<div><i>The Changing Face of Economics</i> gives the reader a sense of the modern economics profession and how it is changing. The volume does so with a set of nine interviews with cutting edge economists, followed by interviews with two Nobel Prize winners, Paul Samuelson and Kenneth Arrow, reflecting on the changes that are occurring. What results is a clear picture of today's economics--and it is no longer standard neoclassical economics.<br><br>The interviews and commentary together demonstrate that economics is currently undergoing a fundamental shift in method and is moving away from traditional neoclassical economics into a dynamic set of new methods and approaches. These new approaches include work in behavioral economics, experimental economics, evolutionary game theory and ecological approaches, complexity and nonlinear dynamics, methodological analysis, and agent-based modeling.<br><br><div><p>David E. Colander is Professor of Economics, Middlebury College.</p><p>J. Barkley Rosser, Jr., is Professor of Economics and Kirby L. Kramer Jr. Professor of Business Administration, James Madison University.</p><p>Richard P. F. Holt is Professor of Churchill Honors and Economics, Southern Oregon University.<br><br><br><br><br></p></div></div>

The Changing Face of Economics

Conversations with Cutting Edge EconomistsBy David Colander Richard P. F. Holt J. Barkley Rosser, Jr.

THE UNIVERSITY OF MICHIGAN PRESS

Copyright © 2004University of Michigan
All right reserved.
ISBN: 978-0-472-09877-4

Contents

Preface...................................................viiIntroduction..............................................11. Deirdre McCloskey.....................................272. Kenneth G. Binmore....................................493. Herbert Gintis........................................774. Robert H. Frank.......................................1075. Matthew Rabin.........................................1376. William A. ("Buz") Brock..............................1577. Duncan K. Foley.......................................1838. Richard B. Norgaard...................................2159. Robert Axtell and H. Peyton Young.....................25110. Kenneth Arrow.........................................29111. Paul A. Samuelson.....................................309Bibliography..............................................315Index.....................................................335

Chapter One

Deirdre McCloskey

Distinguished Professor of English, History, and Economics, University of Illinois at Chicago, and Tinbergen Professor, Erasmus Universiteit Rotterdam.

***

The interview was conducted at the Park Plaza Hotel in Boston, March 16, 2002.

How did you get interested in economics?

When I was in high school in 1959-60, I read Steinbeck's Grapes of Wrath and thought of myself as being on the Left. I was a Joan Baez socialist. I went to college intending to be a history major and found that you had to work an awful lot, you had to read all these books, it was really quite tedious; that's not because I didn't have good teachers, I had excellent teachers. I wanted something easier and something that would satisfy the adolescent desire of doing something good in the world. I couldn't do political science, or government as they called it at Harvard, because my father was chair of the department. So I said, how about economics? And somebody suggested looking at Bob Heilbroner's book. So in the summer before my sophomore year I read Heilbroner's book and instantly became a convert to economics, as has happened to hundreds of other people with that book.

***

How were your first classes in economics? Did you enjoy them? Did you enjoy your teachers?

I took Otto Eckstein's Ec-1, and he did an excellent job. In it we had some superb visiting speakers. I remember John Dunlop coming; he stunned those smart-ass Harvard undergraduate guys. (Almost all of us were guys, because in those times the proportion of females was quite small, so we were tough.) But overall it wasn't a stimulating first course. As a sophomore I had a seminar with Eric Gustafson, who was for a long time at the University of California at Davis. He was terrific; he charmed us into this field. It was a weekly meeting where we produced a paper. Then in my junior year I had Lars Sandburg, the economics historian, as my tutor in my macroeconomics course. The microeconomics course was one of the very last times Edward Chamberlin taught, and he did, as always, an extraordinary job despite the fact that he was ill. It was gripping stuff.

In the spring we had Arthur Smithies, who had a bemused view of macroeconomics. I have never gotten over my bemusement of macro. It still sticks with me. What happened with Arthur was very interesting. At the time I didn't quite grasp it. He would keep trying to explain the multiplier or something like that, and he would screw it up because he was drunk. He would come to class drunk, or at least hung over. He'd get confused, and in a self-deprecating way he would say that he couldn't understand why something wasn't working out. I think he was actually, in a subtle way, criticizing the whole field. The reason I can't get it clear to you is because it is not clear, but perhaps it was just his hangover.

You decided to stay at Harvard to go to graduate school.

Unfortunately. I could have gone to MIT, but John Meyer, the transportation economist, was supporting me. He was at Harvard, so I decided to stay. They didn't offer me a big fellowship at MIT because I didn't graduate summa cum laude. And I did a terrible senior dissertation that will go down in the annals of how not to do a senior dissertation. It was a boring input-output model; the title was "Road and Rail in India."

