Thursday, April 25, 2013

Beatrice Cherrier — The rise of economics as engineering, Parts I and II

The rise of the economist as engineer is, economists and historians say, an essential characteristic of the development of economics in the postwar period. In 2006, Greg Mankiw wrote a much commented paper in which he argued that one brand of macroeconomics (neokeynesian) is akin to engineering, by which he meant “solve practical problem,” and “help policmakers devise better policies to cope with the BC [budget constraint].” Another brand is rather done by (new classical) scientists, he explained, and is about “propos(ing) and test(ing) elegant theories.” He traced the first tradition to Keynes, its theoretical reformulation by Hicks and Modigliani, to the large-scale applied macromodels of Klein, Eckstein and Ando-Modigliani, and to the neo-keynesians. The second stream of course reflects the Lucas-Sragent-Wallace-Kydland-Prescott family tree.
That's either BS or pretty bad engineering. While I am not an engineering, I know enough about engineering method to know that none of these MIT economists remotely resemble engineers other than as members of the MIT community. That's not enough. For one thing, engineers get that there is feedback.

But this is something that we should be looking at and debating. For example:
One element missing from dicussions of MIT-style policy making is how they handled values. Using sophisticated techniques doesn't shelter from the need to work with some ends/evaluation and decision criteria. And the nature, relevance and implementability of such criteria, whether Pareto optimality, surplus analysis, social welfare functions, social choice functions were hotly debated in the forties and fifties.Welfare economics was then looking for new foundations, if not disagregating, and Samuelson was a major player in these transformations. MIT policy-making style is therefore related to the applied tradition there, in particular the postwar development in development economics and public economics.
INET — History of Economics Playground
The rise of economics as engineering I : setting the scene

The rise of economics as engineering II: a case study

Beatrice Cherrier


Matt Franko said...

"G-T": Meaningless from an engineering perspective...


James said...

C.H. Douglas was an engineer

Tom Hickey said...

"G-T": Meaningless from an engineering perspective...

Not really, since it is a flow.