Economics: the death of a discipline

John Kay recently wrote an article titled “Economists: there is no such thing as the ‘economic approach’“. If Kay is right, and there is no ‘economic approach’, then to what extent is there a discipline of economics? To what extent is there economics at all? Here are my thoughts on the issue*.

In my field, a distinction has been made between economics as a ‘topic’ and economics as a ‘discipline’ (e.g. here and here). While the latter is (if it ever existed) doomed, the former might be salvageable.

The discipline

Most of us will agree that although there are overlaps between economics and other disciplines, the lines of analytical demarkation are sufficiently clear for us not to be in much doubt about the differences between the disciplines.

Culyer (1981)

While this may have just about held true 30 years ago, I do not believe it to be true today. For me, the economics of suicide (to which Kay refers) represents the suicide of economics. Gary Becker’s The Economic Approach to Human Behavior was an important milestone. One can look at Becker’s 1992 Nobel Memorial Prize as something of a watershed; though he is preceded largely by ‘proper’ economists studying explicitly market-based phenomena, he is succeeded by individuals who have achieved breakthroughs in mathematics, statistics, psychology, moral philosophy and history.

Do not get me wrong, this is a very good thing. It represents the success of interdisciplinary research and in particular the application of the scientific method to all aspects of life, and we are all the better for it. Outside economics, this conflation of science and social science is leading to painful lessons about the impossibility of quantification in certain aspects of human nature and social interaction (here is one recent example), but economics is the most vulnerable.

The discipline of economics is in a strange state of simultaneous ascendency and yielding. It is ascendant in its influence over any policy analysis and its application to all aspects of life. The reason for this occurring is clear; every action – human, animal, governmental, societal – relates in some way to the allocation of scarce resources. Wiktionary definition of economics reads: “(social sciences) The study of resource allocation, distribution and consumption; of capital and investment; and of management of the factors of production.” And herein lies the problem; as we approach the lowest common denominators of knowledge, these issues are increasingly explained by other better-defined and time-tested disciplines. I am left wondering, over what does the discipline of economics have a monopoly?

The topic

Economics could survive in our lexicon as a topic. This topic is macro. The topic of microeconomics, it seems to me, can be entirely subsumed by other topics. Microeconomics is largely about agents. Humans are agents. The behaviour of these agents is primarily studied by psychologists, sociologists, ethicists, anthropologists, geographers and others, depending on scale. Firms are also agents. Firm-specific topics can reside in the realm of business studies – a far more modest subject than economics. Though an economist’s toolkit is undoubtedly of value to each of these disciplines, it is unclear which tools are exclusively those of the economist.

Inflation, unemployment, trade, growth. Economics may be saved by these topics – they will at least remain under the economics banner until its final day. But they are not safe. Each can be explained by their microfoundations in some combination with political science, philosophy and meteorology. Furthermore, marketisation and the spread of free markets means that society and the economy are now one in the same. One cannot be a quantitative social scientist without straying into the topic of economics. As such, it becomes unclear which topics are exclusively those of economics.

The choice

In my opinion, the primary value of economics today is its multidisciplinarity. But we already have a word for that. The inability of economics to restrain and contain itself is what will lead to its demise. Through its application to everything it will come to mean nothing. To my mind, economics has a choice. Either it can continue to expand itself into obscurity, or it can choose to restrict itself to the study of the economy and engage in the difficult task of differentiating (pun intended) the economy from society more generally.

No matter what, I suspect that economics has much the same destiny as natural philosophy. How long will it be before Economics degrees evaporate and we instead read Social Science? To be what was once termed an economist, one need simply sign-up for the BSc stream.

* This blog post is intentionally provocative, in the hope that people might engage with its content!

doi: 10.6084/m9.figshare.1101354

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#100wordreview – Quack Policy. Abusing Science in the Cause of Paternalism (Jamie Whyte) [Book]


I found this IEA publication very difficult to read, because almost every paragraph is flawed; sometimes logically, often evidentially and at times morally. The book takes what any undergrad might learn in Econ101 and applies it to current challenges and policy responses in health and climate change. All with gusto and arrogance. Whyte has little regard for the policy context, or for much of economic thought from the last 40 years. Most arguments depend on false analogies, which are painful to read. In the author’s own words: “Science progresses by ignoring mere opinion, expert or otherwise”. Thank goodness for that.

