Economics

The dismal science Economics

Economic systems

$  Free market   €  Social democracy   ☭ Socialist economy

Major concepts

Corporation Securities fraud Section 501(c) Broken window fallacy Anarcho-capitalism

The worldly philosophers

Amartya Sen Friedrich Hayek John Lott Alexander Hamilton v - t - e

If you're looking for the definite article, see The Economist.

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“”The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.

—John Maynard Keynes, The General Theory of Employment, Interest and Money, Chapter 24 - Concluding Notes

Economics is a social science dealing with the production, distribution, and consumption of goods and services. Economics was originally a gentlemanly hobby and a relatively obscure research topic for a handful of academics but is a major branch of study today. While some economists conduct research and teach students at various universities around the world, most work in advisory roles in governments, or industry. Indeed, demand for the services of economists is essentially insatiable; there are virtually no governments, or international organization, without its own staff of economists.

There are several main branches of economics. Microeconomics studies the behavior of individual consumers, producers, and traders. Macroeconomics investigates the nature of the economy as a whole, taxation, the flow of investments, the level of income, among other aggregates. Other branches of economics include development economics, finance, labor, and international trade.

Economics is an objective discipline. It aims at highlighting facts and causal relations. In line with this objective, several studies have shown a high level of consensus of economists on various issues — on average. The degree of consensus of economists in a field was also found to be positively correlated with the amount of evidence gathered in this field. However, one should distinguish facts (what is) and political opinions (what should be). This is why, while agreeing on what the economy is, economists can, at least in theory, widely disagree on what the economy should be (the type of market (or lack thereof) that should be created by government, the role of state-owned-enterprises, fiscal policy, or tax), as it is an inherently political question. In practice, however, economists tend to agree on most subjects, and heterodox economics is much tinier than most people think (or wish). The Clark Center for Global Markets regularly poll over 80 prominent economists from Europe and America on a range of timely and relevant topics and usually (but not always) finds a strong agreement between them.

A 2015 review of the literature by Andrew C. Chang and Phillip Li found that there is a major replicability crisis in economic research. Chang and Li (2015) attempted to replicate the findings of 67 papers from 13 "well-regarded" journals using the data and code files presented by the authors of those studies, but were only able to replicate the findings of approximately half of those papers. Chang and Li (2015) conclude that overall economics research is "usually" irreplicable, and conclude their paper with recommendations to improve replicability in economics research. This is still much higher than other social sciences such as psychology though.

History

Economics has existed since the times of the Greeks. But this was mostly in the sense that people tried to put some kind of value to an object. Aristotle and lots of religions also talked about stuff like the evils of interest, ignoring that people pay to borrow money so they can (1) have the money now, (2) because they have a risk of defaulting on that money, and (3) you need to pay people to incentivise them to give up their money and hand it to some other chap, depriving them of the ability to use their money. There was also some stuff in the medieval ages, but this was mostly labour theory of value: the idea that something should be valued based on how much time someone spends making it.

But around the 1600s, there was some trash mercantilist ideas floating around Europe. Their big idea was 'why make shit elsewhere when you can make it here' and 'gold is shiny and pretty, so it must be valuable'. So nations decided, basically, to hoard lots of gold. Hoarding gold means that you need to export lots of stuff and import nothing, because when you buy stuff from abroad, you need to give gold to them to get it. The goldbugs have little gone beyond the 17th century. Also, consider if everyone did this at the same time: nobody would import anything… meaning that nobody would have anywhere to export to. But more fundamental is the presumption here that trade is bad. In reality, making things where doing so is more efficient means that you have more things. Trade is a means of making that happen. So, as basically every economist since the 18th century has said: Trade is good.

Around the turn of the 17th century, aristocats physiocrats were a bunch of rich landowners who decided to make a theory for why land was the real biggie. Their big thing was that farmers create all the wealth because everyone needs food. I mean, everyone does need food, but people also need things other than food. Their solution to how to grow the economy was really 'grow more food' and pretend everyone else doesn't exist.

Classical economics

Classical economics really starts around the 1770s. In the English-speaking world, we attribute this to Adam Smith's Wealth of Nations. His big contribution to nations and their wealth was that nations are wealthy because they make more stuff. And trading, division of labour, and allowing people to make things that earn them money, are means to make lots of stuff. Trade is a question of resource allocation. Division of labour is relatively intuitive as well: you need less knowledge to make a single section of something than the whole thing. This means you can throw more people at the problem and make more stuff. The last one, basically, that profits are good, is less intuitive. Profits are good because profits are rewards for providing some good or service that people want to buy. You only make money when people buy those goods or services. That people want those things is an indication of their value to society.

