Rodrik on Economics and Economists!

Dani Rodrik argues that we should blame the economists, not economics:

“The fault lies not with economics, but with economists. The problem is that economists (and those who listen to them) became over-confident in their preferred models of the moment: markets are efficient, financial innovation transfers risk to those best able to bear it, self-regulation works best, and government intervention is ineffective and harmful.

They forgot that there were many other models that led in radically different directions. Hubris creates blind spots. If anything needs fixing, it is the sociology of the profession. The textbooks at least those used in advanced courses – are fine.

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Economics is really a toolkit with multiple models – each a different, stylized representation of some aspect of reality. One’s skill as an economist depends on the ability to pick and choose the right model for the situation.” (Read the full article here!)

If Dani Rodrik is right (he usually is), then it would not be far-fetched to argue that many economists do not know much about the nature and limitations of their models. Btw, I am rereading Stiglitz’s (1991) piece on the invisible hand and modern welfare economics, where he makes his case for the limitations of the (modern) invisible hand theorem. Maybe economists did not listen to Stiglitz and others who were aware of these limitations. But, it is never too late: Start by following Rodrik’s blog and check out his book: One Economics, Many Recepies

I think, philosophers of economics should pay close attention to Rodrik’s characterization of economic models.