(ngrams) Economists know many useful things about human social behavior, and about how to improve it. And the world would probably be better off if it listened to economists more. But while the world respects economists enough to mention when their analyses support favored policies, people are much less interested in deciding what to favor based on econ analyses. What could get people to listen more?
As a management consultant myself, I see how my profession often takes very basic theories from other firms and fields and repackages them in a way as to sell on the illusion that it is a "unique product provided by our firm". So Bain "invented" their ROS/RMS matrix as to not have to present the "BCG matrix" to their clients... McKinsey recommends "five big strategic moves", Strategy& talks about "Capabilities-Driven Strategy with How to Play and Right to Win" as if Roger Martin didn't exist... etc etc
So how could we make it better? There is no incentive to attribute credit for the underlying ideas, as no one else does it and clients are more interested in the final recommendation than in the whole idea genealogy anyway.
One idea I had was to make a consultancy that trawled and used ideas from any competitor, and entirely avoided this "thought leadership" arms race. Since ideas can be good or bad no matter where they come from, in this model being well-informed might make a difference... And economists with access to cutting edge ideas could be great partners.
The main impediment, however, is that consulting is mostly based on preexisting relationships. Really difficult to start a new firm unless you're an established partner with lots of connections, and if you're one of those there's not much incentive to change the business model and rock the boat.
US real GDP per capita has increased by about a factor of 4 since 1950. Then, why don't typical workers in the US have 4x the income? If we are producing 4x as much stuff per capita, who is getting all the stuff?
So few people publish in industrial organization, and few students take classes in it. Really? I thought IO was a pretty popular field of academic economics. It certainly is at my school. It is true that IO theory is not popular. IO these days is more about structural empirical modeling.
It is perfectly reasonable to have the concept of interventions that improve the welfare of some without reducing the the welfare of anyone. The problems are the widespread promotion of the idea as desirable and the christening of the concept with the grand term of "economic efficiency". As a self-professed "efficient economist", I think we have to classify you as one of the promoters.
Most economists find the concept of "econ efficiency" to be useful. And taxing the rich does have costs that are worth knowing about. Just as taxing any other group does.
Economics is sometimes the victim of smear campaigns.E.g. see: "The dirty secret of capitalism": - https://www.youtube.com/wat...Many of the social sciences are controversial. Practitioners keep attacking each other and accusing each other of over simplification - and other sins. Think about evolutionary psychology, for example. In economics, 'homo economicus' has become a well-known example of this. The resulting shouting matches generate noise and become how the profession is viewed from the outside.
Lastly, some economists are in powerful positions and as such need to take extra care to avoid corruption. For example, they tend to be paid by the rich and so there is a natural tendency to produce science that supports policies that favor the rich. An example is the idea of "economic efficiency". Taxing the rich and redistributing their wealth is apparently not "economically efficient" - since it tends to make rich people worse off. It does seem as though many economists could have done better to avoid corruption. Or at least, they could have hidden their tracks better.
Good article. Too many academic economists focus on policy rather than business implications. This is silly, given how few students end up making public policy, compared to how many students go into business jobs.
IO is useful, but don't forget macro. We know which industries tend to be more cyclical, which less. We know which industries tend to move before the overall economy, and which later. We know why capital-intensive industries often have greater price volatility than less capital intensive industries.
The "theory of the firm" doesn't seem to describe firms in a way that business people regard as being accurate, and maybe confusing that with other economic theories related to industry has put people off economists in the area of business strategy.
Also, I don't know about implicit theories. Would a group of people all have the same theory internally that is fundamentally related to what they are doing without it ever being expressed and becoming explicit? Surely one of them is going to talk about it, or in fact the group is acting without anything as thought out as a theory.
As a management consultant myself, I see how my profession often takes very basic theories from other firms and fields and repackages them in a way as to sell on the illusion that it is a "unique product provided by our firm". So Bain "invented" their ROS/RMS matrix as to not have to present the "BCG matrix" to their clients... McKinsey recommends "five big strategic moves", Strategy& talks about "Capabilities-Driven Strategy with How to Play and Right to Win" as if Roger Martin didn't exist... etc etc
So how could we make it better? There is no incentive to attribute credit for the underlying ideas, as no one else does it and clients are more interested in the final recommendation than in the whole idea genealogy anyway.
One idea I had was to make a consultancy that trawled and used ideas from any competitor, and entirely avoided this "thought leadership" arms race. Since ideas can be good or bad no matter where they come from, in this model being well-informed might make a difference... And economists with access to cutting edge ideas could be great partners.
The main impediment, however, is that consulting is mostly based on preexisting relationships. Really difficult to start a new firm unless you're an established partner with lots of connections, and if you're one of those there's not much incentive to change the business model and rock the boat.
US real GDP per capita has increased by about a factor of 4 since 1950. Then, why don't typical workers in the US have 4x the income? If we are producing 4x as much stuff per capita, who is getting all the stuff?
So few people publish in industrial organization, and few students take classes in it. Really? I thought IO was a pretty popular field of academic economics. It certainly is at my school. It is true that IO theory is not popular. IO these days is more about structural empirical modeling.
It is perfectly reasonable to have the concept of interventions that improve the welfare of some without reducing the the welfare of anyone. The problems are the widespread promotion of the idea as desirable and the christening of the concept with the grand term of "economic efficiency". As a self-professed "efficient economist", I think we have to classify you as one of the promoters.
Not taxing the tall :)
Most economists find the concept of "econ efficiency" to be useful. And taxing the rich does have costs that are worth knowing about. Just as taxing any other group does.
Economics is sometimes the victim of smear campaigns.E.g. see: "The dirty secret of capitalism": - https://www.youtube.com/wat...Many of the social sciences are controversial. Practitioners keep attacking each other and accusing each other of over simplification - and other sins. Think about evolutionary psychology, for example. In economics, 'homo economicus' has become a well-known example of this. The resulting shouting matches generate noise and become how the profession is viewed from the outside.
Lastly, some economists are in powerful positions and as such need to take extra care to avoid corruption. For example, they tend to be paid by the rich and so there is a natural tendency to produce science that supports policies that favor the rich. An example is the idea of "economic efficiency". Taxing the rich and redistributing their wealth is apparently not "economically efficient" - since it tends to make rich people worse off. It does seem as though many economists could have done better to avoid corruption. Or at least, they could have hidden their tracks better.
Good article. Too many academic economists focus on policy rather than business implications. This is silly, given how few students end up making public policy, compared to how many students go into business jobs.
IO is useful, but don't forget macro. We know which industries tend to be more cyclical, which less. We know which industries tend to move before the overall economy, and which later. We know why capital-intensive industries often have greater price volatility than less capital intensive industries.
Good think I suggested it is industrial organization that is useful, not theory of the firm.
The "theory of the firm" doesn't seem to describe firms in a way that business people regard as being accurate, and maybe confusing that with other economic theories related to industry has put people off economists in the area of business strategy.
Also, I don't know about implicit theories. Would a group of people all have the same theory internally that is fundamentally related to what they are doing without it ever being expressed and becoming explicit? Surely one of them is going to talk about it, or in fact the group is acting without anything as thought out as a theory.
When will economists start listening to economists?