Sunday, 18 June 2017

A New Economists' Creed

Paul Krugman, my favorite economically illiterate economist, has this infamous tale of an Economists' Creed from back in the days when he wasn't a junky-for-Hillary and a sell-out. It's about free trade  and its actually not a bad starting point:
If there were an Economist's Creed, it would surely contain the affirmations "I understand the Principle of Comparative Advantage" and "I advocate Free Trade."
In light of his own retraction from free trade positions, I feel like we should expand this creed somewhat, include in it what else it takes to be an economist, what crucial knowledge and fundamental understanding it takes. Here's my attempt to formulate a criterion, a New Economists' Creed:
As an economist, I understand that economics is about scarcity and uses indirect exchange, monetary incentives and economic calculation to best handle this scarcity. I understand that people make decisions on the margin, and never about entire classes at once. I see that the world is getting richer  the poorest quickest of all  and that inequality is an irrelevant misnomer. I fully support the logical conclusion of comparative advantage: remove regulations, inhibitions and tariffs in international  as well as domestic  trade. I understand that climate change and its solutions are not about science but about economic calculation and our ability to prevent the effects of an inhospitable climate, that a 'resource' becomes a resource when the human mind makes it so.
Moreover, I understand that the science of economics does not stem primarily from empirical observations. I understand that laboratory experiments is not available to economists, and that the scope of economics is the market. I understand that this market harmonises groups' and individuals' interest and creates value, which I know is entirely subjective and cannot be interpersonally compared, ruling out involuntary redistributive measures. I understand that expanding the money supply through the credit market distorts information, creates Cantillon effects and system-wide malinvestments that set a business cycle into motion. As an economist, I have a broad knowledge of my profession and those ideas that have governed it in the past.
I wanted to add something about broad familiarity with the modern development of economic thinking, like
I'm familiar with many strands of arguments, ranging from classical economists (Smith, Ricardo, Marx) to neoclassical economists (Walras, Marshall, Pareto, Fisher) to Keynesian (Keynes, Hicks, Hansen, Samuelson), post-keynesians, RE people and the more modern mismatch of New-Keynesian, New-Classical and various kinds of positivist hyper-specialized strands of economists. I also know how to use econometric techniques and I am well-aware of their limitations and mistakes often made with them.
But that seemed maybe a bit over the top to expect economists to be that well-read. After all, that may be for the most passionate of us. Few modern-day so-called "economists" would pass this improved test, which is perhaps an indication of how important it is.  

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