Contradictions in privacy

In the xkcd comic, I’d be the nihilist; I don’t attach much value to my own privacy. Regardless of whether or not I choose to enforce it, I should have the right to privacy. But people who do wish to enforce their right unfortunately find themselves in the minority, and this is a problem. Because the vast majority of people are like me and will happily share their photos with Facebook, their internet history with Google and absolutely everything with the NSA (whoever they are), the maintenance of privacy is made almost impossible.

Though I’m not willing to expend much time or effort maintaining my own privacy (and it appears I’m not the only one), I do still have concerns about the erosion of privacy more generally and the apathy of people like me. See the TED talk at the bottom of this page for some good reasons. In the UK, 62% of internet users use FacebookYou needn’t be a crypto nut to know that using Facebook is a very efficient way to forego your right to privacy. If people wish to engage in activities that the majority of the population does, like join Facebook or use a mobile phone, they are given little choice but to jeopardise their own privacy. Many internet companies depend heavily on the use of our data, and because the majority of people are willing to share their data freely, the companies needn’t offer individuals the option to maintain a good level of privacy. But what would a life be like without Google or Apple or Microsoft or Facebook? Great, probably, but that’s not the point. People value these services and much of modern life depends on them. It’s easy to see how maintaining one’s privacy could result in social exclusion and have implications for one’s career. Why should we have to become the savage to save our right to privacy?

The way I see it is that my apathy imposes an externality on others; increasing the cost to those who value their privacy whether they choose to use privacy-jeopardising services or not: by decreasing the services’ protection of privacy if they do, and by entrenching the use of such services as a social norm if they don’t. The erosion of privacy is more costly to society than to the individual. I don’t know what the solution is, but it will surely have to come from a paternalistic state. Proper allocation of property rights might not be enough. There’d have to be serious regulation. Or you could take the incentives route. You could tax me, for one. Or tax the companies. By sharing my data with the world, Google et al are denying those concerned about their privacy the right to engage in almost-ubiquitous activities of modern society. Attaching a price to my private data, a tax for every nugget of information they share – regardless of whether I have given them permission or not – may discourage them from doing it quite so much.

“In fact,” said Mustapha Mond, “you’re claiming the right to be unhappy.”

“All right then,” said the Savage defiantly, “I’m claiming the right to be unhappy.”

“Not to mention the right to grow old and ugly and impotent; the right to have syphilis and cancer; the right to have too little to eat; the right to be lousy; the right to live in constant apprehension of what may happen to-morrow; the right to catch typhoid; the right to be tortured by unspeakable pains of every kind.”

There was a long silence.

“I claim them all,” said the Savage at last.

– Aldous Huxley, Brave New World

#100wordreview – The Undercover Economist Strikes Back (Tim Harford) [Book]

Tim Harford brings us some macro. For me, a less interesting topic than those of his previous books. Nevertheless, he’s a great writer with a knack for simplifying tricky concepts and, as with his previous books, this is an enjoyable read. Harford only really dips his toe into the complexities of macroeconomics, but I was still able to gain a better perspective on the current debates; the different arguments being stripped – as far as possible – of the politics that envelop them. The book is exhaustively researched and the reader is treated to plenty of interesting factual and historical tidbits throughout. 

New working paper – ‘Happy and healthy: a joint model of health and life satisfaction’

Mónica Hernández-Alava, Allan Wailoo and I have just released a new working paper. You can access it through RePEc here. The paper builds on previous work (mainly by Paul Dolan) looking at subjective well-being as a potential means of valuing health benefits. Our study, however, identifies a number of limitations of these existing studies and offers a solution to some of their problems. Furthermore, our findings contradict some of those reported in previous studies.

Here’s the abstract:

Subjective well-being has been proposed as an alternative to preference based values of health benefit for use in economic evaluation. We develop a latent factor model of health and well-being in order to compare reported satisfaction with life, satisfaction with health and SF-6D responses. This approach provides a coherent, integrated statistical framework for assessing differences between these outcomes on the same scale. Using panel data from the British Household Panel Survey we find that SF-6D and satisfaction with health are influenced to a similar degree by changes in latent health and satisfaction with life is less responsive. For the average individual, there are no substantial differences in the relative impacts of physical versus mental health conditions between the three measures. These findings suggest that the differences between experienced and hypothetical values of health and life satisfaction may not lead to substantial differences in the assessment of value from health technologies.

This paper has been a long-time coming, and is barely recognisable from its earlier incarnations. It started out as my MSc dissertation, which was completed in 2010. Since then a slightly improved version appeared at HESG in Exeter earlier this year, after which the study got something of an econometric makeover. Please do have a read of the paper if you’re interested in this area of research and we’d welcome any comments you might have.