The trouble with economics part 2
02 Apr 2025
In a previous post, I had a look at some major problems in the theoretical foundations of pretty much all macroeconomic models. To recap, they were as follows:
- No money
Hard as it is to believe, the models that underpin modern macroeconomics do not have money. They are actually models of frictionless bartering.
- No unemployment
Markets always clear, so there is no such thing as unemployment. People waiting in line at the dole office are choosing to do this as a leisure activity.
- No price setting
No one sets or influences prices. They are sent down as manna from heaven.
- No strategy
Everyone operates in a strategic vaccuum where no one else's behaviour affects their own.
- One consumer and one firm
For the sake of simplicity, macroeconomic models often treat an entire country's economy as if it consists of exactly one consumer and one firm.
Of course this all looks pretty bad. But it turns out it’s actually not so easy as you might think to improve the situtation.
It’s one of the tasks I set about during my PhD. I believe I had a lot of success, coming up with a new class of models that addresses all of the above problems.
You would think the economics academy would be very welcoming of this.
And you would be wrong.
Who hurt you Steven
So as a young, bright-eyed economist who worked very dilligently trying to solve major outstanding problems in the field, I was expecting at least some interest in my ideas. I mean, sure, maybe there wouldn’t be a parade straight away, maybe it would have to wait a little, but at least a teensy acknowledgement of what was, if nothing else, a refreshing new take.
In reality, I was met with incredible hostility. I submitted my paper to multiple journals, generally receiving either a desk rejection or replies that were scathing and incoherent in roughly equal measure.
During this time, I was a visiting researcher at the Institute for New Economic Thinking (INET) at the University of Oxford. INET was set up in the wake of the 2008 financial crisis, in response to the complete failure of the academic economics profession to anticipate or understand the crash. The idea was to bring in outsiders and hitherto unorthodox thinking in order to shake things up.
I visited the group headed by Doyne Farmer on complexity economics. Doyne is a physicist by training, who has had incredible success across multiple fields over the course of his career including complex systems, theoretical biology and econophysics. An incredibly smart and accomplished academic, and by many accounts, a genius.
At the time I was trying to figure out why my papers were getting such a frosty reception. As I spoke more with Doyne and the people in his group I found out, to my shock, that they rarely if ever published in economics journals. Strange on the surface, given that they were all academic economists.
The reason? It turns out that they found it difficult or impossible to do so. They were working on things that were not in the mainstream, like agent-based models and chaotic systems. Not because they were crackpots or these were bad ideas, but because the mainstream had arbitarily decided to close ranks against them.
Learning this information caused a sort of relief in me - finally I understood that there was not some cosmic conspiracy to keep me out of economics. I was not experiencing anything new. It was simply the nature of the beast. Extreme hostility to innovation is the order of the day. Stray even a little from the accepted path, and you will be swiftly rebuked. If Doyne Farmer can’t publish in mainstream economics journals, what hope could I possibly have?
Not long after, I exited from economics. It was clear there was no future for me in the field.
Why is economics the way it is
It is useful, however, to understand why exactly I had the experience that I did, and to appreciate the full extent of the rot in economics.
Economics is very insular
On the face of it, you wouldn’t think economics would be an insular subject. It is so closely bound up with a multitude of neighbouring disciplines, like psychology, sociology, political science, history, computer science, even physics. Whereas, say, for someone working in mathematics, the opportunities for citing researchers from other fields are definitely naturally limited.
And yet, it turns out that economics researchers are far less likely to cite reseach from other fields. There is absolutely no reason for this to be the case - economists should be drawing inspiration and knowledge from many other disciplines. Why aren’t they?
One major reason is that academic economics is something of a racket that is controlled by a relatively small number of universities in the USA. Compared to other disciplines, these universities have a strangehold on all the most prestigious journals, and production of Nobel prize winning economists. In other disciplines, the most celebrated researchers are much more evenly distributed across the planet. A clear signal of the institutional capture that has happened across the field.
Academia is very conservative
Everything in academia is reputation based. No one has the time or motivation to go over all of your work with a fine-tooth comb. There may only be a handful of people in the world who are sufficiently qualified to understand it anyway, and they’re all pretty busy. At the same time, there is no shortage of crackpots overselling shoddy work. The solution that the academy has more or less settled on to this situation relies heavily on reputation. Generally what this means is that you have to convince an expanding circle of people in your orbit that you can be trusted.
In many ways this is about as good a solution as we can hope to have. The people close to you are the ones who will naturally have more understanding of your work - your PhD supervisor, your collaborators, etc. First you have to convince them you’re on to something. Once you’ve done that, maybe they will be impressed and start to tell more people they know. The more impressive you are, the more people you should be able to win over to your side. If you can pull this off, it means that when you submit a paper to a journal, you greatly improve your chances of getting a reviewer who is familiar with you, or who is only a few degrees of separation away. They may be more willing to accept some things you say on faith because you have built a reputation for trutworthiness.
That’s how it works when things are working well. When they aren’t, the above mechanisms become channels through which nepotism and favouritism run absolutely rampant, and access to publishing in journals is monopolised by a small group of people/institutions. This brings me to my next point.
The economics journal system is broken
As someone who has worked in multiple academic fields, I can say without hesitation that the journal system in economics is hands down the most labyrinthine, kafkaesque and academically stifling I have ever experienced.
For example, it is not unusual for it to take three or more years between the first time you submit an article to a journal, to it actually being published. Why does it take so long? What is happening in that time? It can often take more than a year just to hear back from the reviewers, which is a ludicrous turnaround time. And remember you will likely be rejected multiple times before eventually being accepted for publication.
There seems to be little or no correlation between quality of work and its likelihood of being accepted in a high end journal. I have heard several economists express this about their own papers. Genuine bafflement at the papers that have ended going to better journals versus the ones that have been relegated to the lower leagues.
I also know of multiple individuals who have permanent or tenure track positions at universities who have published somewhere between zero and two papers. That’s right - people on track for professorial positions without ever having published anything.
There is absolutely no reason for this to happen. It stifles the production of knowledge and strangles innovation. The only reason it does happen is because the field has been captured by special interests and stripped of its academic integrity.
Conclusion
In my view, academic economics is probably beyond being salvaged. A tremendous amount of time, effort and brainpower goes into producing remarkably little genuine or useful knowledge about the world. Nepotism runs amok, and the whole field is run more like a cartel than a free market. This is not how a discipline that aspires to be called a science can or should ever work.