The Lost Art of Economics by David Colander (Overview)

Colander is more than willing to turn his sights inwards at the profession and critique it.  He says economists have lost the ability to adequately address policy through an unjustified search for positive formal grounds.  Due to this, academics have also lost touch with their intended purpose of teaching.  Further more, the profession (like all institutions) contains perverse incentives.  I appreciate the insight and advice on actually being an economist, especially from one not completely enamored with the status quo.

The Lost Art of Economics by David Colander (Part 2)

Ch 6–

Notes: Keynessianism should still be taught in intro, although not necessarily under that name. Specifically, it should be taught as a “vision that does not assume that the market economy – left to its own devices – will necessarily gravitate toward a preferable equilibrium.”

Economics exam questions always stay they same, the answers just change/

Classical model + Keynesian insight that initial shocks can lead to an undesireable position

Teach the middle ground; no pendulum that swings drastically between theories

Keynes is to be partially blamed for trying to distinguish himself from Classicals be overemphasizing differences

Ch 7–

The Yeah Criterion – gut level satisfaction of an explanation – as motivation for research

Chicago style econ (both in terms of method and results) gives lots of intuitive, satisfying answers, but they don’t always hold

MIT style focusses on formal method and is often sterile and limits the Yeah criterion.

“Models should be as simple as possible, but not more so.” –Einstein

Math as language, and language is limiting and contains implicit assumptions

Colander as gadfly – jumping between subjects that interest him

Colander’s experience with Abba Lerner

Textbooks provide a wide forum while providing foundations for future

Ch 8–

Surviving as a slightly out-of-sync Econ’ist

Tenure hardly granted by stated rules

Most realities of econ’ist’s life learned at hotel bars at econ conferences

First, one should make a reasonable decision about how to do economics. Ask what econ should be, and whether it is what it should be. What is your role in furthering your conception of econ?

To Colander, primary reason for econ’ists is to teach

Clander’s rules of teaching

1. Consider teaching important. Spend lots of time preparing. Excite students.

2. Don’t let the medium become the message. Teach econ, not technique.

3. Spend time with your students. Read broadly and carry that into class. Talk the student’s language.

4. Teach w/ passion, or don’t teach.

5. Use examples that relate to your students. Relate economic reasoning to their life.

6. Distinguish among various types of models. Use technical modeling as a method of exercising students’ minds; do not apply the models when they don’t really apply.

7. Listen to others’ advice on teaching, but don’t necessarily follow it.

Research is important as a means to good teaching.

Rules for good teaching-relevant research:

1. Ask meaningful questions; a layperson should be interested in the results, and you should be able to explain why

2. Ask manageable questions. By that I mean asking questions that can be dealt with using data you have availible for research and choosing a research question with which you have sufficient time to deal.

3. Use a research technique and mode of expression with which you are comfortable. Otherwise the technique overwhelms the analysis and you lose judgment.

4. Know previous research don eon the subject – and be able to explain how your research fits in. You should expand, not duplicate.

5. If you use econometrics, you should be familiar with the methods of collecting data, and with the institutions from which that data was drawn.

6. Do not be falsely scientific.

7. Carefully consider thequestion of your research from all sides.

8. Do not violate the law of sig figs. Be no more precise than the least precise dimension of the question analysed.

However, your work is constrained by the demands and incentives of the profession.

Compromise only as much as is necessary.

Hiring is done by credentials. Know important people and develop meaningful contacts. Know others’ research and methods to make a good impression. Hiring is internal to a school; don’t move around too much.

Research largest component of tenure. Publish in the “right” journals. Total immersion in the question is imperative. Have some gumption about your work; don’t blatantly structure it to impress others.

By the time something is published in a journal, the issue is usually dead. Attend workshops and seminars to join the conversation.

Steps:

1. Decide what good econ is.

2. Decide what determines success in your institutional enviroment.

3. After becoming successful, you will have rents to spend on your work.

4. Work towards changing perverse incentives.

Ch 9–

Notes: Ecn’ists fear being called artists.

Results upheld even when data turns out to be in error (instance of Martin Feldstein and social security on savings)

There is an optimal amount of disagreement in a profession, but that disagreement must be focussed in contructive ways.

