Organizations and Markets

More on Economics and the Contiguous Disciplines

28 June 2006 at 12:01 pm Peter G. Klein 1 comment

| Peter Klein |

Monday’s post on the accusation that contemporary economists focus too heavily on “puzzles,” rather than real problems, elicited a number of interesting responses. Tom Schenk alludes to Coase’s suggestion that economists are shying away from their traditional areas of interest because they can’t solve the standard problems. Coase is worth quoting in full:

Economists are extending the range of their studies to include all of the social sciences. . . . What is the reason why this is happening? One completely satisfying explanation . . . would be that economists have by now solved all of the major problems posed by the economic system, and, therefore, rather than become unemployed or be forced to deal with the trivial problems which remain to be solved, have decided to employ their obviously considerable talents in achieving a similar success in the other social sciences. However, it is not possible to examine any area of economics with which I have familiarity without finding major puzzles for which we have no agreed solutions, or, indeed, questions to which we have no answers at all. The reason for this movement of economists into neighbouring fields is certainly not that we have solved the problems of the economic system; it would perhaps be more plausible to argue that economists are looking for fields in which they can have some success.

Steve Sailer, who has gained a reputation as Steve Levitt’s most vocal critic (1, 2), suggests that the problem is not the application of economic analysis to neighboring disciplines per se, but rather economists’ tendency to apply their tools to subjects in which they lack the necessary background knowledge and expertise. “My objection to Levitt’s work is not that he’s wasting his vast analytical powers on trivial subjects, but that his analytical powers have too often been found inadequate for the magnitude of his subjects.”

In a follow-up email Sailer puts it this way:

[T]he freakonomists who are turning themselves into general purpose social scientists tend to be worse at the non-economic social science than the specialists in the field.

For example, Levitt “discovered” that legalzing abortion had reduced crime by looking at crime rates in 1985 and 1997 and noticing that they had gone down, which he attributed to the legalization of abortion from 1970-73. But not being a criminologist, he had totally failed to observe that crime rates among teenagers had shot upward between 1985 and 1993-94, which is the exact opposite of what his theory predicted. . . .

Similarly, when Levitt ventures into psychometrics, he’s limited by his not knowing very much about psychometrics, all that doesn’t stop him from promoting grandiose conclusions about nature and nurture.

The truth is that a Ph.D. in economics doesn’t give somebody much special insight into pronouncing on venerable problems in non-economic fields.

To what extent is this complaint — that economists don’t know enough about strategy or organizations or leadership to make contributions to those fields — behind the critics of economics we’ve discussed on this blog many times? Is the complaint justified?

Entry filed under: - Klein -, Management Theory, Methods/Methodology/Theory of Science, Strategic Management.