One of Smith's more famous quotations here is that butchers do not provide meat because they are required to or out of the goodness of their hearts. They provide meat because people pay them money to do those things.

“”It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

—Adam Smith

Some of the big ideas around this time is that government interventions are not always good. In the 1770s, government across Europe had legal monopolies for all sorts of industries. And they heavily taxed those monopolies. Today, we see this as a question of raising funds. The governments of that time simply did not have the means of finding out how much everyone should pay. So they made a monopoly that everyone really would have to pay, and then taxed that monopoly as a means to get revenue. Today, we call this an indirect tax. But taxing like this also meant that prices for stuff people need (food, paper, etc.) gets jacked up. And people spend their time not making things, but chasing after the government to give them a monopoly of their own. Special privileges, rent-seeking behaviour, and excessive competition-stifling regulations allocate resources poorly. Plus, the King's plan of raising money with arbitrary forced loans and taking everyone's stuff? Probably bad for business. Instead, it is free markets that do it better.

Another important contribution is Smith's criticism of usury prohibitions, where he argued that prohibitions on usury only increased the interest rate at which one has lent the money from a banker because the banker now also has to pay insurance for when he gets caught doing it.

One of the big questions for economists around the 1870s was about how stuff like diamonds, shiny, are worth more than water, needed for life. The Marginal Revolution explained that: the value of something changes based on how much of it you have. When you have lots of it, like water, it isn't valuable. But when you have only a bit, like diamonds, it is valuable. Economics really got its mathematical expression around the 1890s, with the Marshallian economics. This guy is the person to thank about all the supply and demand graphs. This is where neoclassical economics really takes charge. The introduction of maths means that one ends up with means to study exactly by how much some thing gets better when something happens. But the models around this time are simple and have many simplifying assumptions (turns out solving a 10-dimensional optimisation problem by hand is hard).

Many passages in his work criticize the institution of slavery, creating the ground work for the abolitionist movement.

Great Depression

Keep in mind that until around the 1930s and 1940s, when the Great Depression and the Second World War create the need for government statistics about all sorts of things in the economy, there is little ability for anyone to measure anything about the economy as a whole (the term 'the economy' as a single all-encompassing thing only emerges around this time too). Instead of counting how many trains are moving around as a proxy for economic activity, government centralisation means that we now know exactly where things are. And which theories are wrong: since you can't disprove them without evidence. However it is, shortly before the Great Depression, there are different undercurrents for different ideas about how the economy works. In the 1890s through to the 1920s, there is considerable debate by economists: on one hand, you have the neoclassicists, who are primarily based in microeconomics (since that is where all the data is) and the Austrians, who reject measurements and claim the non-existence of those measurements is an indication of their impossibility.

The Great Depression happened, which really refocuses economists from a focus on microeconomics. Explaining why it happened is far too complicated for a synopsis like this. And government creates institutions which give them the data to better understand the economy as a whole. There is a myth that all the government spending was good. A lot of it wasn't. For example, Steinbeck in The Grapes of Wrath bemoans government policies that support farmers . . . by paying them destroy their crops and not grow anything. The government didn't create a subsidy for food (so money was spent to make food cheaper and increase farmer profits), but rather, paid people to destroy the food altogether.

The Great Depression lasted a long time. And no country really fully recovered to normal economic times until the Second World War, when government expenditures (and demand in the economy) was so high that the unemployment rate fell, basically, to 0 (a draft did help with that too). Keynesian economics, which was a strong undercurrent during the 1920s, took the lead with macroeconomic models primarily based around the role of interest rates, demand for capital, and the demand and supply of money, as means for explaining the economy. This is one of the core models in mid-century Keynesianism: the IS-LM model (the investment-savings and liquidity-money supply model). Other important ideas around this time are the Phillips curve: the idea that there is a trade-off between unemployment and inflation, i.e. higher inflation means lower unemployment.

