Approaches to Economic Science

Transcription

1 S.1 Approaches to Economic Science Part 4: Social Science and the Social System (Module MW26.1) Prof. Dr. Andreas Freytag Friedrich Schiller University Jena

2 1. Introduction Her Majesty The Queen... Madam, when Your Majesty visited the London School of Economics last November, you quite rightly asked: why had nobody noticed that the credit crunch was on its way? The British Academy convened a forum on 17 June 2009 to debate your question, with contributions from a range of experts from business, the City, its regulators, academia, and government.... So in summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole... Besley, Timothey et al. (2009), Letter to the Queen. Homo Oeconomicus, S.2

3 S.3 1. Introduction Her Majesty The Queen... Madam, We are writing both in response to the question you posed at the London School of Economics last November concerning why few economists had foreseen the credit crunch and the answer to you from Professors Tim Besley and Peter Hennessy dated 22 July. We agree with many of the points made by Professors Besley and Hennessy... but we regard their overall analysis as inadequate because it fails to acknowledge any deficiency in the training or culture of economists themselves the letter by Professors Tim Besley and Peter Hennessy overlooks the part that many leading economists have had in turning economics into a discipline that is detached from the real world, and in promoting unrealistic assumptions that have helped to sustain an uncritical view of how markets operate... Hodgson, Geoffrey et al. (2009), Letter to the Queen, Homo Oeconomicus, 2010.

4 S.4 1. Introduction What do these letters tell us? 1. Social science is prone to extraordinary failure 2. This holds particularly if it becomes essentially self-referential! 3. Social science is not a monolith; its representatives differ from each other wrt methods and aims 4. Problems within social science reflect difficulties of social science to define its relationship with society 5. Social science has an obligation to deliver valuable research 6. Social science has to justify its existence (see the development of humanities in UK) See also: Symposium: Letter to the Queen, Homo Oeconomicus, Volume 27, No 3 (2010), contributions by Peter Skott, John Hudson, Andreas Freytag, Leif Helland, Gebhard Krchgässner, Alain Marciano and Heinz D. Kurz

5 S.5 Problem #1: Economics and other social sciences are dealing with very complex systems Problem #2: Researcher is part of the system endogeneity? Problem #3: What is the quality of science? Problem #4: What is and should be academic independence? Problem #5: Public financed academia and its freedom? Problem #6: He who pays the piper calls the tune? How to deal with external partners? Problem #7: Honesty Problem #8: Students

6 S Problem #1: Economics deals with very complex systems Economics and other social sciences are dealing with very complex systems The fact that social interaction is subject of our analysis makes it difficult to get the full picture in theoretical and empirical models. Strict assumptions axioms ceteris paribus clause endogeneity problem feedback loops There is a need for simplification math is necessary.

7 S Problem #1: Economics deals with very complex systems Some economists criticize the mainstream for using models, e.g. critical realists. Others do not like the models for their pro-market approach (Letter #2); however: Are neoclassical economists really liberals? They talk of a social planner They almost never mention government failure They speak about Nudging In fact, a very naïve approach! Others do not appreciate the neglect of institutions and the static nature of many models. Others do not believe in steady-state equilibria.

8 S Problem #2: Researcher is part of the system Researcher is part of the system endogeneity? The problem is that the modeler herself is part of the model. Does this imply a bias? Can we imagine models without our own value judgements? Prognosis: own objectives? Consulting, policy advice: own objectives? In a television talk show, a leading German politician claimed that an economics professor, who is a civil servant should not give advice about wage flexibility. The professor is not able to judge it as he never is in such a situation, so the justification. Right? Hypothesis: since everyone is part of the economy, the respect for expertise is low.

9 2.3. Problem #3: What is the quality of science? How to measure quality? Who measures quality? External benchmark? economic growth? (community as such) appearance in the media? (single scientists) official prizes? appointment in advisory councils etc? salary? students judgements?... Internal benchmark? Nobel Prize, other prizes? quotations? rankings? hypothesis: Rankings mirror the inability of scholars to judge their colleagues! fundraising? administrative work? what about fashions and trends? (Kuhn: marginal revolution) publishing as prostitution? S.9

10 S Problem #3: What is the quality of science? Internal benchmark and their consequences: Should publications be the only measure of quality? Can teaching and research be separated meaningfully? Is it likely that pressure to publish (or lose the job) increases productivity? Who will work in the faculty council or in other administrative capacities if these activities are not counted in favor? Therefore: a mixture of both external and mainly internal benchmarks is optimal!