Incentives to disagree (GATT talks in Geneva; pleasent meals in comfortable surrounding continued as long as they disagreed)

Study your opponents and know their position in a way they would approve of.  Incentive discourage this though.  Many disputes are resolvable, but continued to milk more publications out of them.

Formality replaces intuition, but formality has not lived up to its expectations.

Institutions screen out those wary of math or willing to challenge assumptions.

Be open about the true nature of disagreements.

Ch. 10–

Changes recommended by COGEE report unimplimented in grad school.

Formalist, deductivist and generalist , inductivist mindsets needed, but generalist are weeded out, except for perhaps rare few that are both.

Colander’s proposal: set up two tracks; one to develop formal thoery, and another for jobs in undergrad teaching, business, and gov.

Ch. 11–

Neoclassicism is dead.  Not the content, but the name.  Modern econ is on a much different footing than what is correctly termed neoclassical.

Terminology is important.  Clasifications should help organize thinking in a way understandable to nonspecialists.  Terms should be intuitive and acceptable to practioners.  They should work over time (no new, neo-, or post-).  Classification should describe content, not harbor an agenda.  It should be consistently defined.

“Classical” invented by Marx.  Is Smith even classical? “Neoclassical” by Veblen.  Originally Marshallian synthesis of Smith, Ricardo, & Mill and Jevons & Menger.  Then all marginalists.  Keynes lumped classical and neo’s together.

Currently used to refer to 1870-1930 period, and broadly for modern mainstream.

Central attribute of modern econ is modelling.

Colander proposes “New Millennium Economics”

Game theory supplemented with experimental econ and complexity theory as hallmarks of new millenialism.

Ch 12–

Virtual universities, increasing specialization, redefined boundaries between currently distinct grad schools, replacement of losse-fitting positivism w/ pragmatism, and focus on complexity theory possible changes in next 50 years.

The Lost Art of Economics by David Colander (Part 1)

Ch 1–

Notes: J. Neville Keynes tripartite distinction of econ: positiv, normative, and the art of econ.

Results are only as precise as the least precise part of the calculation.

Empirical work is not to test theories (although this may be the case in regards to positive econ), but to apply them by adding in contextual reality.

Significance: Applicability should always be kept in mind. Positive econ reveals details about means, thus through the art of econ, we can comment on policy. Both issues must be kept in mind.

Questions: To what degree do other fields need to e integrated in order to deal with contextual, empirical issues?

Connections: The Ethical Assumption of Econ by Roderick Long (lecture at Mises University)

Ch 2–

Notes: Positive: Economy as it is; understanding for its own sake

Normative: values; formal or heuristic

Art of econ: bridges between pos and norm; broad and applied

Study methodology by what economists do, not what they say about method

Friedman’s rules for doing econ (as claimed by Hirsh and de Marchi)

1. Develop and “outside” view of behavior

2. Start w/ observation

3. Test implications continually

4. Use best knowledge and theory available

5. Do not seek answers “in principle”; address the concrete

Ch 3–

Notes: Colander’s Rules for doing econ

1. Do not violate the Law of Significant Figures

2. Be objective & use “reasonable person” criterion to judge policy

3. Use best theory available

4. Take in all dimensions of a problem

5. Use whatever empirical work sheds light on the issue at hand

6. Do not be falsely scientific; present only convincing empirics

Simple scatterplots are often more useful that complex econometrics

Questions: What is vector autoregression?

Connections: Economics and the Real World by Andrew Kamarck

Truth and Precision in Economics by Thomas Mayer

Ch 4–

Notes: Understanding policy requires an understanding of operational detail.

Paul Volkner’s tale of the fish-loving squirrel and the wise owl who told him to become a kingfisher was best policy; how to become a kingfisher is just “operational detail”

Operational detail: institutional and context; subtle differences

Kyland and Prescott on optimal v. consistent policy; feedback effects and discretion v. rules

Economics is science of modelling and accurate models for policy require institutional knowledge

Ch 5–

Notes: Economics seems boring to intro students because it tries to tie an exciting story with a formal model. Enthusiasm is lost as the story is translated through models; better to go straight from researcher’s general understanding to student’s general understanding. Formalism can be taught as mental exercise. Models suitable for intro students also limit the number of stories that can be told. Case studies as an integral part of historical approach to growth, for example. Simulation as a possibility.