Stagflation

The dominance of Keynesianism continues until around the 1970s, when stagflation happens. Stagflation is the existence of both high unemployment and and high inflation. Mid-century Keynesian economics says this should not happen: unemployment should always trade off with inflation. The predominant explanation for this today is that inflation expectations rose, meaning that the trade-off described in the Phillips curve became less pronounced over time. The cause of those changes in expectations was because of the overuse of fiscal and monetary policies. Empirical research into the Phillips curve over a period of decades supports this explanation (and you should also find such graphs in a introductory macroeconomics textbook).

The Keynesian explanation was more on the lines of a supply shock – the 1970s also had an oil crisis which raised the cost of petrol and energy, making all goods more expensive, meaning that aggregate supply contracted. Contracting aggregate supply increased price levels, causing inflation, and reduced output, causing unemployment. This explanation of the problem is the one taken by supply-side economists. The mid-century Keynesian perspective was rooted in focusing on the demand side (along with a presumption that supply would increase as demand increased).

The result was monetarism and supply-side economics taking the fore. Monetarism put the use of monetary policy as a means to set inflation expectations, price levels, and interest rates. Milton Friedman and the Chicago school were central to promoting these ideas. Either way, whether mismanagement of interest rates or a supply side shock, in the 1980s, the Federal Reserve put these ideas into practice, increasing interest rates to 20 per cent in 1981. It did crash the economy, unemployment averaging 9.7 per cent in 1982, but reduced inflation from 13.5 per cent in 1980 to 1.9 per cent in 1986. This outcome vindicated the monetarists and supply-side economists.

New Keynesianism

The growth of the 1990s and the early 2000s under the domination of monetarist ideas also helped to increase confidence. The 2007 financial crisis, and the ensuing real economy meltdown changed that. There is considerable debate on why the crisis occurred, but one of the more dominant explanations is that adopted by the FDIC in its publication Crisis and Response: An FDIC History, 2008–2013, which attributes the cause to a global savings glut, which increased the quantity of loanable funds, lowering interest rates.

“”As interest costs fell and, in response, the demand for mortgages increased, the funding for mortgages increased significantly, allowing lenders to offer credit to more borrowers. Behind this increase in funding were (1) a heavy demand of investors worldwide for highly rated assets with high yields, and (2) the satisfaction of that demand through the mortgage securitization process, which allowed the financialization of mortgage assets.

This, along with increased international ties and highly leveraged institutions, created significant systematic risk. That risk became visible when new statistics were introduced to measure subprime mortgage risk and credit rating agencies initiated mass downgrades of securities in early 2007. This made many previously marketable securities practically worthless, making institutions holding those securities insolvent. That also created a significant negative wealth shock in home prices, suddenly making many households around the country poorer, directly influencing the real economy.

New Keynesianism, which focuses again on the role of demand, in a set of imperfect and subdivided goods and capital markets, took the fore (and the popular imagination) in arguing for immediate fiscal action. This was signed into law with stimulus bills in the 2007-2009 period. Government action around the world massively reduced interest rates and government spending. And from there, we step into the future, on which no history can be written.

Fundamentals of economics

What represents a fundamental truth in economics can be difficult to determine, as many theories have proven difficult to test. However, there are some ideas accepted almost universally, except by cranks. Here are ten commonly accepted principles taken from the top-selling college economics textbook, Gregory Mankiw's Principles of Economics:

1. People face trade-offs
2. The cost of something is what you give up to get it
3. Rational people think at the margin
4. People respond to incentives
5. Trade can make everyone better off
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
8. A country's standard of living depends on its ability to produce goods and services
9. Prices rise when the government prints too much money
10. Society faces a short-run trade-off between inflation and unemployment

These touch on most of the major concepts and problems addressed in economics — the scarcity of capital, resources, and labor, the concept of absolute and comparative advantage that leads to trade, the use of the market as the basis of exchange, the disparity between rich and poor nations, inflation, and government intervention.

Strong assumptions and economics

The stronger an assumption, the less realistic it tends to be. The better the economic model, the more it relies on weak assumptions. Some assumptions made in specific areas of economics have come to be viewed as economic "fundamentals," mostly due to crankery and political hacks. Cranks make a big deal of these assumptions in order to create straw man arguments criticizing economists for making assumptions that any ordinary person knows is unrealistic. Often, the reality is that these issues have been the focus of much attention among economists, to the point where the finer details can be difficult to communicate. Other assertions come about as a way to defend certain political ideologies.

