The Decline of Economic Theory
When I started my Ph.D. in Princeton, pure economic theory was king. Economists with stellar math skills were high in status and high in demand, even if their knowledge of the real world was… slight.
In the following eighteen years, however, something big seems to have changed. Some of this could admittedly be my selection bias – mathematicians masquerading as economists were never big at GMU, and it’s hard to see how they could do well in the blogosphere either. But the pattern is much bigger. The top journals now run very few pure theory articles – and top departments don’t seem to hire many pure theorists. My econjobrumors insider tells me that its countless trolls are largely frustrated theorists who feel cheated of the respect they think the profession owes them. Speculation, yes, but speculation born of years of study of their not-so-silent screams.
All this leads us to two questions:
1. What is the best way to measure the status of pure theory in academic economics – and has it really fallen as much as it seems? Nothing on this topic googles for me.
2. Assuming theory has taken a nose dive, why did it happen? It’s not like the field was ever particularly fruitful. Was it just a case of preference falsification – of tens of thousands of economists pretending to value pure theory a lot more than they did, in order to seem smart and “rigorous”? Or what?
Update: Thanks for lots of good comments. Quick replies to two:
Bryan I would be very interested to know your views on the value and
use of econometrics. which questions does it help economists answer?
for which questions is it less useful?
how important is it for the intuition of an economist?
I’d say it’s about half as important as most economists think, which still means it’s very important indeed. It’s very useful for understanding basic facts and relationships, and tipping the scales for questions where common sense provides little guidance. See e.g. my notes on voter motivation here, here, and here. It’s not so useful when it’s used to test common sense itself – see e.g. the bizarre literature on “the price puzzle” – whether printing money really causes inflation.
The only people who think theory is in decline are non-economists and
the fringe of the academic community. Theory is alive and well, people;
Caplan doesn’t know that because he doesn’t have any in his department.
Then again, GMU is barely part of the academic community in economics
in the first place.
Maybe I’m wrong, but have you got any data? And what’s the cash prize if I identify one well-published economist at a top-ten school who agrees that theory is in decline? 🙂