Did your background with your intellectual family significantly influence how you thought of economics?

I always thought of economics as being very much a social science, as being part of intellectual activity in general. That's natural for the son of a political scientist and the son of a very intellectual, if not formally educated, mom. I still have intellectual conversations with my mom; she's about eighty. We might do a book some day called My Daughter the Economist, which has a lot of ironies in it, where we'll have a conversational format where she'll ask about economics and try to get me to predict the interest rate.

What did your father think about economics?

Well, he had a course with Alvin Hansen when he was a graduate student at Harvard in 1945 or 1946. He had gotten an A in the course because he was a smart guy, but he told me once that he had skipped over all the diagrams and equations because he had a math phobia. Even in 1945, that was dif

You were at Harvard during the Vietnam War and everything else. What was your position on that? We have heard you described as the one conservative at Harvard. Would that be correct?

I certainly was not a conservative on the war. There's a famous photograph, one of those shots that appear in all the histories of the period, which is a photograph of McNamara at Harvard, surrounded by Harvard students around his car. We hated the guy. I'm in the front row. I was not violently against the war, and I didn't really do anything about it, and I was ashamed about that. During that time I was in favor of ending segregation, but unlike some of my classmates who were down in Mississippi and South Carolina in the summer of 1963, I didn't do anything about it. After a while there were women's rights and gay rights. I was in favor of those, but I didn't do anything about it.

So when it came time for me to stand up and ask myself, "Should I stand up as a gender-crosser or just say no that's a private affair and I won't speak to anyone?" I thought that I had to stand up because it was my last chance. So, in any case, I was not a conservative. I don't know who's telling you those things. I was not a socialist at that time but a middle-of-the-road enthusiast for planning, as we all were. We thought we were so smart.

You did your thesis in economic history, and then you went to Chicago. Did this middle-of-the-road person feel comfortable going to Chicago?

I steadily changed. My joke is that I've been everything. I was a communist, I was a man, I was a mathematical economist. I was all these things; now I'm not. My political views were steadily developing in a Chicago direction. In fact as an undergraduate, as a junior, I did these Harvard-type Chamberlin attacks on the Chicago view of industrial organization. Then I figured out through "Road and Rail in India," and other episodes, that if you didn't apply economics, there wasn't anything there. Since you could apply the stuff of George Stigler and Milton Friedman, I started to wonder if this is how you should go. And then, when I started to do my dissertation, it became obvious to me that if you want to talk about the competitiveness of the iron and steel industry, you've got to have some crystal clear mathematical idea of what competition means.

What was your dissertation on, and were people supportive of, the topic?

Yes, people were supportive. It was on "Economic Maturity and Entrepreneurial Decline: British Iron and Steel, 1870-1913." The point was, as a title of another paper of mine put it, "Did Victorian Britain Fail?" which was a theme of socialists for a long time. They wanted it to fail because they wanted capitalism to be a failure right from the beginning, or at least as early as they could make it fail. I was opposed to this, but I didn't really finish the dissertation until well after I got to Chicago. I started at Chicago in August 1968, around the time of the Democratic National Convention, and I didn't finish the dissertation until the following year, late in the fall. People liked it, and it got the Wells Prize. I graduated in June 1970.

When you were at Chicago, you also visited LSE and Stanford, right?

Yes, I did. Not LSE in particular. I visited Birkbeck College. Eric Hobsbawm was there, and I was in the history department not in the economics department. The economics department in Birkbeck was a famous location for Marxists. That was in 1975-76. I visited Stanford in 1973, they offered me a job, and I turned them down. That so annoyed them, especially Paul David, that in 1980 when I wanted a job there they wouldn't extend it.

Were you comfortable with the Chicago position?

Yes at first, because the Chicago position at that time was exemplified by people like Friedman and my main man Bob Fogel, whom I of course had a lot of contact with. There were also Al Harberger and George Schultz. But by the time I left Chicago, it had come to be exemplified by people like Bob Lucas and Gary Becker. Lucas in particular changed the character of the Chicago School. He made it a freshwater pond, and a small pond at that.

So by the time I left in 1980, I was very uncomfortable there. I had been there for a long time, twelve years. Leaving Chicago was one of the big decisions of my life. It was a great place to be an assistant professor, but if I had stayed, I would have been doomed to a life of 22-1 votes. I didn't think the way they were going was right; it would have been horrible.

