The story appears on

Page A7

February 15, 2016

GET this page in PDF

Free for subscribers

View shopping cart

Related News

Home » Opinion » Foreign Views

Market for economic ideas captured by old elite

Imagine that you fell asleep in 2006 and woke up today. The world economy would be barely recognizable. While you were dreaming of real-estate riches, the United States and Europe were hit by the most crippling financial crisis in almost 80 years, and China’s economy overtook Germany and Japan to become the world’s second largest (and, despite its recent slowdown, is poised to surpass the US).

Given such massive shifts, you might be even more surprised by what didn’t change: the way economists think about themselves and their discipline.

To see this, one need look no further than the Ideas.RePEc.org website. RePEc (Research Papers in Economics) arguably provides the closest thing to a credible hierarchy of economists, not unlike the ATP’s rankings of professional tennis players. The site, entirely open and free (thanks to hundreds of volunteers in 82 countries), maintains a decentralized online database of around two million items of economic research, including working papers, journal articles, books, and software. Its index of influence assesses the number of citations for each author, weighted by impact and discounted by citation age (otherwise, Adam Smith and Karl Marx would likely still top the list).

Because the ranking is updated every month, RePEc enables one to track which economists are viewed by their peers as the most influential over time. So I compared the rankings from December 2006 and September 2015 to see whether the RePEc index had evolved along with economic reality.

It had not. Despite the profound — and largely unpredicted — financial and economic turmoil of the intervening decade, the intellectual influence of those whose theories suffered the most evidently remains undented.

After a succession of bursting multi-trillion-dollar credit bubbles, you might wonder what to make of Robert Lucas’ view that rational expectations enable perfectly calculating “agents” to maximize economic utility. You might also want to rethink Eugene Fama’s efficient markets hypothesis, according to which prices of financial assets reflect all available information about economic fundamentals.

You must not be an economist. In fact, Lucas and Fama both moved up in the RePEc rankings during the period I examined, from 30 to nine and from 23 to 17, respectively.

And the persistence at the top is striking across the board. Among the top ten economists in September 2015, six were already there in December 2006, and another two were ranked 11 and 13.

Mobility in the RePEc rankings remains subdued even after widening the sample. For example, of the top 100 economists in September 2015, only 14 were absent from the much wider top 5 percent in 2006, and only two others had advanced more than 200 spots over the previous decade.

Among those recently ranked from 101 to 200, just 24 were not in the top five percent in 2006, and only ten others had moved up by more than 200 places.

The rate of renewal among the 200 most influential economists was as low as 25 percent — and just 16 percent among the top 100 — during a decade in which the explanatory power of prevailing economic theory had been found severely wanting.

What is remarkable about this is the difference between the pace of change in the ranking of economists and in the economy itself.

How surprised should we be that, even after the Great Recession cast grave doubt on the rational-market theories so dominant a decade ago, the top tier of academic economics remains largely unchanged?

After all, many of these scholars have made tremendous, lasting contributions to understanding how markets and societies work. And ideas tend to advance and retreat slowly, like glaciers, not precipitously, like armies.

But replace the names of the leading economists with products in any other market — cars, for example, or semi-conductors — and most people probably would agree that the RePEc ranking looks like a closed, inefficient market with high entry barriers.

For a group of people so committed to free markets and so enamored of “creative destruction,” that is a question that urgently needs to be addressed. The answer may hold enormous implications not only for intellectual growth, but also for human welfare.

The author is a financial columnist, and the author of Noi siamo la rivoluzione (We are the revolution). Copyright: Project Syndicate. Shanghai Daily condensed the article.




 

Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend