In a call to arms for economists, David Zetland (from aguanomics) writes:
As an economist, I was appalled to read the comments of recent PhDs on Ostrom's award:
http://aguanomics.com/2009/10/economics-fail.html
As I am sure you know, she has made critical contributions to understanding how common pool resources can be managed in the absence of private property rights. In these days of climate change, collapsing fisheries, etc., I can hardly think of a better person to get the prize (besides Williamson, whose contributions are also critical to understanding when markets/firms work or fail!).
Unfortunately, these NEW PhDs -- perhaps an unrepresentative sample or perhaps the best of the best -- seem to be ignoring relevance in favor of "mathiness"
Here's the money quote: "If she [Ostrom] is so big and important how come there isn't a theorem that is named after her? huh? tell me, smart ass!"
This is ridiculous.
I think it's high time that we BREAK the Core, replacing at least half of it with the economics of people -- not an imaginary, but mathematical homo economicus.
I am doing that in my course (http://www.kysq.org/EEP100/) for undergrads, but the real work (yes WORK) is really on remaking the PhD curriculum.
Haven't we falsified the importance of the status quo by now? It's time to discard this rejected hypothesis and try something different, something that WORKS.
My thoughts below:
These kinds of diatribes always strike me as attempts to garner attention for a smokescreen. In my experience, attacks on the status quo usually result in a rewording of the status quo--a rearrangement of the furniture with a few new accessories. While at first it may look like a new room, in the end, we're still looking at the same foundation.
The problem with economics is not the status quo. The framework of economics works. Establishing a common framework in graduate school gives everyone a common base from which to argue. Without this common base, you end up with a discipline founded in case-by-case studies without the generalizability afforded by rigorous modeling.
This may sound like I've drunk the Kool-Aid and fall in the camp of Ostrom-deniers on the grounds of lack of rigor. That would be the wrong interpretation. Ostrom's work is valuable and changes the way economists think about common pool resources. But the value of Ostrom's work doesn't end with Ostrom's case studies. Ostrom's work doesn't provide specific answers, rather it raises important questions. Just as Coase's work before her, Ostrom presents economic arguments that are readily incorporated into the classic economic framework--with modification and creative thinking.
Coase didn't propose a theorem and had no intention of such. He made arguments. Economists' used those arguments to modify and solidify the classical framework in light of Coase's arguments. Coase's writings--while not mathematically rigorous--provided clarity of thought for economists within the context of the classical framework. Coase's arguments were critical in understanding the workings of markets and the pitfalls that may arise in the practical application of economic principles to real world environmental problems. Ultimately, an understanding of Coase's arguments and some of the practical limitations of the classical model resulted in the implementation of arguably the most successful environmental policy ever implemented: the Sulfur Dioxide market.
But Coase's lack of rigor didn't render the status quo obsolete, just as Ostrom's work will not. The lessons from Ostrom's work--social and regulatory institutions matter in common pool management--raise questions about the classical model. But just as observing a ball stop rolling doesn't render Newton's Laws of Motion obsolete, observing common pool outcomes inconsistent with the classical economic framework doesn't render the classical model obsolete. Rather it raises a call to revisit the assumptions of the model to see if the framework can handle the new observation. If it can, then the framework is further validated. If it can't then we need to step back and ask where does the framework fail?
But abandoning a common framework in favor of individual observation and interpretation is not progress. Economics has an advantage over other social sciences in the commonality. While we may sacrifice some of the ability to explain every specific situation, as a discipline we gain generalizability and a framework for debate. Without that, we are just--WARNING: unwarranted disciplinary attack coming--sociologists (lighten up sociologists, it's a joke).