11 2.3. Problem #3: What is the quality of science? Digression: The Economics of the Nobel Prize The unofficial criteria of the Nobel Committee are: specificity, originality and importance. It seems that Economics moved away from that group. In reality: Missionary or technician? Background: Chance or temptation? World views? Family background? Role of teachers? History s heavy footprint Lone wolf or tribal animal? Puzzle solvers or system builders? Puzzlers or masters? The unlikely source of crucial ideas What fish in what pond? Notions of progress? Substitutive, cumulative and circular progress Science vs. scientism? Horn, Karen (2009), Roads to Wisdom, Conversation with Ten Nobel Laureates in Economics, Cheltenham and Northampton: Edward Elgar. S.11

12 S Problem #4: What is and should be academic independence? In a television talk show, a leading German politician claimed that an economics professor, who is a civil servant should not give advice about wage flexibility. The professor is not able to judge it as he never is in such a situation, so the justification. So why should a professor be a civil servant? Compensation for high insecurity at the start of a career? [no] Financial independence allows independent research? [depends] Civil servant status makes independent form government order? [depends] In effect, there is no need to grant professors the status of a civil servant.

13 S Problem #4: What is and should be academic independence? However, academic independence can be very helpful for the academic work (both teaching and research) Imagine social science professors who argue scientificly funded about the role of government in education, the economy etc. If they are too dependent on the government and have very flexible work contracts at the same time, they might be subject to pressure to teach the right themes and lessons. Can they teach revolution (Problem #6)? This is not the only aspect of academic independence: Financial independence vs. laziness! third interested parties (Problem #7) Buchanan, James (1979), What Should Economists Do?, Chapter 14: Public Finance and Academic Freedom, Indianapolis: Liberty Press.

14 S Problem #5: Publicly financed academia and its freedom? This problem is closely related to problems #5 and #7. What can the public expect from academia which it finances? obedience? critical minds? independent research? independent critical teaching? what is critical: can the public afford to pay teachers who call for marxist revolution? public universities and subsidized consulting? public universities and patents?

15 S Problem #6: How to deal with external partners? He who pays the piper calls the tune? How to deal with external partners? Social scientist are involved in policy advice and consulting of private agents. This makes them vulnerable for corruption, media attention and bribery as well as hijacking. Corruption: the results are biased. Media attention: Professors are vein. Hijacking: interested parties claim that the results of research have certain policy implications (theory of strategic trade policy) To protect oneself from these dangers, it is sensible to base policy advice on peer reviewed research (cross-checking). The financial independence may help (Problem #6 and Problem #5).

16 2.6. Problem #6: How to deal with external partners? Reputation and Commitment in Consulting Short term vs. long term Independence might be costly, as some attractive research and consulting projects will not be raised. Nevertheless, it may be very helpful to build up a reputation as being incorruptible. Reputation matters: An independent thinker may well be highly appreciated in the public and raise projects in the long run. Nota bene: it may be adverse to the interests of the consulted firm, government branch or the like to insist on certain results or their absence In particular, young scholars cannot afford to be too accomodating. There is the trade-off between research and personal money on the one hand and reputation on the other hand. S.16

17 S Problem #7: Honesty 1. There have been a number of spectacular cases of plagiarism of PhDs in German politics. These people have: copied without citing and/or obviously hired ghostwriters. 2. In other cases, authors have submitted the same paper several times to different journals without cross-citations several publications of (exactly) the same content but different title (sic!) 3. Others treat their data until the results are fitting the expectations spectacular cases in natural science. 4. There also have been cases of applications for grants with fake publications. All forms of dishonesty have to be rejected and punished.

18 2.8. Problem #8: Students Finally, we come to the objects of this class, this time treated as subject of the course. Universities offer higher education in an increasingly competitive environment. They are dependent on high enrollment as otherwise the public funding dries out. students fee and the incentives Bologna-Reform accreditation niches transferability employability Rankings and their meaning (cantines, grades etc.) Competition and the mass university Alumni and their tasks Frey, Bruno S. (2010), Withering Academia?, Munich: CESIfo, S.18