I don't know what would have happened to me emotionally because they would have been hammering away at their stupid attempt to turn economics into a branch of, not the engineering department, but the math department, and it wouldn't have worked. Furthermore, I ate lunch every day for twelve years with the economists from the Business School. They were the ones who met "downstairs." There were some people from the economics department who would come. But it was mainly from the Business School like Merton Miller, Fischer Black, Myron Scholes, George Schultz, etc. So it was the Business School economists I hung out with.

Why was I with the Business School economists? Partly it was because they were more social. The upstairs economists would be off conspiring. Recently, it occurred to me, a few months ago actually, that the reason I was so comfortable with the Business School people was because they didn't have control of my tenure. So I learned a gigantic amount from these guys. It occurs to me now, twenty years after the event, that I was wary with my colleagues. In 1974 I got tenure.

One of your reviewers wrote that sometime around 1976 you underwent a profound and controversial life change. "You stopped doing economics and instead devoted yourself to telling the rest of us how to do economics." What brought about the change? How would you respond to him?

To say that I stopped doing economics is a stupid statement. I've produced more economics between 1976 and 1977 than that guy has produced in his life. I didn't stop doing economics. I continued to do economics, but I got very dissatisfied with the positivist anthology at Chicago, the so-called positivism. I'm kind of stupid, I don't grasp things quickly, but I do keep thinking about things. I do change my opinions. It's scandalous in some parts of economics to admit that you change your opinions, but I did. Being a Chicago School economist, recall if you can that in the early 1970s it was not a good idea to be a Chicago economist; it was not popular in the rest of the profession. When I went to Stanford, they didn't like Chicago economists, which was shown clearly in the great debate over Stan Engerman and Bob Fogel's Time on the Cross in 1973. I was in this beleaguered minority. I was all for it because I was for the underdog; I was always for the underdog, which means I am always the underdog.

I grew to understand how the Chicago School argued, and I can do it myself, but they were lying about how they arrived at their conclusions. I could see that they were obviously lying, but I was just annoyed and shocked that they continued to lie about how they got to the questions that they got to. And then it gradually occurred to me that if this is true, then maybe the whole profession is lying, and that belief has gotten stronger as I have gotten older. People say, "We do econometrics, and that tests our hypotheses." Baloney. We do theory. I was just rereading last night Paul Krugman's famous article where he tries to introduce geographical considerations into economics, and it is a very skillfully done article. It's rhetorically very skillful. I can show you how it works rhetorically, but it is complete nonsense scientifically, not because it is wrong but because it is arbitrary. There are a zillion other ways of formalizing geography in economics that would come to opposite conclusions to those he comes to, and yet he's kind of airily saying that this is a contribution. Then there are a thousand other articles modifying that. It doesn't get anywhere: they modify it and get completely different conclusions. If you change your assumptions, you get different theorems. So the whole exercise, it gradually dawned on me, was complete nonsense, so that's what turned me. But it is unfair and kind of stupid to say that I stopped doing economics.

You continued in economic history, correct? Your 1981 book on enterprise and trade in Victorian England is seen as a landmark.

Yes, and I kept doing other books. I did my price theory book. The problem with the book is that I don't have as much faith as I had, even in 1985 when I did the second edition, in blackboard exercises. If I redid it today, I'd have to introduce so much empirical material the book would be many inches thick.

Do you feel that you have received a lot of resistance from the profession on your rhetorical work?

Oh, yeah. Resistance isn't the word; blankly uninformed opposition is how I'd describe it. An awful lot of economists only read the titles of most of my articles, if that. Economists don't read very much, and they're not too curious, which, I think, is our main failing as a science, in the way that the best anthropologists or historians are curious and want to know more about things. An awful lot of economists, and I keep getting this, think that I am advocating rhetoric. Many seem to think that what I'm saying is that we use too much math or statistics and that's boring and we should have more flowery speech and just pour more of it into an article.

I finally figured that the first edition of the Rhetoric of Economics was badly organized and it gave the impression that it was a philosophical book. It's not; it's a rhetorical book. It's not from the department of philosophy but from the department of English, and that's the point. So in the second edition I turned the whole book around. I threw out some chapters and added some new ones and turned the whole thing around. It now starts with examples and exercises: here's how you do this stuff, here's how you find out where the metaphors are and how they work and how the stories work. I have a bunch of stuff about Ronald Coase. I take to pieces an article by Coase, and then at the end I throw in some of the philosophy. For a while I thought I was doing philosophy. I am a professor in philosophy, but I am also mainly a professor of English.

You went to Iowa in 1980, and they had a whole group of people working on rhetoric.

Absolutely, as I discovered after I got there.

(Continues...)

Excerpted from The Changing Face of Economicsby David Colander Richard P. F. Holt J. Barkley Rosser, Jr. Copyright © 2004 by University of Michigan . Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.