Must-read: Noah Smith: “Book Review: ‘Economics Rules'”

Must-Read: Noah Smith: Book Review: “Economics Rules”: “I love a good book about econ philosophy-of-science…

Economic Rules: The Rights and Wrongs of the Dismal Science, by Dani Rodrik, is my favorite book in this vein to come out in quite some time…. I do have one big problem: the first two chapters. These chapters consist entirely of Rodrik’s very general thoughts on economic models, and what they should and shouldn’t be used for. The problem with these early chapters is the audience. Economists will already have heard most or all of these philosophical ideas. Non-economists, in contrast, will probably not understand…. These early chapters… fall into an uncanny valley, too old-hat for economists but too inside-baseball for non-economists.  So I fear that many readers may get turned off early….

Rodrik really shines when he talks about his own field, development econ. He gives a vivid recounting of the Washington Consensus – why it was adopted, why it went wrong, and how the mistakes could have been avoided. The story of the Washington Consensus provides the perfect backdrop for Rodrik’s ideas about what economists and models should do. The episode demonstrates why it’s important for policy advisors to look at a bunch of alternative models, and use personal judgment to choose which ones to use as analogies for reality. It is the perfect example of the ‘models as fables, economists as doctors’ worldview that Rodrik is trying to lay out. In fact, I wish more of the book had been about trade and development….

I find myself pretty much in agreement…. It’s very difficult to sum them all up (so go read the book), but here’s a few that really stood out: Rodrik notes that economists tend to present a much more simplistic, pro-market stance to the public than they show in their research and behind closed doors…. Rodrik strongly criticizes the New Classical and RBC macro theorists…. Rodrik tries to counter the criticism that economists ignore things like norms. In doing so, he basically says ‘The evidence shows that norms often matter, and economists pay attention to the evidence.’… This is a great book, and a quick read. Get it and read it if you haven’t.