Akerlof 2020: Sins of Omission and the Practice of Economics

In a recent paper in the Journal of Economic Literature, George Akerlof describes how the reward structure of economics favors "hard" research over "soft" research. He argues that this leads to "sins of omission" as researchers ignore important topics that are difficult to approach in a "hard" way.

Akerlof pushes "for reexamination of current institutions for publication and promotion in economics" [and] greatly increased tolerance in norms for publication and promotion as one way of alleviating narrow methodological biases."

Overall I enjoyed the paper. I think it's important, especially in providing an understanding of how we got here. A couple notes are below. One important omission from the paper IMO is an examination of the role of network effects in maintaining the status quo. Without this, I find it even less likely that we'll overcome the coordination difficulties of moving to a more useful research agenda for the discipline. Also, the current mainstream benefits certain groups (such as people on the political right) who will resist a push for better questions and better methodologies, regardless of whether they provide a better understanding of our economy.

Three reasons for the bias toward hard research:

1. Place in the scientific hierarchy -- economists have physics envy
2. The evaluation process -- quantitative / hard papers are easier to judge than important ones
3. Selection into the profession -- mathematicians appreciate mathematicians

Three consequences of hardness bias:

1. Bias against new ideas -- old paradigms have tools that aid precision; also, this bias makes it harder to challenge existing paradigms
2. Overspecialization
3. The curse of the top five -- tenure committees give a lot of weight to the fop five journals

Examples of sins of omission:

1. Failure to predict the financial crisis
2. Motivations -- people act based on the stories they tell themselves rather than as rational deductive optimizers with perfect foresight
3. Four examples illustrating the unappreciated role of stories in economics:
1. The Soviet Union
2. Smoking and health
3. Global warming
4. Macroeconomics - Shiller's explanation for how the Great Depression unfolded

Additional notes

Akerlof mentions Kuhn's Scientific Revolutions (2012) which describes scientific progress as occurring when "normal science" uncovers "anomalies" within existing paradigms. Scientific revolutions that explain those contradictions lead the way to a better paradigm. But Akerlof argues that an issue with economics is that the paradigm is not just the subject matter but also the field's methodology. In other words, is a good economist someone who understands the economy or someone who understands linear algebra? The more powerful economists that think it's the latter (and I have a hunch it's a significant majority) the less chance economics has of progressing as Kuhn has described.

Lastly, Akerlof mentions that 'Colander and Klamer (1987, table 4 3, p. 100) thus found that only 3 percent of economists thought it "very important" for their success to "have a thorough knowledge of the economy"'. Three percent.