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Is Economic Theory in Academia on the Decline?

March 8, 2011

I just came across an interesting post discussing the difficulty that Economics grad-students who specialize in the study of pure economic theory are facing in the academic job-market.

Click Here for the Original Post

I wonder what has caused this supposed difficulty? Is it that Economics has come so far in rational choice models that little progress is left to be made? Is this why behavioral models and theories that do away with many of the assumptions of rational choice have had so much momentum recently? Or maybe in the face of the current economic crisis such theories have lost their use?

Click Here for my analysis of the situation:

Analysis

I would say the latter certainly isn’t so if you look at some of the recent winners of the Nobel Prize in Economics: George Akerlof and Joseph Stiglitz. They are both putting out interesting theoretical work which pushes how we understand rational choice models but also lends itself to policy prescriptions relevant to the financial crisis. If you’re interested in this just look at Stiglitz’s Nobel Prize speech.

I think the explanation is more behavioral. Within academic Economics, theorists often get the reputation of being a bit nerdy and a bit too focused on mathematical magic. Thus the problem may lie in a lack of social and teaching skills on the part of these students. My experience has been that most professors who specialize in economic theory are poor teachers. Further, if econjobrumors is filled with economic theorist trolls as this blogger points out, then comments such as these indicate a profound amount of sexism and lack of basic social etiquette amongst economic theorists.

Further complicating things is a belief I hold, and have heard others in the profession voice, which is that the best economic theorists are not pure economic theorists. Rather many interesting economic theories come out of doing applied economic work. As a comparison, I suggest you to try to think of significant theoretical discoveries from economists over the last 30 years; chances are few of them are from pure economic theorists. To come to interesting economic conclusions it helps to have a broad viewpoint of the world, something most economic theorists struggle with I believe.

Thus the problem economic theorists face is that by choice of specialization they have revealed themselves, and are viewed as subjects of a self-selection bias present in the discipline of Economics; whereby their contributions to both teaching and academics are likely to be less than other more diversified or applied economists.

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One Comment leave one →
  1. August 29, 2012 2:05 am

    I believe strongly that economists should be required to take Evolutionary ecology. How can you truly understand economics without being aware of niches and evolutionary pressure? Economists have their own models for selection pressure, but they don’t properly convey the predictive error, the runaway selection issues, and the industry inter-related issues. Any economist who knows what happens to Rain Forest land when you cut down the trees should be able to see the obvious analogy to first world country middle classes, for example, and anybody who thinks that electric batteries will spontaneously arise in one country while electric cars arise in another could stand to learn about habitats and support zones.

    Of course, now that I think about it, some theorists could probably learn this stuff and still not get the hint.

    I also think that economists should be familiar with basic chemistry. The math involved in a basic chemical reaction is very easily adapted to the problem of production opportunity meeting consumption opportunity and this is a very useful metaphor for explaining the concepts.

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