I wanted to study economics after learning about it from reading popular books and studying it in business school. I thought there were a lot of cool applications for economics in both business and life. (And there are!) Unfortunately, I have been underwhelmed by how much practical value most contemporary research seems to have. And positively alarmed by how few academics seem to care.
I like this essay by Brad DeLong about the failure of economics professors. They didn’t just fail to predict the recent economics crisis but they have failed, as far as he can tell, to learn from it. If you are naive, of course this is astonishing — but DeLong is not naive. Yet he is “astonished”. That’s interesting.
It’s hard to imagine DeLong doesn’t know what I am about to say. I imagine anybody with any academic sophistication is aware of it — especially economists. As Thorstein Veblen (an economist) pointed out in The Theory of the Leisure Class (1899), a great deal of what professors do, including economics professors, is about signaling high status. In economics, this is done by being highly mathematical. (Same in statistics. In art history, it is done by using big words. In engineering it is done by being theoretical. In many areas of science, it is done by using expensive equipment and having a large lab. In many fields it is done by being useless — e.g., preferring “pure” research over “applied” research.) This is no mystery. Economists think a lot about signaling. Michael Spence wrote an influential paper (which included Veblen’s phrase “conspicuous consumption”) and book about it, for example, for which he won a Nobel Prize. (More examples from economics.) But DeLong ignores the signaling of economists. Let me propose why economists haven’t taken the steps DeLong is astonished they haven’t taken: Because it would make them more useful and less mathematical. Thereby signaling lower status.
Why is signaling so common? It is basic biology, yes. But it is also convenient. Here is what Veblen didn’t say: It is so much easier to signal than to make progress. Among animals, it is much easier to signal you will win a fight than to actually win one. Among professors, it is easier to use big words than to write clearly. DeLong wants economists to choose progress over signaling. Shouldn’t an economist not be astonished when the lower-priced option is chosen?
Is it simply a matter of signaling or an aspect of diminishing marginal returns to research? Or am I wrong in my perspective?
See my previous post on making economics relevant again.