It should be kept in mind that many modern economists rarely deal with purely theoretical models, though they certainly capture the public imagination. Most dissertation or extremely long papers generally do massive amounts of empirical and statistical analysis to prove that some kind of effect exists. Then, a theory is introduced as a means to explain an effect that is observed by empirical analysis. Thus, an article by D Harmesh estimated that throughout the second half of the XXth century, the share of purely theoretical economic paper has shrunk. In 2011, more than 80% of academic papers contained empirical testing (modeling, quasi-experiences, Randomized Controlled Trials like in Medicine). As a consequence, there are lots of seminars in the academic world of economists. If you presented a model without empirical analysis showing the existence of the effect(s) your model purports to explain, you'll be laughed out of the room.

Assumptions that are commonly misunderstood or falsely assumed to be consensual among economists include:

• Agents possess perfect information – A common assumption in the economic models presented to undergrads, but by no means accepted by economists as an accurate description of humanity. Outside of strawmanning in the realm of reality, modern economics routinely uses imperfect information models, and while introducing imperfect information often adds a level of strategic interaction to economic models that make them difficult to solve with elementary calculus, most graduate-level economic research dismisses perfect information models out of hand.

• Agents are perfectly rational - An excellent example of the issues in using jargon. The definition of "rational" in economics, and in the rest of the world, are very different. Rationality in economics refers to the type of preferences a person exhibits, whereas the common usage of rationality describes the level of clarity present in ones thought. Certain fields of economic study, such as behavioral economics, have spent significant amounts of time testing the boundaries of this assumption.

• Firms are perfectly competitive - Mostly a misconception by those that do not expand their economic education beyond Econ 101. Perfect competition is an assumption that, like the assumption of perfect information, eliminates a level of strategic interaction between agents and firms. Economists rarely think of this as a good description of markets, so many modern economic models relax this assumption. Game theory and Industrial Organization which model explicitly the strategical interactions between agents are among the most important branches of microeconomics. In short-term macroeconomics, DSGE models often describe an economy in imperfect competition - firms have mark-up. In long-run macroeconomics, innovating firms are said to be in imperfect competition, since they need profits to invest in R&D.

• Government activity is always incompetent or harmful (including lowering taxes always raising tax revenue) - Many simplistic models of government taxation show that poorly executed taxes may lead to a dead weight loss for the economy. While this is sometimes true for marginal taxes, any losses caused by levying the tax should be weighed against the greater economic efficiency and social benefits they provide. In theory, Pigovian taxes, which are marginal taxes designed to offset the effect of negative externalities, can improve social welfare (and have been advocated across the political spectrum). Many other examples of welfare-improving government intervention exist and are described by economic theory. Regarding macroeconomics, the endogenous growth theory has shown the benefits of government intervention.

Economics and prediction

Two type of predictions should be considered : exact predictions ("the unemployment rate will increase by 2.4% next month"), and general predictions ("the unemployment rate will rise in the coming months").

Economists are not able to do exact long - term predictions. In January 2018, they cannot forecast what the US GDP in January 2028 will be. Yet, regarding short - term (one year) forecasts, Empirical evidence suggests that macroeconomic models perform better than atheoretical sophisticated statistical analysis. However, the accuracy of short - term forecast is lower for developing countries. More worryingly, while making most of the times relevant predictions, the economists are not able to forecast rare yet crucial exogenous shocks on the economic activity, like financial crises. This is partly linked to the fact that economic predictions can affect individual behaviors, thus rendering the initial forecast irrelevant.

Regarding general predictions, econometrics and quasi experimental designs can allow economists to identify the impact of a given economic policy in the past, and thus to try and predict the impact of future economic policies.

The lack of black and white explanations can be frustrating to cranks of all sorts, who would like to take this as a sign that their particular pet discipline offers the best possible explanation for the world we see today. Unfortunately, these cranks are typically unwilling to do the hard statistical work needed to empirically validate their theories. Economists do have a wide variety of statistical tools to employ in order to test the quality of different economic models. However, as in all social sciences what you're measuring is as important as it is subjective. For instance Chicago School believers in Homo economicus would attribute a worker's productivity solely to pay, whereas behavioural economists would also consider things that can't be quantified as easily (e.g. relative pay, job satisfaction, workplace culture).

