Apparently I've Ruined Economics (Again)

A few years back, the New Republic accused me of ruining economics.

Now The Economist magazine, in a much more subtle way, makes the same implication. Here’s the second sentence of an article entitled “What Went Wrong With Economics”:

A few years ago, the dismal science was being acclaimed as a way of explaining ever more forms of human behavior, from drug-dealing to sumo wrestling.

The article actually turns out to be an indictment of macroeconomics and financial economics — two fields I’ve had nothing to do with — so I can’t fairly take credit for the most recent ruination of economics. But I do appreciate their attempts to make me relevant.

I have one complaint though. The article is about how the models that macroeconomists thought described the economy have been revealed to work much less well than was previously believed. In contrast, my descriptions of drug-dealers and sumo wrestlers are no less applicable than when I did the research. Indeed, recent research by three Swiss economists suggests that my research on sumo actually changed the sport for a few years (they got rid of the sharp non-linearity that led to cheating, and the cheating disappeared), but later the non-linearity was reintroduced and the cheating came right back.

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  1. Science Minded says:

    I say you did not ruin economics, you made the “dismal science” just a bit more interesting or interesting to a bit of an exagerated extent, but not sufficiently interesting to warrant real optimism re its future. That’s my job– as will be the work of my fellow economists to carry on.

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  2. Mahdi says:

    It’s fairly rubbish criticism to say because from what I understood, your research is more bottom-up research than top-down…so how in the world you’re at fault for anything, especially ridiculous models, is not really understandable.

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  3. Vasanth says:

    Hi Steve,

    If it helps, you were one of the inspirations for me to read and delve into economics. I hope this doesn’t deter either of you from continuing to shine a light to everyday “economic” issues like why my real-estate agent is cheating me.


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  4. TimB says:

    There are interesting overlapping topics within Economics, Finance, and pure Statistics. I’d be interested in seeing that elaborated on in a Venn diagram kind of way.

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  5. Hannah says:

    Economics is far too broad of a field to claim that “Economics went wrong.” Sure economic models can fail, and they do all the time, but to claim the entire field is wrong or bad would be like saying psychology is failing because a theory was disproved.
    I would have hoped that a publication like the Economist would be a bit more specific.

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  6. Denys Usynin says:

    The Economist article is rubbish.
    There were plenty of economists who predicted the crisis, and plenty more who were warning that the financial system was on a non-sustainable path.
    That those voices were suppressed is not a failure of the economics itself. All the ideas and tools necessary to understand and foresee the crisis WERE available in the economics. That we humans chose to ignore them is our fault, not the fault of the science.

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  7. ktb says:

    Actually, the assumptions that macroeconomics models make which in retrospect may have been their weaknesses (the market will act rationally on average, and eventually any market will reach the ideal prices) are exactly the kinds of assumptions you DON’T make in your research (and because you work on small scale have the luxury of not needing to make). Presumably if you were able to apply profiles of realistic human participants in such a large scale model the model would be closer to real life…

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  8. JRC says:

    All those “other” economists are just jealous because they don’t have books on audio. ;)

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