It is no secret that the glory days of the kind of economics many of us learned at university are long gone.
The mighty edifice of neoclassical micro erected by Samuelson, Becker, and Stigler – with its hyper-rational homo economicus operating within a crystalline architecture of preferences, incentives, and constraints – went first. It disintegrated following sustained assault by the behavioural school of Kahnemann, Thaler, and Sunstein. By the turn of the millennium, it was out with the hard-nosed regulatory economists of the 80s and 90s, and in with behavioural insights and Nudge Units.
As for traditional macro – whether of the Saltwater Neo-Keynesian or the Freshwater New Classical flavours – that flamed out in spectacular fashion in 2008 when, as the Queen herself famously observed, it failed to predict the biggest economic crisis in history. It took a decade for policy-makers to desert the old doctrines explicitly, but there is little doubt today that the Biden administration’s lodestar is more MMT than JMK or RBC.
Yet are these revolutions really the answer to the shortcomings of Old School Econ 101? For more than four decades, Deidre Nansen McCloskey – professor emerita of no fewer than six separate disciplines at the University of Illinois at Chicago, and a truly unclassifiable scholar who has made major contributions to economic theory, history, methodology, and statistics – has been arguing that the problems run deeper. What economics needs to fulfil its unparalleled potential as the premier science of human progress, she insists, is the rediscovery of its origins as the discipline which successfully marries the methods of the sciences and the humanities.
Professor McCloskey explains why in her new book, Bettering Humanomics: A New, and Old, Approach to Economic Science. I reviewed it in the Financial Times on May 27, 2021. You can read my review here.