Don Boudreaux wonders why I make that prediction, and he offers one possible explanation.
economists’ increasing embrace of empiricism that isn’t solidly rooted in basic microeconomic theory of the sort that can be, and should be, taught to undergraduates. That which can be measured and quantified is that which can be seen. Indeed, to quantify something is, in a real sense, to see something – or at least to see some of that something’s physical manifestations. And yet a chief lesson taught by a sound course in basic economics is that many social phenomena are unseen.
What I need is an explanation for what I see as the current and future drift of economics. The difference between the seen and the unseen has been discussed since Bastiat. It could be true that the greater availability of data and the greater emphasis on empirical work creates a bias toward seeing the benefits of intervention and understating the costs. But that is not one of the explanations I had in mind.
I am thinking primarily in terms of the culture of the academy. Disciplines can easily become dominated by narrow ways of thinking. As of the late 1970s, when I was in graduate school, mathematical optimization and multiple regression crowded out everything else. Soon, rational expectations theory and dynamic stochastic optimization had crowded out any sensible thinking about macroeconomics. As those of you who have read my macro memoir can perhaps appreciate, my experience leads me to believe that incredibly dumb ideas can become dominant in an environment in which a handful of professors effectively control the academic job market in a field.
I actually think that in terms of methods, academic economics is getting more broad-minded and less stupid. The generation that believed that progress comes from solving more difficult math problems and using fancier econometrics is finally giving way to younger economists with less rigid methodological doctrines. But young economists are less interested in the fundamental issues of social organization. They prefer looking at narrower, technical questions. They are happy to write papers that suggest potential policy improvements, without worrying about how the political process conducts itself in practice.
If contemporary America is embroiled in a war between the Concrete class that works with stuff and the Abstract class that works with words, numbers, and computer programs, then economists, like other Academics, will side with the Abstract class. The Abstract class believes that in the natural order of things it ought to be managing and governing. I suspect that young economists today are not going to want to criticize this natural order of things, for fear of being shunned as class traitors.