Yes, I am using that word correctly. I am here talking about DeLong’s views on method. So remember kids, if you’re giving a job market talk, don’t say, “In this paper my methodology was to regress unemployment against Glenn Beck’s ratings.” If I am on the hiring committee, you’re done for. (Of course, I won’t be on the hiring committee, so it’s a moot point.)
One of the embarrassing dirty little secrets of economics is that there is no such thing as economic theory properly so-called. There is simply no set of foundational bedrock principles on which one can base calculations that illuminate situations in the real world. Biologists know that every cell runs off instructions for protein synthesis encoded in its DNA. Chemists start with what the Heisenberg and Pauli principles plus the three-dimensionality of space tell us about stable electron configurations. Physicists start with the four fundamental forces of nature. Economists have none of that. The “economic principles” underpinning their theories are a fraud–not bedrock truths but mere knobs twiddled and tunes so that th right conclusions come out of the analysis.
What are the “right” conclusions? It depends on what type of economist you are, for three are two types. One type chooses, for non-economic and non-scientific reasons, a political stance and a political set of allies, and twiddles and tunes their assumptions until they come out with conclusions that please their allies and their stance. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones and the skeleton that emerge will teach lessons and suggest principles that will be useful to voters, bureaucrats, and politicians as they try to guide our civilization as it slouches toward utopia. (You will not be surprised to learn that I think that only this second kind of economist has any use at all.)
I feel utterly vindicated. For a few years now, when people ask me, “Are these Keynesians stupid or evil?” I say, “No, I think it’s that they don’t believe in economic law. So they aren’t lying in their minds. They can go to sleep at night because they think, ‘For all we know, my policy prescriptions just might work. Those free market guys can’t be sure they’re right either. This is just a big game we play with the public.’”
Now I had guys like Krugman in mind when crafting such responses; I really do think Krugman is clever enough to realize he can justify any policy response he wants, by making some ad hoc assumptions about political feasibility and then whipping up a two-period model.
But DeLong explicitly admits that he doesn’t believe there are economic laws. Very refreshing.