Pseudo-economics

“”A friend of mine once said: You know what the problem is with being an economist? Everyone has an opinion about the economy. No body goes up to a geologist and says, 'Igneous rocks are fucking bullshit.'

A large and diverse body of crank economic ideas exists, ranging from people who still adhere to quaint and archaic theories of the past (see below) to those ideas which still enjoy widespread popularity today, such as name it and claim it (aka. God will make you rich), pyramid schemes, and esoteric conspiracy theories about the Federal Reserve. The Liberty Dollar is a cranky libertarian scheme to set up a competing private-minted currency. Bitcoin is much the same.

Other notions such as the Laffer Curve are valid economic theories. However, ideas like the Laffer curve (i.e. that at a certain high level of taxation, government revenues can increase by lowering income taxes, due to expansion of the tax base) have been long misapplied by some who don't have a full understanding of these theories. This is especially the case when empirical research into the Laffer curve puts the point at which lowering taxes can increase revenue somewhere near 70 per cent. Often solid economic thought is twisted to fit a political agenda. Taxation and government intervention are two common targets.

Schools of thought

A broad field determined by its many different schools of thought, it is, at its core, the science of material production, consumption, scarcity, supply, finance, and monetary policy. That being said, its status as a science is pretty much determined by the individual model of normative analysis. In some cases, it is more of a Social science, as is the case with Austrian School, which has historically eschewed any mathematics as the basis of market analysis. While modern Austrians seem to be leaning more towards a behavioral-based approach based on logic-based math, Austrian economics is soft even for a social science. Behavioral economics suggests that the market is defined by individual rationality based on specific situational circumstance, which is ultimately affected by one's choice whether consciously or subconsciously. This would probably fit into the more general social science category.

Now, it is probably best to address yet another economic school that demonstrates a lack of empiricism. Of course, we're talking about good ol' Marxism, which, though most people agree on that it's not so bad-looking on paper, is an even crankier version of economic analysis than Austrianism, seeing as its pretty much just a set of proposed ideals as opposed to a presentation of fiscal solutions. Marx, though technically an economist, was really more philosopher than scientist, both as a political and moral theorist (although the three often go together, and, in Marx's case, the heart of his philosophy was collectivism). Eventually, at some point somewhere, people actually decided to add a sensical economic system to incorporate with the communist political ideology, generally referred to as socialism. In Soviet Russia, economy helps you everything sucked unless you were a rich white oligarch. Basically, both the USSR's economic policy, which involved near-total government subsidisation of all facets of production and distribution (with most of it going to the elite, of course), and the ironically self-interested motivations that drove people like Lenin and Clark Kent that OTHER "Man of Steel" ultimately resulted in the Soviet's union becoming one of the most oppressive forces of the 20th century.

Unlike the market economy, in which, aside from protectionism and the imposition of tariffs, the public and private sectors are essentially divorced, 20th century communism was the result a loving marriage between economic structure and the state, where they both relied on the other. This unsustainability led to the decline of the Eastern Bloc's supremacy. Ultimately, the entire system would implode as a result of Western markets, when the One True Lord and Savior famously Reagansmashed the communist economy after feigning a rapid military buildup, causing the reds to freak out, do the same thing, and then bankrupt themselves. By then, pretty much everyone realized what a mess that traditional standard socialist model was. Even the Mao Dynasty changed its economic model after witnessing the flaws of absolute state socialism, implementing a market, or, rather, corporate, element as well, albeit highly subsidized. Other than that, the Marxist-Leninist model proved to be an absolute trainwreck.

This is another example proving of how economics is, indeed, a legitimate science. The implementation of (mathematically feasible) normative models to a society is basically the use of the Scientific Method. The overall success of the systematic determination in market functionality, or the efficiency of distribution and allocation of resources, is evidence of a proven and objective theory. Pretty much every communist country of the past century collapsed largely due to economic unsustainability, and those that are still around, aside from a quasi-neoliberal China, have terrible economies (i.e. North Korea).

While there are those economic models that would qualify in the "social science" category, or just as downright arbitrary nonsense, there are some (usually consequentialist) models that actually practice economics as a hard science, driven primarily by statistics and empiricism. Two prominent models that make use of this empirical approach, as well as rational determination of market transaction, are Chicago-style Neoclassicism and the Keynesianism system. The former, which until recently was the pure basis of the American economy, favors free trade and a market-friendly approach to fiscal policy with a preference for privately-solved solutions to issues, whereas the latter essentially favors self-sustenance of the economy through the buildup of a nationally-subsidized industrial complex as a means to control both unemployment and inflation at once.

