There was an important discussion about economics and economists in Davos at the recent World Economic Forum gathering, as reported here. Apparently, Christine Lagarde, who used to be the Managing Director of the International Monetary Fund and is now the President of the European Central Bank, sees economists as a “tribal clique” because economists quote each other, among other things.
Although this is curious if not ironic in that Lagarde led an institution that has infamously pursued the Washington Consensus economic dogma to the detriment of many lives across the globe, we think that there is an element of truth that people in the same discipline cite those in that discipline more than they cite those who are not in their discipline.
It makes obvious sense that sociologists cite other sociologists more than citing political scientists as an example. There could be exceptions of course.
The article links what Lagarde said with what the writer considers to be a problem in economics and about economists, including the debate about Thabi Leoka. The debate about economics and economists is welcome — but what’s economics really got to do with legitimate concerns about Leoka misrepresenting her qualifications?
The debate must be informed by an understanding of the discipline and its practice. It should not be about certain individuals. In 2016, significant airtime went to discussing Chris Hart after it was revealed that he only had a bachelor of commerce and a higher diploma in education. He had held positions such as senior economist at Absa and Global Market Strategist at Standard Bank as well as a frequent speaker on various media platforms on economic matters. (Chris Hart has never publicly claimed to have qualifications other than what he holds, so it would be disingenuous to make a comparative argument - Ed)
Leoka debacle
Now we are preoccupied with Leoka for having misrepresented herself as having a PhD in economics. At least Leoka has a master’s degree in economics. There are many fine economists without a PhD in economics, and there are terrible economists with a PhD in economics.
We also have professors of economics who have never written a PhD, something that has been questioned. This does not make it right for anyone to lie about their qualifications. Our hope is that Leoka will bounce back. Hart bounced back: he now runs an investment company, if his LinkedIn profile is anything to go by.
Read more in Daily Maverick: Economist Thabi Leoka’s PhD appears to be a figment of her imagination
Some people make a point that Leoka’s economics was not sound because they most likely disagreed with her economic views. Economists hold different views and often have different ideological orientations, mostly shaped by their training and outlook.
It greatly matters in economics, perhaps in other disciplines too, where one studied and who supervised the research undertaken at master’s and/or doctoral level. The doctorate, or doctor of philosophy or of commerce in economics, is a narrow specialisation similar to other disciplines, but economics training at that level provides advanced analytical approaches to an understanding of an economy and society based on a particular school of thought, which can be applied in the study of other economic phenomena.
It is in this context that you find economists in the different organisations. But they should not be confused with bankers or investment analysts or opinion makers on economic issues.
Economics confusion
So, what is economics exactly? Economics is about how societies meet the wants and needs of their people, taking into consideration the scarcity of resources, and most importantly the political environment. It is the study concerned with the well-being of people or societies.
It gets confused with other related disciplines such as finance, actuarial science, and business studies. The field of economics is wide, but generally categorised as either microeconomics (concerned with individuals, households and firms’ behaviours, prices and quantities of goods and services) or macroeconomics (focused on economic performance, ie, inflation, interest rates, unemployment, gross domestic product).
There are also development economics, financial economics, institutional economics, agricultural economics, public economics, international economics, behavioural economics and other sub-fields in economics, including the most misused or misunderstood sub-field, that of political economy.
We say political economy is misunderstood or misused because many claim the title of political economist without any training in economics. It should be perfectly fine for anyone to comment on economic and political matters without considering themselves a political economist.
Economists have continued to grapple with critical economic issues since the days of Adam Smith and Karl Marx, who were essentially political economists because they applied mathematical economics to political phenomena.
The field has significantly advanced: econometric and statistical techniques have improved such that understanding phenomena like relationships among variables has become easier. The discipline can quantify important issues such as the size of a government in relation to the market, or an impact of a policy or government expenditure, or estimating productivity in the public sector.
The history of economic thought reveals that there is no one way of thinking about economic issues, hence the many economics schools of thought referred to earlier.
For instance, the so-called classical economists include the likes of Adam Smith, David Ricardo and Karl Marx, who were more concerned with the impact of politics, trade, and production processes on societies meeting their needs.
On the other hand, the concern of renowned neoclassical economists William Stanley Jevons, Leon Walras and Carl Menger (who are celebrated for having introduced mathematical toolkits for analysis of economic phenomena) was the satisfaction consumers derived from the goods and services they consumed.
Alfred Marshall added that both the supply and demand of goods and services were equally important when studying how societies meet their needs. Furthermore, John Maynard Keynes, founder of the Keynesian school of thought, emphasised the importance of governments intervening to ensure that societies can meet their wants and needs, especially in times of crisis. Irving Fisher, founder of the Monetarist school of thought, focused on the role of money and credit in societies meeting their needs.
Economists, like the two of us, agree and disagree on many economic issues. This is healthy. In any grouping of economists — hopefully similar to many groups of people in the same discipline — there are vibrant debates. Advanced training in economics, especially the ability to make use of econometric techniques, helps ensure that the debate is evidence-based instead of broad generalisations.
It is therefore unfortunate that some people have used the Leoka scandal to scandalise the discipline. DM