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Home | Blog | What Economists Are Not—And Shouldn’t Try to Be

What Economists Are Not—And Shouldn’t Try to Be

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Tags Austrian Economics OverviewEntrepreneurshipInterventionism

A NBER working paper published this month purports to show how economists, who now undertake more and more policy work, should see their job in terms very similar to plumbers. The author, Esther Duflo, argues that “economists should seriously engage with plumbing, in the interest of both society and our discipline … [since] plumbers try to predict as well as possible what may work in the real world, mindful that tinkering and adjusting will be necessary since our models give us very little theoretical guidance on what (and how) details will matter.” She goes on to explain, using discussions with policymakers and top bureaucrats as a starting point, that “economist-engineers” and “economist-plumbers” (as opposed to “economist-scientists”), can help governments figure out the minute details of policy implementation, such as particular consumer preferences, what incentives might work to get people to embrace an affordable care act, or even how to make government employees work hard and for the interest of the citizens.

In contrast, I’d like to suggest three things economists are not that undermine this entire proposition.

First and foremost, economists are not entrepreneurs. The solutions Duflo sees economists providing to policymakers, such as designing a detailed, robust plan and implementation of “a school choice mechanism, an auction, or an exchange market for a kidney” can in fact only be provided by entrepreneurs. Economists, as she herself admits, can only “guess” and “wait” to see what the effects of such policy designs might be. This is because economists and the governments they advise, unlike entrepreneurs, cannot perform future-oriented economic calculation from outside the market. Duflo talks about health reform in Kerala, India, and asks incredulously: “did the planners really think it was going to be possible for health care professionals to spend a lot more time on public health and prevention when there were only two doctors for every 30,000 people?” (Duflo 2017, 10). And why not? What is in fact the correct number of doctors and activities they need to perform per 1,000 people? No amount of agonizing over the details of this particular healthcare program could correctly answer this question, and thus make economic calculation possible under central planning. At least Indian bureaucrats are not wasting time on things they can never achieve.

Second, and equally important, economics is not a profession, but a vocation. Economists should agonize about the immutable laws of economics and the truth of real-world prices and markets. That is all. As much as they like to think of themselves as superior human beings, they cannot “tinker” with the implementation of governmental programs in any meaningful or effective way that would make the latter any less distorting or useless. Entrepreneurs solve the problems in society that governments claim to want to solve, but only if the bureaucrats’ constant meddling is scrapped entirely.

Three, economists are not poets. It is thus best, for the “discipline and society” alike, if they abstain from making tortured analogies. While sometimes useful, such as in teaching economics to undergraduate students, analogies and metaphors do little for the advancement of the science itself. More often, they actually detract from and obscure the truth of the principle or concept one tries to expose. For example, Adam Smith likened money and banking in a society to a “waggon-way in the air,” a metaphor which grew into the now inescapable dogma that money and monetary policy are neutral with regard to relative prices in an economy. This led to another misleading analogy between changes in the price levels and the principle of communicating vessels from physics. The history of economic thought is littered with figures of speech that have betrayed the truth of economic laws, and Duflo’s essay commits a similar error.

Economists should not “design the tap” or “lay the pipes” of economic policies. The market doesn’t need “economist-plumbers” (or “economist-scientists,” for that matter) any more than it needs government intervention in the first place. 

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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