It didn't predict the crash—and that isn't its only flawby Diane Coyle, Andrew Haldane / December 9, 2014 / Leave a comment
President Harry Truman famously yearned for a one-handed economist, in exasperation at their inability to give a straight answer. But economists have long been united about at least one thing—their positive assessment of their own subject. Since the 1980s, at least, economics has accorded itself high professional status, as well as taking an increasingly prominent role not just in shaping public policy, but in shaping many other aspects of public life.
However, that confidence has begun to wane in recent years. Internally, economics is more fractured than perhaps at any time in a generation. The reason for this is not difficult to find: the global financial crisis has made economists’ pre-crisis self-confidence look, in hindsight, more like hubris.
The areas of economics suffering most acutely are those whose shortcomings were exposed by the crisis—the fields of finance and macroeconomics. Although many economists do not work in either of these fields, they are the areas of economics most visible to the wider world. It is talk of recession, recovery, the ups and downs of inflation, Gross Domestic Product and unemployment that fills television and radio programmes. Beyond that, there is a broader public awareness, sometimes concern, that an incomplete economic orthodoxy may have intruded into wider society. And economics is not always a welcome guest there. This concern sometimes manifests itself in fears about rampant consumerism, the erosion of public spiritedness or the emergence of markets in everything from votes to kidneys, from education to clean air.
To the surprise of many, including perhaps the authors themselves, recent books such as Thomas Piketty’s Capital in the Twenty-First Century and Michael Sandel’s What Money Can’t Buy have made the bestsellers list. They succeeded because they examined how and why economics has shaped societies in ways that are not always benign or, indeed, entirely intended.
And then there is economics teaching and research. Somewhat paradoxically, the crisis has generated a groundswell of interest in the discipline among both students and scholars from outside economics. This ought to be the chance of a lifetime, a steroid injection of human and intellectual capital. Yet some in the economics profession have treated this interest in the subject as a threat, and have regarded students and scholars from other disciplines as barbarians at the gate to be repelled at all costs.