The economists have no clothes

Over at The Atlantic, Gregory Clark admits, rather refreshingly, that academic economists have no clothes.

The current recession has revealed the weaknesses in the structures of modern capitalism. But it also revealed as useless the mathematical contortions of academic economics. There is no totemic power.

As a discipline, economics proposes models, which are by definition incomplete. That is, they exclude some details and highlight others. To think that economic theories actually describe reality--as opposed to offer an image of reality that is useful for some purposes--is to mistake the map for the world.

Ceci n'est pas le monde.

Further, the dismal science has all too often provided models whose validity is impossible to ascertain, since it has often built its theories on the basis of premises that are false prima facie. The point here is that, logically speaking, false premises do not yield false conclusions; rather, false premises render the truth values of an argument's conclusions indeterminate. It isn't that economic models are false, but rather that the falseness of their premises means that can know nothing with certainty about their conclusions. We can't say whether economic models are true, false, or some determinate mix of the two. Logically speaking, they're mere speculation, with the same logical status as wishful thinking.

You mean we came all this way and we don't even know if we're wrong?

For example, the theories of classical economics generally accept as axioms (i.e., they accept as true without argument) the following:

1. All economic actors are rational.
2. All economic actors have perfect information about the markets in which they act.
3. All resources are scarce.

These are bad axioms, since they're obviously not true. As in, there's no doubt at all that these are false. Of course, not all branches of modern economics still accept these premises without qualification, but historically speaking these assumptions lie at the foundation of all economic thought. This is precisely the main reason I never studied economics in college. Who can take seriously a discipline that, wherever it ends up, begins with nonsense? While there's no doubt that the phenomena we think of as economic are intrinsically interesting, I remain skeptical that the formal discipline of economics has a great deal to offer beyond the obvious. As Clark notes:

The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner.

Common sense cloaked in jargon and equations. Even the economists' invisible clothes look rather shabby these days.

The value of inconvenience

By almost any meaningful performance measurement, the U.S. economy in the 20th century performed better under Democratic administrations than under Republican ones. Reflecting on this seeming paradox, Christopher Carroll suggests that

perhaps the best explanation has to do with attitudes, not doctrines: Maybe capitalism works better when its excesses are restrained by skeptics than when true-believers are writing, interpreting, judging, and executing the rules of the game. (The Democrats are surely the more skeptical of our two parties).

Most would agree that restraining the excesses of almost anything counts as good sense, but this is only a preliminary step toward a bigger and more interesting idea:

Capitalism works better when it is being held accountable to some external standard than when left to its own devices.

The whole system works better when "held accountable to some external standard," when it is, in a word, constrained. Optimal performance, in other words, is the fruit of struggle. Make things too easy and performance declines.

Relaxed external standards? Check. Highlight reel material? Not so much.

Consider how effective coaches pull outstanding athletic performance from their players. Good coaches don't let their players do whatever they want, without accountability or oversight; they create rules and systems of accountability. A good soccer coach makes you use your weak foot in order to develop it. A good swimming coach pushes you to hold your breath longer. Optimal athletic performance depends upon the measured application of psychological and physiological pressure. (Go watch Gavin O'Connor's Miracle to see a dramatization of great coaching.) Good coaches don't remove limitations--they use them.

Or consider architectural and industrial design. The famous designer Charles Eames (yet another famous St. Louisan) once remarked:

Design depends largely on constraints.

We tend to believe that creativity is best served by removing constraints. If we could just somehow make the process of invention easier for the inventor, we imagine that she would be more inventive. But the opposite is usually true. People get creative--truly creative--when challenged to negotiate constraints. Budgets (within reason) push architects to develop new strategies to solve old problems. (The story of how the design of Seattle's new public library building developed is a great example.) The particularities of manufacturing processes push industrial designers to find solutions which challenge convention. (The story of the how the first commercially viable computer mouse was designed is a textbook example.) Constraints drive creativity.

Artist Andy Goldsworthy creates astonishing ephemeral works using only the materials he finds on site during his wilderness hikes: creativity driven by constraint.

The same is true in business. Real innovation happens where someone discovers a new way to scratch an old itch, where someone thinks through a problem in a new way (even if it's simply a new application of an old technology). When we talk about innovation happening "at the edges" of a market or industry, what we mean is that innovation happens where business rubs up against constraints. (The "mainstream" of anything is where things flow smoothly, right?) We can't have innovation--and capitalism's greatest strength as an economic system is its powerful incentives for innovation--unless we have the right kind of rules and restrictions. (The question of "more" regulation versus "less" regulation is puerile. The kind of regulation matters more than the amount.) The free market, to put it pointedly, is only as free as its constraints force it to be.

Of course, constraints are damned inconvenient. And that's precisely the point. It's often--if not always--in response to inconveniences that people are most creative, most inventive, most innovative. And so we're led inevitably to the conclusion that inconveniences can be useful.

"Traffic lights are just the Man keeping us down! We will not be constrained!"

Some inconveniences, naturally, are more useful than others, but that hardly obviates the necessity of inconvenience for optimal performance. It's easy enough to see how inconveniencing others might be worthwhile, but it's one of the marks of emotional maturity to see the value of inconvenience for oneself. Politics--in the largest possible sense of the word--is only possible because we deliberately accept to be inconvenienced in certain ways (e.g., we don't simply use whichever car is closest, use guns to force our crushes to go out with us, or lynch elected officials from opposing parties). We recognize that our condition is collectively better when we all accept to be inconvenienced in certain ways. (Again, the kind of self-regulation matters more than the amount.)

Finding--and enforcing--the right kind of constraints is key to getting the most out of people, as innovators, as politicians, as artists, as designers, and even as citizens. We would all of us do well to remember that inconvenience--yes, even our own--often serves us much, much better than convenience.

The first rule of student engagement

I'm in Québec City right now, attending a 5-week intensive program in French Language immersion. One of the options I've chosen is an introductory survey course on Quebecoise literature. There are only a dozen students in the course, so the teacher said she'd like to run the class more as a seminar and less as a lecture. Which sounded great--but it turns out our teacher doesn't seem to know how to run a discussion (not an uncommon failing among teachers). She doesn't seem to grasp the first rule of student engagement--actually, the first of intellectual engagement in general. And that rule is this:

People engage with ideas on the basis of what they already know.

The technicalities of revolution are, as everyone who attended the party found out, pretty damn tedious.
(Revolutionary Tedious Party, originally uploaded by abitnice)

This rule has two important practical corollaries:

1. Discussions turn on questions that everyone can answer. Domains where students are largely ignorant offer no footholds for students to establish a stance and launch into a discussion. If you start talking about what you know well, but what your students don't know at all, they won't respond for the simple reason that you're the obvious authority and what you say goes. If you base the discussion in a domain where the students have some knowledge (their own opinions are painfully dependable as a point of departure), you'll be able to introduce the topics you want to cover without killing the conversation.
   
2. Technicalities kill engagement. Technicalities are inevitably the province of specialists. If you're talking about technicalities, you'd better be talking to another specialist (or someone who aspires to be a specialist). If you're not, guaranteed you're boring people in a way that makes them just want to break something.
   

Engagement is the foundation of every learning experience. Engagement can only happen when people take what they already know and either reinterpret it or connect it with new knowledge.