The typical mainstream economist is about as good at making predictions as a monkey reading tea leaves. Exhibit A: The financial crisis, which only a few economists outside the mainstream saw coming, despite oceans of papers, prognostications and plumb academic assignments.
The question is, why?
Researcher Vinca Bigo decided to investigate, and found a surprising explanation: the profession of economics is suffering from a collective mental disorder, causing practitioners to project their pathologies onto the rest of us. Which is very costly for you and me.
Let’s explore.
Pathological Math
In a fascinating paper, Bigo hones in on the fact that economists are in love with mathematical models, despite the glaring fact that they often don’t work in their field. The problem starts when researchers base their models on arbitrary and often ridiculous assumptions about how people and institutions behave, which leads to conclusions that are airily detached from reality. The complexities of the real world then come along to blow up those fancy models, rendering them all but useless. Yet this never stops the mainstream economist, who just goes on to make more models.
Now, this wouldn’t be so bad if these phantasms didn’t lead to policies that affect your pocketbook. But they do. According to the predictions of mainstream (often called “neoclassical”) economists, the 2007-'08 financial crisis wasn’t supposed to happen. I bet it felt pretty real to you, didn’t it? When asked by Congress why he was unable to warn Americans among the coming sh*tstorm, Alan Greenspan
offered an uncharacteristic admission: the model he had used to assess the economy for decades was not worth a hill of beans.
"Yes, I found a flaw,'' Greenspan said. “That is precisely the reason I was shocked because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well.''
Thanks, Maestro!
People have been trying to apply mathematics to social phenomena for centuries. Especially since the Enlightenment, math seemed to many to be the best way to suss out the secrets of the universe. The problem is, human beings and their institutions don’t behave like gravity and geometric proofs. They are messy, unpredictable and often irrational.
By emphasizing mathematical models, Bigo argues, economists turn their work into a kind of intellectual parlor game in which the practical problems faced by actual human beings become irrelevant. Bigo acknowledges that some practitioners are now trying to focus more on human behavior and psychology, but they are still expected to package their work in the trapping of mathematics, never mind that the models don’t really fit. They end up with good ideas stuck in bad or useless models.
Social Biases
This math fetish is a problem, but Bigo finds there’s something more going on. Economists are people, and like all people, they have biases and presuppositions that cloud their thinking and blind them to certain realities.
For one thing, if you’re inclined to view the world from a mathematical perspective, you expect to see regular patterns and correlations that hold true no matter what. Like atoms or objects falling in space. You tend to think that society, like nature, should operate according to mechanistic laws. This can make you uncomfortable dealing with phenomena that don’t follow regular, predictable patterns.
But human beings don’t operate like atoms. Neither, for that matter, do companies. Or universities. Or markets. Or language. All these social phenomena are constantly evolving and transforming, rather than operating according to immutable laws.
Which brings us to another problem. If you convince yourself that you are a scientist, you tend to see yourself as objective. But it’s very important for anyone doing research to understand their own position and location in the world, and think about how they relate to communities. Economists function within their own specific cultures, and the rules of those cultures, which involve professional structures, impact how they come at problems.
Like most other fields, economics is dominated by elites who get to decide what’s acceptable. You can introduce a new idea to these elites, that’s fine — but if you start questioning their methodologies, you will run into trouble. You’re not going to get published, get tenure, or be invited back to next year’s conference.
If you are a young upstart economist doing battle with these old elites, you might notice something else about them: they are nearly all male.
Mommy Dearest
Feminists like Susan Feiner have talked about neoclassical economics as a project that shores up a male-dominated society (and one that is also dominated by a particular class and race). The math/prediction fetish is very handy for this project because it allows economists to construct models in a way that tends to rationalize inequalities. Another way economists tend to justify inequalities is to rely on what are called “hierarchical dualisms.”
Throughout Western history, people have tended to present men as rational beings and women as irrational. It’s the old mind/matter division, in which man is associated with the mind and woman is linked to matter (which comes from the Latin word
mater, meaning “mother”), or nature. You can see this gender bias playing out in all kinds of oppositional parings: the immortal soul (male) v. the body (female). Order (male) v. chaos (female). These dualisms are written into our language, our art, even our sciences.
Hierarchical dualisms and predictions are things that tend to emphasize the differences between myself and others (I am supreme, you are not/I know the future, you do not). Many psychoanalysts and cultural observers have noticed that these particular traits seem to be linked to male subjects more than female subjects (it’s important to note that we’re talking about cultural constructs of masculinity and femininity here rather than biological sex). The fantasy of prediction and fantasy of supremacy, as Bigo calls them, are connected to a sense of grandiosity and intolerance of others.
So why is this more common in male subjects?
Bigo looks to objects relations, a psychoanalytic theory pioneered by Freud contemporary Melanie Klein, for clues (this theory has long been deployed by researchers investigating gender issues). Object relations focuses on the coping mechanisms and adjustments we develop as we grow, especially our tendency to try to find mother substitutes to compensate for the painful separation from our mother or primary caregiver. If we feel particularly anxious about this separation, we may resort to fantasy.
The idea is that there could be something different in the way male and female subjects relate to the world based on their early experiences. Because of the way gender is culturally constructed, male children may retain a stronger sense of delusion about the primacy of their place in the world. They may experience greater separation anxiety from their mothers, which could manifest as an enhanced desire for control as they grow up (making predictions is a way of exerting perceived control), and a tendency to reassert primacy by devaluing others, particularly women.
Then they may grow up to be elite economists who carry their fantasies right into the classroom — and your bank account.
Economy as Giant Breast?
Bigo’s research suggests intriguing possibilities and ways of looking at what appear to be confounding irrationalities among policy makers. Take the case of Social Security. Our national conversations surrounding this program are always tied up in the predictions made by economists about what might potentially happen in the distant future, despite the fact that economic predictions are often dead wrong.
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