Economics Needs to Tackle All of the Big Questions in the Social Sciences

The Economist's Free Exchange column on January 14, 2017, reporting on the American Social Science Association meetings that month argues "To be relevant, economists need to take politics into account." For example:

Their theories had always shown that globalisation would produce losers as well as winners. But too many economists worried that emphasising these costs might undermine support for liberal policies. A “circle the wagons” approach to criticism of globalisation weakened the case for mitigating policies that might have protected it from a Trumpian backlash. Perhaps the greatest omissions were the questions not asked at all. Most dismal scientists exclude politics from their models altogether. As Joseph Stiglitz, a Nobel laureate, put it on one star-studded AEA panel, economists need to pay attention not just to what is theoretically feasible but also to “what is likely to happen given how the political system works”.

But I worry that people reading this will think a bandaid is enough. Indeed, the author advises halfway measures:

Political and social institutions are much harder to model and quantify than commodity or labour markets. But a qualitative approach might actually be far more scientific than equations offering little guide to how the future will unfold.

What is needed is a full-fledged research program that does the hard work of modeling and quantifying. In order for economics to influence policy in the way I believe it should, we need to take all of social science as our area of concern, not a limited slice of the social sciences.

What is economics? In my view, economics should encompass every important social science question that those with training in economics are well suited to study. If economists have a comparative advantage in investigating an issue, that issue should be part of economics. 

That doesn't mean the economists should ignore the work done by other social scientists, but neither should they be overly deferential to that work. Social scientists outside of economics have turned over many stones and know many things. Economists need to absorb the key bits of that knowledge. And the best scholars in any social science field are smarter than mediocre economists. But in many cases, economists who are not dogmatic can learn about social science questions outside their normal purview and see theoretical and statistical angles to studying those questions that others have not. 

Because of the great practical need for a deep understanding of the social sciences, I consider it a cardinal sin for any economist to discourage another economist from trying to tackle an important social science questions because it is "not economics." No! If it is an important social science question, and the economist who wants to study it can make a real contribution, it is economics.  

That is, for practical reasons of saving the world, social science understanding outside the traditional domain of economics is so desperately needed that we should not hold fellow economists back. In addition, concerns in the traditional domains of different social sciences interact with one another, so it makes sense for economists to go there.

Linguistics is the social science that seems the furthest from traditional economist to me. But even the border between Linguistics and the humanities is of great relevance to core economic questions, as the description in the column of Robert Shiller's talk indicates: 

In a keynote address, Robert Shiller—a Nobel prizewinner, habitual freethinker and outgoing AEA president—suggested that economists should think more broadly about the factors that affect human behaviour. Narratives matter, he argued. Powerful ideas, captured in memorable stories, can spread like epidemics, wreaking economic havoc as they go.

If we understood what makes narratives striking and memorable, and what makes people accept them as a basis for making decisions, we would understand both politics and movements in the stock market better.

George Lakoff in particular has done a good job of applying linguistics to understanding politics. The psychologist Jonathan Haidt is operating in similar territory in his book The Righteous Mind. Economists who want to be more politically relevant would do well to read their work. 

The model I am putting forward is one in which the different social science disciplines act as different schools of thought for addressing social science questions rather than any social science claiming a monopoly on a particular question. This goes both ways. On questions within the traditional domain of economics, the group that with a different perspective that must be taken quite seriously are business school professors and business practicioners. For example, economists should know the work of Clay Christensen. I have written these posts about his work:

  1. Clay Christensen, Jeffrey Flier and Vineeta Vijayaraghavan on How to Make Health Care More Cost Effective
  2. Saint Clay
  3. Clay Christensen, Jerome Grossman and Jason Hwang on the Agenda for the Transformation of Health Care
  4. Clay Christensen, Jerome Grossman and Jason Hwang on How the History of Other Industries Gives Hope for Health Care
  5. Clay Christensen, Jerome Grossman and Jason Hwang on Intuitive Medicine vs. Precision Medicine
  6. Clay Christensen, Jerome Grossman and Jason Hwang on the Personal Computer Revolution
  7. Clay Christensen, Jerome Grossman and Jason Hwang on the Three Basic Types of Business Models
  8. Clay Christensen, Jerome Grossman and Jason Hwang: How to Divide and Conquer Our Health Care Problems
  9. In Defense of Clay Christensen: Even the ‘Nicest Man Ever to Lecture’ at Harvard Can’t Innovate without Upsetting a Few People

Despite the efforts of all the human social scientists that have ever lived put together, we don't understand politics all that well. But we will. And free-range minds will ultimately bring us to a better understanding of many other social-science questions as well. 

Update: This New York Times essay by Neil Irwin (and flagged by Justin Wolfers) talks about some of the questions and concerns of sociologists that economists need to bring into their work:

What if Sociologists Had as Much Influence as Economists?

Neil Irwin talks about sociologists becoming more influential. But it is much easier for economists to incorporate insights from sociology into their work than for sociologists to become as influential as economists. For one thing, there are probably about 10 times as many economists in the world as sociologists, judging from association membership and so on that I had to look up once for a Templeton Foundation grant proposal I did with three sociologists. (I have two unpublished papers coauthored with sociologists.) 

Don't miss the follow-up post "Defining Economics."