Cute-o-nomics vs. The Big Questions
The blogosphere has been abuzz over lapsed economist’s Noam Scheiber’s critique of Freakonomics in TNR. Scheiber claims that the vogue of Steven Levitt’s punchy papers on narrow topics has led to an epidemic of “cute-o-nomics,” eclipsing the work of more serious scholars. In other words, economists are focusing on small questions with limited data sets where they can guarantee answers, rather than the larger, more difficult queries that may lead to endless arguments.
Scheiber’s claims reminded me of two other pieces that showed the promise, and pitfalls, of trying to tackle the big questions. In a recent encomium for Milton Friedman, the late Chicago economist’s predilection for addressing the largest economic questions of his day is roundly praised. Friedman certainly deserves a great deal of credit for thinking so carefully about the Depression, unemployment, et al. (problems that in our day are perhaps matched by, say, the rise of global inequality). But this little explanation of his importance to the study of inflation took me aback:
Nonmonetary theories of inflation not only failed to predict the inflation of the 1970s, but also offered misleading guidance for how to control it.. . . [C]onfronted, on the one hand, with repeated worldwide failures of wage and price controls to suppress inflation and, on the other hand, with the unique ability of central banks to control inflation, economists came around to Friedman’s position that central banks were responsible for inflation.
I guess I see the failure of the “nonmonetarists” prescriptions, but were central banks wholly responsible? Wasn’t there some sort of supply shock with oil at the time? And long-building pressure from Johnson and Nixon-era budget deficits?
On the other hand, I guess I prefer this type of argument (which may well be interminable) to Freakonomics’ school’s hermetically sealed demonstrations of results like “people pay too much for gym memberships they don’t use” or “stock traders aren’t sharp on Fridays because they are distracted by the weekends.”
What’s the solution? Barry Lynn suggests that we need to see a return of “institutionalists” to the field. Institutionalists
would study and model the power of large firms and trace the effects of these concentrations of power on such factors as pricing and employment. This approach implie[s] that markets are, at least indirectly, the products of law acting on or through the corporation and other institutions. It also implie[s] that the concentration of economic power, especially through a public institution like the corporation, transform[s] the affected marketplace into a largely if not entirely political realm.
Sounds like a good start to me, and a reason to hope that lawyers will soon be joining economics departments at the same rate that economists are joining law school faculties.
Photo Credit: Cute Overload (where else?)