Sociology and Masonomics
We still think about supply and demand, but we also think about policy, psychology, behavioral genetics, and much more.
Some random comments:
I wrote about Masonomics as thinking about incentives, signaling, institutions, and evolution. I have heard Nobel Laureate Douglass North complain that he did not want to call what he does “institutional economics,” because he sees it as broader social science. Nobel Laureate Robert Solow once warned economists against doing “amateur sociology,” but in the context of a paper in which he admittedly was doing so in order to explain wage stickiness, which in turn was necessary to explain unemployment. George Akerlof, another Nobel Laureate, delves deeply into sociology. In 2005, the Journal of Economic Perspectives published an article on economic sociology.
What are the problems with sticking to the traditional paradigm?
1. To explain a society’s transition from poverty to prosperity, you need to invoke institutions.
2. The traditional paradigm has this strange dichotomy, in which market behavior is rational and self-interested but policymaker behavior is perfectly altruistic. These idealized constructs are very limiting. Note that the Left tends to complain about the limitations of the rational model of the market actor, while the Right tends to complain about the altruistic model of the policymaker.
3. The attempts to do macroeconomics based on rational actors and incentives seem strained and unhelpful.
4. As Nobel Laureate Robert Fogel points out, in the developed world we are dedicating a smaller share of resources to producing food, clothing, and shelter (including durable goods). The growing sectors of the economy are health care, education, and leisure. The production of food, clothing, and shelter can be well described by using traditional factors of production–labor, land, and capital. Not so with health, educational attainment, and the enjoyment of leisure, where psychological and social factors are important.
Jun 12 2009 at 12:54pm
To respond to number 3: rational actors may not have been a useful approach in Macro, but trade-offs must play a role. Otherwise you are not doing economics at all.
Jun 12 2009 at 8:13pm
Masonomics or Freakonomics or whatever you want to call it was fashionable back in 2005 when economists were plausibly claiming to have more or less solved all the old problems of economics (e.g., preventing massive financial crashes), so they had time on their hands for taking over other fields with the same skill sets that had made the world economy the foolproof perpetual motion machine it appeared to be a few years ago.
Jun 13 2009 at 1:00pm
Are you actually implying that the financial crisis discredited the microtheoretic foundations of Masonomics?
Yeah, yeah, I know you’re blatantly trolling, but really now.
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