I quoted a while ago:
Alfred Marshall: “The study of economics does not seem to require…(1924):
…any specialised gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject, at which very few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must reach a high standard in several different directions and must combine talents not often found together. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician…
I have been thinking about it because a couple of weeks ago I ran across a comment I once made:
The model says that attempting a 4%-point increase in government revenue as a share of GDP in Greece may well push you over the top of the Laffer Curve. It follows immediately that the excess burdens of a 1%-point increase are overwhelmingly large. It then follows immediately that any tax increases at all are inadvisable. Thus the only deficit-reducing policies that might possibly be advisable are those that cut spending. It would, therefore, seem to me that the paper ought to consist of one paragraph–that Greece is near the top of the Laffer Curve, hence what it urgently does not need is any tax increases–followed by fifteen pages documenting this claim on which all else depends: that Greece is near the top of the Laffer Curve. Yet those fifteen pages are missing…
It seemed to me very clear what was going on the moment I read: “We do not push the model to generate the full 4 percent increase in the [Greek] primary balance as a share of 2014 GDP… [because it] could push capital and labor taxes into the downward sloping portions of the Laffer curve…” And yet the well-regarded authors then spent fifteen pages calculating benefit-cost ratios–which were, of course, much less than one–rather than documenting their belief that Greece is near the top of the Laffer Curve.
I have been thinking about this Keynes passage in the context of Dani Rodrik’s “don’t blame economics–blame economists!”
It strikes me that a first-class economist needs to have a firm grasp of:
- The economic models that might be used to analyze the situation.
- The benefits and drawbacks of each possible model, and the reasons to on balance prefer one particular model and one particular analysis.
- What dangers the assumptions needed to make one’s chosen model tractable expose one to.
- How one’s model actually works.
Using and Abusing Models in Economics: A Review of Rodrik’s Economics Rules: “Rodrik… argues that both unrealistic assumptions and mathematics are useful in economic modelling…:
…Rodrik argues that economics is not the problem, economists are… idealization, abstraction, utilization of unrealistic assumptions, methodological individualism are not problems as long as one appreciates the diversity of economic models and accepts the fact that each economic model is an attempt to understand some real world relationships in isolation. Market favoritism is not a problem of economics… [but] rather a problem created by some overconfident economists…. Economics is more pluralist than it appears…