Professor Chang's one-sentence schools guide

• Classical: The market keeps all producers alert through competition, so leave it alone.
• Neoclassical: Individuals know what they are doing, so leave them alone -except when markets malfunction.
• Marxist: Capitalism is a powerful vehicle for economic progress, but it will collapse, as private property ownership becomes an obstacle to further progress.
• Developmentalist: Backward economies can't develop if they leave things entirely to the market.
• Austrian: No one knows enough, so leave everything alone.
• (Neo-)Schumpeterian: Capitalism is a powerful vehicle of economic progress, but it will atrophy, as firms become larger and more bureaucratic.
• Keynesian: What is good for individuals may not be good for the whole economy.
• Institutionalist: Individuals are products of their society, even though they may change its rules.
• Behaviouralist: We are not smart enough, so we need to deliberately constrain our own freedom of choice through rules.

Normative discipline or positive science?

Given the is-ought problem many scientists appreciate the fact/value distinction and claim that science’s role in society is merely to describe social and natural facts; that efforts to determine what values should be held or how things ought to be is of the domain of ethics. This isn’t to mean that scientists themselves don’t have ethical aims, or that science itself is void of normative values in it’s practice. Rather the idea is simply that it’s not up to science to determine what our normative beliefs ought to be.

This distinction is most apparent within medicine, to which medical science discovers what effects treatments measurably have while medical ethics becomes the practice of establishing clinical norms in the actual application of medical treatment.

Economics as a field plays an important role in informing the decision of policymakers and it is of the opinion of some economists that their role is only that of positive science; meaning that, the economist’s role is merely to describe what methods are effective to achieving certain ends, and not about what ends we should be aiming for to begin with.

This description raises skepticism from philosophers given the normative account economists give to concepts like rationality, normative arguments presented within a discipline proclaiming itself to be scientific, such as “economic growth is good for the poor”, and the fact that many economists work for governments, think tanks etc, whose job prospects are partially dependent on how favourable their conclusions are to their employees.

This all arguably makes the field susceptible to ideological biases and biases towards the material interests of institutions that hold economists in their employment. Arguably this isn’t unique to economics given that all sciences typically have to make an appeal to political bodies and donors to secure funding. This doesn’t per se discredit the content of any science in particular, and to argue such runs afoul of the shill gambit.

There is a large body of literature showing that economists tend to be less charitable than other professions, befitting the effects of a normative structure in a discipline supposedly free of ideological influence. In particular, Frey and Meier (2003) contend that the above-average selfish behavior exhibited by economists is consistent with an indoctrinatory effect that results from training in economics that encourages students to emulate the pro-selfishness Homo economicus model of behavior which is one of the bedrocks of neoclassical theory. Bauman and Rose (2011) have found a selective effect to consider in addition to an indoctrinatory one. Specifically, the possibility that more selfish people are more inclined to become economics majors than non-selfish people. To quote from the abstract:

Our data set allows us to track student donations and microeconomics training over time in order to distinguish selection effects from indoctrination effects. We find that there is a selection effect for economics majors, who are less likely to donate than other students, and that there is an indoctrination effect for non-majors but not for majors. Women majors and non-majors are less likely to contribute than comparable men.

Toxicity in the field

A climate survey from 2019 found that many economics departments have an incredibly toxic environment. Some of the critiques and concerns raised in the survey is that economics possesses an elitist culture:

There was a frequent reference to the elitism within the field. There is a strong sense that the AEA, the NBER, and the top journals – and de facto the profession – are controlled by economists from the top institutions. Many comments (about 60) reference that there is a network and you are either in or out, and if you are out your chances of success in the profession are greatly diminished. As one commenter stated “Those outside the top ten tend to be discounted, dismissed, and not taken seriously.” Furthermore, the view of the profession as a closed-network has a negative impact on inclusivity “Elitist nature of the profession is magnified if you are a minority.” By backward induction, if a successful career requires attending an elite Ph.D. program, the chances of this happening are much higher if one attends an exclusive undergraduate school, and this may not an available option for many minorities, “It takes a lot of money, connections, and concerted effort in education for a person’s whole life to be a top economist.” Even if one makes it to such an institution, the feeling is that it is a “good old boys network” that only lets in other boys. It is worth noting that this sense of exclusion pervades the profession: those at teaching institutions feel dismissed by those at Ph.D. institutions, those at 2-year institutions feel ignored, and there is a strong feeling that those that obtained their degree, or work, outside the U.S. are not given the appropriate level of respect.

