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Tuesday, March 29, 2011

So why do economists differ so much-specially those in academics?

While IIM-A has 'stud' economics Profs(actually correct that to 'stud' profs in all subjects!), one peculiar thing is that in the 1st year MBA program here, macroeconomics is the only subject for which different sections have different textbooks/reference material/exams, all upto the discretion of the Prof who teaches them. After enduring the 2nd(and hopefully the final) such 'differential exam', I sympathize with President Nixon who desired a 'one armed economist' because he was tired of listening to ambiguous/hedged comments.

But a closer scrutiny explains why. Unlike microeconomics which can get away with treating human beings as 'rational' profit maximizing beings, macroeconomics faces the difficulty of culling out lessons from the behavior of human beings in crowds. And this is no Brownian motion which cancels out, but often a 'herd effect' dominates. And though one may argue that 'numbers speak', different sets of numbers can be used to reach different conclusions. And given that it is a SOCIAL science, the interpretation of the context is often key. And if we presume that economists want to influence policy, they need to adopt political means. And this shows in the style of arguments. So, Nixon's wish may never be met and economists may at best 'agree to disagree'. A miracle of this subject is even after 80ys, one never knows whether they were right. Take Keynes's recipe for getting out of the 'Great Depression' of the USA. In 2010, economists still argue whether he was responsible for solving it, or(hold your breath!) exacerbating it.

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