I have a new paper in the Papers and Proceedings Volume of the AER that is out in print and on the AER website. A short version of the supporting appendix is available here and on the AER website. A longer version with more details behind the calculations is available here.
The point of the paper is that if we want economics to be a science, we have to recognize that it is not ok for macroeconomists to hole up in separate camps, one that supports its version of the geocentric model of the solar system and another that supports the heliocentric model. As scientists, we have to hold ourselves to a standard that requires us to reach a consensus about which model is right, and then to move on to other questions.
The alternative to science is academic politics, where persistent disagreement is encouraged as a way to create distinctive sub-group identities.
The usual way to protect a scientific discussion from the factionalism of academic politics is to exclude people who opt out of the norms of science. The challenge lies in knowing how to identify them.
From my paper:
The style that I am calling mathiness lets academic politics masquerade as science. Like mathematical theory, mathiness uses a mixture of words and symbols, but instead of making tight links, it leaves ample room for slippage between statements in natural versus formal language and between statements with theoretical as opposed to empirical content.
Persistent disagreement is a sign that some of the participants in a discussion are not committed to the norms of science. Mathiness is a symptom of this deeper problem, but one that is particularly damaging because it can generate a broad backlash against the genuine mathematical theory that it mimics. If the participants in a discussion are committed to science, mathematical theory can encourage a unique clarity and precision in both reasoning and communication. It would be a serious setback for our discipline if economists lose their commitment to careful mathematical reasoning.
I focus on mathiness in growth models because growth is the field I know best, one that gave me a chance to observe closely the behavior I describe. For growth theorists, the choice between price-taking and monopolistic competition is our version of the conflict between the geocentric and heliocentric models. The point of this paper is not to explain, yet again, why I think that price-taking models are too restrictive. The larger point is that after more than two decades, the two sides have failed to make progress in resolving their disagreement, and hardly seem to care. Even worse, in defending their positions, the economists I cite in this paper are not living up to basic standards for what constitutes acceptable mathematical theory.
Dysfunction in growth theory may do little direct harm because governments rarely change policies that can influence the long-run rate of growth. Nevertheless, the problems I identify in growth theory may be of broader interest. If economists can understand what the problem is in this sub-field, we may be in a better position to evaluate the scientific health of other parts of economics.
The field to which scrutiny might first extend is economic fluctuations. Some macroeconomists are already asking methodological questions about what constitutes good macroeconomic theory. One part of this analysis could be to ask whether mathiness also shows up in theories of aggregate fluctuations. Another might be to ask whether a parallel form of “academic politics that masquerades as science” might be undermining how macroeconomists analyze statistical data and broader sources of evidence.
If I am correctly interpreting what Paul Pfleiderer says here, he thinks people working in corporate finance and in money and banking should also try to assess the scientific health of their fields, with particular attention to the interaction between theory and evidence.
The goal in starting this discussion is to ensure that economics is a science that makes progress toward truth. A necessary condition for making this kind of progress is a capacity for reaching consensus that is grounded in logic and evidence. Given how deeply entrenched positions seem to have become in macroeconomics, this discussion could be unpleasant. If animosity surfaces, it will be tempting to postpone this discussion. We should resist this temptation.
I know many of the people whose work I’m criticizing. I genuinely like them. It will be costly for many of us if disagreement spills over into animosity. But if it does, we can be confident that the bad feelings will pass and we should stay focused on the long run.
Growth theory has one practical policy implication that economists should take seriously. An investment now that maintains or increases the rate of growth of the stock of knowledge will yield a high social rate of return.
Science is the most important human accomplishment. An investment in science can offer a higher social rate of return than any other a person can make. It would be tragic if economists did not stay current on the periodic maintenance needed to protect our shared norms of science from infection by the norms of politics.