The Nobel Prizes awarded each year resemble a kind of report card where each prize-worthy discipline (Physics, Chemistry, etc.) gets a grade that depends on the prize-winning research. If the prize-winning research is useful and surprising, the grade is high. If not the grade is low. More generally, at least to me, the intellectual history of the prize winners sheds light on the whole profession. Perhaps some biologists were unaware of the behavior of Eric Kandel described in Explorers of the Black Box when he was awarded the biology prize. Kandel, I hasten to add, is an unusual case.
Thomas Sargent is one of the winners of this year’s Economics prize. In 2007, he gave a graduation speech at Berkeley to economics majors (via Marginal Revolution). In the speech, Sargent called economics “organized common sense”. He went on to list 12 common-sense ideas, such as “Individuals and communities face trade-offs” and “governments and voters respond to incentives” that economists believe. The reasons for their belief weren’t stated.
When I started as a professor (at Berkeley) I did many experiments with rats and, to my annoyance, discovered an inconvenient truth: I understood rats less well than I thought. Even in a heavily-controlled heavily-studied situation (Skinner box), my rats often did not do what I expected. My common sense was often wrong, in other words. This experience made me considerably more skeptical of other people’s “common sense”.
To me, and I think to most scientists, science begins with common sense. Experimental psychology certainly does. I used common sense to design my experiments. Had I not done those experiments, I would not have learned that my common sense was wrong. So relying on common sense was helpful — as a place to start. As a way to begin to understand. You begin with common-sense ideas and you test them. That common sense is often wrong is a theme of Freakonomics, in agreement with my experience. Yet Sargent seemed content (he called economics “our beautiful subject”) to end with common sense, perhaps tidied up.
This is really unfortunate because economics, beautiful or not, is so important. If you ignore data, the answer to every hard question is the same: the most powerful people are right. That way lies stagnation (problems build up unsolved because powerful people prefer the status quo) and collapse (when the problems become overwhelming). Alan Greenspan’s faith-based belief in free markets and the 2008 financial crisis — after Sargent’s speech — is an example. In 2009, Sargent’s speech might have been less well-received.