Alejandro Delgado’s Post

I took the time to read "Rethinking Economics or Rethinking My Economics?" by Angus Deaton, published in the IMF's Finance & Development Magazine, https://lnkd.in/dEWRNbcy, and he clearly states what every young person is feeling about the state of the economy. Angus Deaton's Central Arguments • Economics Successes, Yet Shortcomings: Deaton acknowledges that economics has made significant theoretical and empirical contributions to our understanding of the world. Yet, he argues the field is facing disarray, particularly due to its failure to predict the financial crisis and its potential role in exacerbating it. • Importance of Changing Views: He believes economists should be open to questioning assumptions and changing their opinions as circumstances evolve. • Overemphasis on Markets: Deaton suggests economists overstressed the virtues of free and competitive markets, along with technological innovation. This led to downplaying the role of power in influencing things like price and wage setting, where technology develops, and even altering the very rules of economic systems. • Inequality and Power: Without a focus on power dynamics, Deaton contends it becomes impossible to fully understand the complexities of inequality and ethics within modern capitalism. An increased focus on market efficiency has inadvertently become a free license to plunder. Free market capitalism is not the solution to the worlds problems.

Changing your mind as a public figure is difficult. So I can't image how difficult it must be for Angus Deaton, an Economics Nobel Prize winner, to change his mind about the effectiveness of the profession of economics. As a former (frustrated) economics major, I am SO glad someone has spoken up. In the latest IMF magazine, Angus Deaton argues: 🏆 Economics doesn't understand how power influences the allocation of resources (its not just free market) 👩👩👧👦 Economics over indexes on individual free market choice and fails to take into consideration of community, families ,impact on decision making 💸 Equating well-being solely to money or consumption 📐 Econometrics is not so great processing potentially important but slow-acting variables that operate with long and variable lags He also says he was once against unions and that globalization and migration was a good thing. He has second thoughts on both topics now. The 19-year old economic undergrad student in me feels heard. 🔗

For almost a decade, we at the Dutch foundation Our New Economy have been advocating for a more diverse perspective in economics (pluralism). While change is occurring, it is progressing at a rather gradual pace, particularly at the highest levels. Two days ago, the editorial board of the Financial Times published an excellent op-ed titled 'Is economics in need of trustbusting?' and subtitled 'An elite closed shop of economists at US universities sparks concerns over groupthink.' A recent study of Nobel laureates suggests that power in economics may be too concentrated. The editors argue that this is problematic because 'there is no shortage of criticisms to lay at the profession’s door' and advocate pluralism as the way forward: 'It is said that success has many parents, while failure has none. The opposite is the case for the economics profession: its shortcomings are what economists would call “causally overdetermined” — many factors could be to blame. A less concentrated economics could just mean more dispersed failure. Still, the principle that more pluralist systems are better and faster at self-correcting is worth holding on to, in business and knowledge production alike.' I agree wholeheartedly. Let's hope it will happen soon!

An Interesting article in the FT introduces new titles in Economics. It begins with an interesting statement...... "Human discovery has been driven by a desire to sort and simplify the world. But our ability to navigate the future will be increasingly determined by how we handle its complexity. Adam Smith, the father of economics, described the economy as a complex system. Yet the study of social science that emerged after Smith wrote his 1776 opus The Wealth of Nations was largely about modelling the decisions of rational actors in simplified settings. That served its purpose, but as our economies have become more complex, parameters that were considered well-defined are no longer so. We are more interconnected; technological change is exponential; our climate and environment are changing faster than we can adapt. In recent years, complexity economics has risen as a response. Three new books help outline how we can respond." So despite Adam Smith recognising the economy is a complex system centuries ago, the discipline of has taken a very long time to wake up to the fact. And, whilst I agree with most of what the journalist says, I disagree with the suggestion that the path economics went down - largely about modelling the decisions of rational actors in simplified settings - has "served its purpose," unless its purpose was something other than serving society which it has done very badly. And I suggest the economist Ha Joon Chang was absolutely right when he said, "economics is far too important to be left to the economists." https://lnkd.in/eW2rW9GC #economics #systemsthinking #complexity #chaostheory

“Without an analysis of power, it is hard to understand inequality or much else in modern capitalism.” Angus Deaton, winner of the Nobel prize in economics That’s why I did my PhD in political science (which is all about studying power) rather than economics. As I often tell my students, economics (generally) seek to discover and explain how the economy should work. Political economy, which is what I studied (and it does require a deep understanding of economics too), seeks to discover and explain how the economy actually works (i.e., why many policies that economists generally advocate don’t get adopted). That’s why the concept of “political will” is meaningless. Saying that the absence of political will explains why the “right” or “good” economic policy was not adopted by political leaders is equivalent to people saying that someone eats/drinks/smokes/shops/gambles/games too much because they lack the will to control themselves. To make sense of the excessive behaviour, we need to unpact the factors that cause it. It’s the same for policy-making. One needs to unpack the politics of any government policy decision.

Economists should listen to Angus Deaton's wise words and read historians a lot more than they currently do! : https://lnkd.in/eTjVH73C? "Historians, who understand about contingency and about multiple and multidirectional causality, often do a better job than economists of identifying important mechanisms that are plausible, interesting, and worth thinking about, even if they do not meet the inferential standards of contemporary applied economics."

A thought provoking reassessment of his assumptions on how the economy works and an analysis of the failings of the economics profession by Angus Deaton, recipient of the Nobel Memorial Prize in Economic Sciences in 2015: "Economics has achieved much; there are large bodies of often nonobvious theoretical understandings and of careful and sometimes compelling empirical evidence. The profession knows and understands many things. Yet today we are in some disarray. We did not collectively predict the financial crisis and, worse still, we may have contributed to it through an overenthusiastic belief in the efficacy of markets, especially financial markets whose structure and implications we understood less well than we thought. Recent macroeconomic events, admittedly unusual, have seen quarrelling experts whose main point of agreement is the incorrectness of others. Like many others, I have recently found myself changing my mind, a discomfiting process for someone who has been a practicing economist for more than half a century. I will come to some of the substantive topics, but I start with some general failings." #cdnecon #ukeconomy #useconomy #globaleconomy #economics #economy #cdnpoli #cdnbiz #competition #globalization #smallbusiness #smallbiz #deloitte #economist #economists #economicpolicy

Has anyone seen the latest of the lament in the dismal science, Economics? First was Paul Collier's 2018 publication of "The Future of Capitalism: Facing the New Anxieties." Now 2015 Nobel Laureate Sir Angus Deaton has penned a lamentation of the truths we knew in our bones and the truths before our eyes that: TL;DR: 1. Without a proper analysis of power, the free market is neither free nor a market. 2. Money matters. But there are more things that matter more than money. 3. Efficiency without equity is often a license to plunder. 4. Empirical methods, and econometrics know very well how to count. But seldom know what counts. 5. There are different ways of living. And one account can't tell all about the world. Ideas have consequences. Sadly, some of these ideas have cost limbs and lives and continue to do so. Let me know what your thoughts are in the comments below. #AngusDeaton #freemarket #Economics #Rethinking #Secondthoughts https://lnkd.in/d-z6Amwy

Must-read article from Angus Deaton with reflections on what mainstream economics neglects: - power structures - philosophy and ethics - distributional issues and equity - empirical methods other than inferential econometrics - humility. https://lnkd.in/egkBuv2N

Must-read article from Angus Deaton with reflections on what mainstream economics neglects: - power structures - philosophy and ethics - distributional issues and equity - empirical methods other than inferential econometrics - humility. https://lnkd.in/e_-w3tnx