[PEN-L:30044] Post-Autism in the Micro

[Ben Day <day@xxxxxxxxxxxxxx>]

Anyone else following the post-autism "debate" over the role of
microeconomics and game theory in economics curricula? What do folks think
of this? The latest Post-Autistic Review has short pieces by McCloskey and
Galbraith - Solow and and Blanchard had taken shots at the Post-Autistic
petition a ways back in Le Monde.

-----Ben

http://www.btinternet.com/~pae_news/review/issue15.htm
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Yes, There is Something Worth Keeping in Microeconomics
Deirdre McCloskey   (University of Illinois at Chicago / Erasmus University
Rotterdam)

Bernard Guerrien is severe on Messrs. [and no Mesdames, I note] Varian,
Schotter, Kreps,
Mas-Collel, Whinston, and Green, and I think he's quite right to be
so.  The usual idea of
"microeconomics" is, as Guerrien avers, formalism useful only for the
generation of articles in
the American Economic Review and worse.  It's scandalous that game theory
and GE and
overlapping generations and other mere existence theorems are taught as
"tools."  As we say
in American English (with thanks to Yiddish): tools, schmools. No physicist
would consider
such stuff scientific.  She would want tools that can measure.

The problem comes partly from a terminological confusion.  "Theorist" has
come to mean in
economics "guys trained in Mathematics-Department math."  (I note again
that this Hilbert/Bourbaki
style has nothing, nada, rien to do with the sort of math that physicists
and engineers actually
use to investigate the world; go have a look at The Physical Review and
you'll see what I mean.)
Since the "theorists" so defined can't do anything else (like give a
substantive course in
economic history or in urban economics), they get assigned to first-year
graduate courses.
It's their comparative advantage, considering that the department has made
the mistake of
hiring them in the first place.

The result has been a catastrophe for economic education.  Most economists
arrive on the
job without knowing how to think like economists.  In fact they've been
specifically and
elaborately trained by the "theorists" not to think like economists, but to
think like Hilbert/Bourbaki
mathematicians, though of course to a childishly simple standard.  (By the
way, a distinguished
committee of the American Economic Association was some years ago on the
edge of doing
something about the catastrophe; Bob Lucas vetoed the proposal, since he
wants economics
to carry on being unscientific.)

So I agree.  I highly recommend a pamphlet just published at the University
of Chicago Press,
The Secret Sins of Economics, which shows how thoroughly I agree.

My disagreement with Guerrien is merely this: if microeconomics were
properly taught it would
be obvious that it does indeed have numerous scientific uses.  Not the
Whinston and Green stuff,
on the whole.  Most of that is useless, unless you think "use" means not
"good for grasping the
world in a quantitative way" (called "science") but "good for generating
publishable articles."

Yet there is tons of really useful stuff in, say, (the lamentable George)
Stigler, The Theory
of Price, or in Steve Landsburg's or David [sic] Friedman's similar books;
or (if I may) in a
wonderful but neglected book published last in 1985, The Applied Theory of
Price.  (It's
available free in its entirety, diagrams and all, on the web site
www.uic.edu/~deirdre2; David
Friedman's is available free on his web site, too.)  If graduate courses
taught "micro theory"
in this sense-namely, ideas about how to show this or that effect in an
economy,
quantitatively-economists would be good scientists instead of bad
philosophers.  Some of
the economists, admittedly, survive the first-year courses and go on to
actually think
about economic ideas and to measure their oomph in the world.  But so do
some children
survive households with beatings and sexual abuse.

It just won't do, therefore, to say as Guerrien does that price theory (as
we Chicago types
prefer to call it) "obviously contradicts almost everything that we observe
around us."  Huh?
When OPEC (viz., Saudi Arabia) cut the supply of oil in 1973, didn't the
relative price of oil
rise, just as a simple supply-and-demand model would suggest?  And when the
population
of Europe fell by a third in 1348-50 didn't the ratio of wages to rents
double, just as a simple
production-function-and-marginal-productivity model would suggest?  The
point is that both
of these can be made as quantitatively serious as you want.  They are real
scientific ideas.
If you want to see hundreds upon hundreds of such examples, see The Applied
Theory of
Price---or, indeed, the serious scientific work of any serious economic
scientist, someone
actually trying to measure the oomph of an effect: Robert Fogel, say, or
Moses Abramowitz,
or Simon Kuznets (their teacher).

Let me put down the following challenge to the people who think they hate,
just hate,
neoclassical price theory.  Go work through a serious book about it-not the
"theoretical"
micro that Guerrien and I both think is silly---and do the applied
problems.  If you can't get
inside the hundreds of empirical exercises in, say, my book, or in the
applications of price
theory as they occur (obscured by nonsensical existence theorems) in the
neoclassical
literature then you don't really know what the tradition of
Marshall-Wicksell-Friedman-Coase-
Alchian is about, and you are not qualified to sneer at it, right?  Doesn't
that sound fair?
I think so, and I would apply it to my own understanding of Marxian or
institutional economics.
________________________
Deirdre McCloskey's books include  The Rhetoric of Economics (Rhetoric of
the Human Sciences), The Vices of Economists : The Virtues of the
Bourgeoisie, and Knowledge and Persuasion in Economics.