Towards a better way of doing Economics

Yesterday I was invited to give a talk on Latin America within a seminar series on The Future of the Neoliberal Society that a great group of graduate students is organising in Cambridge. Over dinner with three students, we discussed their efforts to change the way Economics is taught and, more broadly the best way to do research in Development Economics/Political Economy. All of this resonated when this morning I read Piketty's new great reflections on his book. Even if all his thinking is based on neoclassical models (which many heterodox economists have criticise, see here and here ), I think it is excellent on so many accounts: a. It shows the role of economic models as a baseline through which to think about other processes. The relationship between g and r should be seen as a general pattern that is then shaped and reshaped by institutional, political and social processes that evolve over time. "Models can contribute to clarifying logical relationships between particular assumptions and conclusions but only by oversimplifying the real world to an extreme point. Models can play a useful role but only if one does not overestimate the meaning of this kind of abstract operation. All economic concepts, irrespective of how “scientific” they pretend to be, are intellectual constructions that are socially and historically determined, and which are often used to promote certain views, values, or interests. Models are a language that can be useful only if solicited together with other forms of expressions, while recognizing that we are all part of the same conflict-filled, deliberative process." b. Economics is presented as a discipline grounded in history and aware of the role of social and political processes. c. For the study of many dimensions of inequality, cross country econometric studies will be less useful (not useful at all?) than case studies: "In my view, a more promising approach—on this issue as well as on many other issues—is a mixture of careful case studies and structural calibrations of theoretical models." d. Institutions are central to our understanding of economic changes, but should be studied in particular historical contexts and centred on struggle. In doing so, he criticises approaches a la Acemoglu and Robinson which, while illuminating on some key patterns, are too ahistorical and abstract. So right! "In their fascinating book Why Nations Fail, they develop a broader view of institutions and stress the distinction between “inclusive” and “extractive”.This broad concept might certainly include the type of institutions and policies on which I focus upon, including progressive taxation of income, wealth, and inheritance, or the modern welfare state. I must confess, however, that seeking to categorize institutions with broad terms like these strikes me as maybe a little too abstract, imprecise, and ahistorical. I believe that institutions like the welfare state, free education, or progressive taxation, or the effects of World War I, the Bolshevik revolution, or World War II on inequality dynamics and institutional change, each need to be analyzed in a precise and concrete manner within the historical, social, and political context in which they develop." I realise that many of these arguments have been developed by structuralist economists forever (see much of the work of Lance Taylor, for example). Yet the fact that one of the most influential economists in today's world is stating them so clearly is a great opportunity to think about a new economics that creates more conversation with qualitative researchers and accepts all kinds of useful evidences for the study of social, economic and political struggles.