I read an article called “The X Factor of Economics: People” in the New York Times today that covered an important subject near and dear to my heart: The lack of reliable knowledge of cause-and-effect in economics. It was unintentionally revealing of an important elite bias.
It started out promisingly enough. The author quoted Robert Solow about how the complexity of society makes it so difficult to know even after the fact what effect our titanic stimulus spending has had (“It has run its course over the past year and a half, but it is not an isolated event. One thousand other things were happening that had an effect on employment and real G.D.P.”), and cited Gary Becker about the significance of the lack of controlled experiments in economics to resolve such questions. So far, so good.
But what comes later in the article directly subverts the points that animate the first part of it. The author writes that “A depression seemed possible two years ago, and thanks to the ideas of economists, that didn’t happen.” [Bold added] But, as per the first half of the article, how do we know that a depression didn’t happen because of the ideas of economists? We don’t.
It is extremely hard to maintain awareness of our own ignorance when trying to make real-world decisions. The article ends with a quote by currently-fashionable behavioral economist Dan Ariely:
If you have a simple problem, you can offer a simple solution. But the economy is a hugely complex problem. So we either simplify the problem and offer a solution, or embrace the complexity and do nothing.
But there is an unconsidered alternative that permits us to constantly recognize our ignorance, yet not be paralyzed: The Open Society. This is the whole point (in my view) of the institutions of representative democracy, limited, law-bound government, and free markets.
We all have biases. One that is rampant in the contemporary elite West, and by extension in elite Western journalism, is an excessive belief in the capacity of intellectual elites to have valid expertise that transcends common sense and practical experience concerning the organization of human society.