A "sardonic" tweet by a "Duke sociologist"* about this year's Nobels in economics generates an op-ed response in the New York Times by a MacArthur ('genius') fellow and Harvard economist, Raj Chetty. [HT Matt Zwolinski] It's been a few decades since an elite economist felt the need to notice a sociologist. Chetty reveals what is at stake:
the headline-grabbing differences between the findings of these Nobel laureates are less significant than the profound agreement in their scientific approach to economic questions, which is characterized by formulating and testing precise hypotheses. I’m troubled by the sense among skeptics that disagreements about the answers to certain questions suggest that economics is a confused discipline, a fake science whose findings cannot be a useful basis for making policy decisions.
If economics is not "a useful basis for making policy decisions," its seventy year, lucrative (jobs, funding, prestige, etc.) reign as the the privileged discipline in the policy sciences ends. (The only time I have discussed Chetty's views on the blog, I provided historical context for that claim.) Before I turn to Chetty's argument for why economics is "useful" in the relevant fashion, it is worth noting that he accepts the idea that consensus in methods ("formulating and testing precise hypotheses") and answers ("simple, unassailable finding") is an adequate proxy to a discipline not being a "fake science." Such consensus, need not prevent it being "ideology," too.
First, Chetty's piece highlights two important methodological developments in recent economics: (i) the brilliant and ingenious use of so-called 'natural experiments,' in which the impact of policy changes are measured: "These studies approximate medical experiments in which some groups receive a treatment — in this case, extended unemployment benefits — while “control” groups don’t." (ii) Data-mining huge data-sets for policy-sensitive patterns. For example, Chetty describes his own work "Using a data set with anonymous records on 2.5 million students, we found that high-quality teachers significantly improved their students’ performance on standardized tests and, more important, increased their earnings and college attendance rates, and reduced their risk of teenage pregnancy."
Chetty rejects, en passant, the role of (iii) experiment on humans associated with experimental economics (e.g. Vernon Smith) and behavioral economics (e.g. Daniel Khaneman)--an earlier 'opposing ideas' Nobel. Despite the vibrant health of these experimental approaches (and one can also include neuro-economics), Chetty asserts that there is "limited ability to run experiments." He means by this that if economists "could randomize policy decisions and then observe what happens to the economy and people’s lives, we would be able to get a precise understanding of how the economy works and how to improve policy."
Chetty's stance on (i-iii) ignores the same cluster of problems: (a) humans may change their behavior in light of their knowledge that they are subject to policy; (b) Chetty's methods are not capable of looking at the complex interaction of multiple policies at once. That is to say, even if one grants that Chetty's approach is scientific, it does not produce robust knowledge. His stance tacitly presupposes background stability in one's institutions and norms. This makes his approach remarkably friendly to existing institutions (recall this post on Gul and Pesendorfer). That is to say, the concluding line of his piece has a false opposition between making "policy decisions on the basis of evidence instead of ideology." His reproducible methods are also capable of producing "ideology." For, they have a built in bias in favor of policy interventions that leave institutions and norms pretty much untouched. (I am no revolutionary, so I might favor this, but we need to call a spade-a-spade.) Obviously, this makes economics a "useful" policy science to some who share his relative status-quo-bias.
As an aside, we philosophers are, in part, to blame for peddling the idea that if something is "grounded in fact" then it is likely to fall into 'science' category and not the 'ideology' category. We have not fully come to terms with the fact that an empirical science may also simultaneously be ideological.
Second, Chetty claims that these new methods are "transforming economics into a field firmly grounded in fact." He does not pause to consider that his views entails that earlier economics was, well, not "grounded in fact" and, by his lights, not scientific. So, Chetty is really saying, this time is better. But he does not acknowledge that there are legitimate questions to be asked about past performance of economics and the way they influenced policy decisions.
Third, Chetty is very fond of the analogy between economics and medicine. This is an important trope in economics that (as I have discussed) Milton Friedman popularized when he and his students were attacked by critics over their involvement in the Chilean junta (recall this post and scholarship). Let's stipulate -- for the sake of discussion -- that good health can always be characterized objectively (and is not itself a complex mixture of bio-chemistry, institutions, and ideology) and that medical practice is appropriately oriented toward it. Even so, public policy economics falls short of medical standards in five respects.**
(1) In some cases not all policy goals (low inflation, high growth, and income distribution that accords with, say, -- let’s set the bar low! -- some version of Rawls’ difference principle) will always cohere. (In Chile, during the 1970s, the Chicago Boys achieved low inflation, but at the cost of very halting growth and regressive income distributions.)
(2) The good that technical, economic experts promote can conflict with other potentially more fundamental values, e.g., democratic participation, political freedom, the right to human dignity, justice, etc.
(3) Whatever its many ethical problems, medicine integrates and continuous to develop important ethical guidelines in its practice as experts and researchers: do-no-harm principles have a robust presence and patient autonomy, dignity, and, say, consent influence expert judgment and behavior.
(4) Medicine confronts its many conflicts-of-interest by promoting disclosure requirements and by generating rules of thumb of how to treat sponsored research.
(5) Medical experts are very regularly evaluated and assessed locally and comparitively. While these evaluations have limitations, of course, they help develop 'best practices' and guard against expert overconfidence.
Medicine has a fairly open discussion with neighboring fields (including philosophy and sociology) and larger society on themes related to all five of these issues. By and large the economics profession has proven disdainful to its potential interlocutors that might generate discussion on these issues (and I say this with much love for the many individual economists that have invested huge amount of their time in sharing their insights with me). Bio-medical ethics is a huge field with a substantial impact on medical practice over the last century; the ethics of economics is extremely small and has no impact on the economics profession. (Yes, I am leaving aside so-called 'business' ethics as well as 'capability' and 'well-being' approaches that blend economics and ethics.)***
Finally, Chetty does not say what to make of his concession that "it is true that the answers to many “big picture” macroeconomic questions — like the causes of recessions or the determinants of growth — remain elusive." Even so, economists continue to be entrusted with leadership in institutions with non-trivial 'big picture' social consequences. It's not obvious that their selection and training prepares them for how to behave when they really do not know what they are doing by their own lights.
*Kieran Healy is, of course, familiar to regular readers of the blog.
** Full disclosure: my wife is a surgeon.
*** This is not to deny that medicine can learn from economics about evidential practices.