Others noted that economics is incredibly homogenous in its thinking and frowns upon innovative thought, as one commenter put it:

There is too much homogeneity in thought about new techniques/approaches. Presenting innovative ideas is often frowned upon.”

There was also a general sentiment that fields of economics perceived as less valued were more likely to be populated by minorities, especially those fields with a larger female presence.

Some of the other concerns raised in the survey are summarized below:

The profession does not handle mental health issues well, “Be more tolerant of mental health issues.” a) Although alluded to above, many women expressed the view that they are talked over or ignored when discussing research, “men interrupting and talking over women, restating what a woman just said and take credit for it, marginalize women’s comments.” b) Many raised concerns about lack of visibility of black economists “If I don’t see people who look like me in leadership positions/positions of seniority, I can’t expect to belong there.” c) Economists from outside the U.S., or for whom English is a second language, often feel looked down upon, “I personally experience discrimination very frequently because English is not my native language.” This is reflected in perceived attitudes towards research “Researchers from Europe are a priori not taken very seriously by their American colleagues.” d) Academia is rife with power differences that can create “toxic workplace culture and workplace harassment issues, particularly between junior-senior faculty, faculty students…” These power issues were also seen to be reflected in the behavior of journal editors as well, “the amount of disdain coming from anyone who is an editor in a journal is astounding.”

The survey includes some policy recommendations.

An example of this toxic environment among economists is Harvard economics professor Roland G. Fryer, who according to the Harvard Crimson has a long and sordid history of sexual harassment dating back years:

A lab employee first filed a Title IX complaint against Fryer nearly two years ago, alleging he created a hostile environment in EdLabs and had committed “egregious” acts of verbal sexual harassment. In the next several months, two more Title IX complaints, a financial investigation, and a now-closed investigation by the Massachusetts Commission Against Discrimination followed. The New York Times reported that, at the close of the first Title IX investigation, Harvard found Fryer engaged in six of 32 counts of “unwelcome conduct.”

A Harvard University mental health survey conducted in 2019 found that a large percentage of economics graduates reported suffering from symptoms of anxiety and depression.

Economics also has a race problem. According to a survey released in 2019 by the American Economic Association, only fourteen percent of black and brown economists agreed with the statement "my work is respected in the field." Black Americans in particular are also, as of June 2020, underrepresented in the field. For example, as of June 2020, there were no black editors of the "most prestigious economics journals." There were also no black professors at the University of Chicago's main economics department at the time.

Economics has a long history of discrimination. In 1962 Nobel laureate George Stigler wrote that the disadvantaged position African Americans find themselves in in the labor market stems "in part" from their "inferior position as workers." Stigler also wrote that "lacking education, lacking a tenacity of purpose, lacking a willingness to work hard, he [the black worker] will not be an object of employers’ competition." While "few scholars today would use such explicit language," these fundamentally racist ideas still abound in the economic literature, as "economics journals are still filled with papers that emphasize differences in education, upbringing or even IQ rather than discrimination or structural barriers."

Damon Jones, an economist at the University of Chicago's Harris School of Public Policy, has stated that a lack of diversity will affect what is significantly studied and in what way:

“”We study things that are related to race and racism all the time, but we are inclined to figure out what other explanations may be at play.

The gender gap in economics is the worst in any academic discipline. To quote Veronika Dolar:

Women received about 30% of doctorate and bachelor degrees in economics in 2014 – the same as in 1995 – compared with 45% to 60% of degrees in business, humanities and the STEM fields. That’s the latest year for which comparable figures are available.

A popular jobs forum for economists is rife with misogyny. In fact, a 2018 study found that discourse on the website about women tends to reflect personal comments about personal appearance, whereas those about men tend to be "focused on academic or professional characteristics.

See also

• Black swan
• Debate:Who is to blame for the banking crisis?
• Gold standard

External links

• National Bureau of Economic Research
• EconLib
• Investopedia
• Daniel Goleman's blog related to his book Ecological Intelligence advocating "radical transparency".