Dani Rodrik reminds us that economic models are good, and what they’re good for
Tyler Cowen writes that “Economics Rules is the single best source for explaining the strengths and weaknesses of economics to an outside audience.” I just listened to the audiobook, narrated by James Conlan, and I thoroughly enjoyed it. Over the course of six short chapters (272 pages, or 5.5 hours on audio), Rodrik lays out what economic models do, how to use them correctly, where economists go wrong, and finally answers a series of critiques of economics. One central message of the book is that the source of economics’ richness is its multiplicity of models, and that economists veer wrong when they seek to apply a single universal model to all situations (i.e., they “mistake a model for the model”). A second message is that economics has a lot to say about efficiency, but we shouldn’t pretend that’s the only worth value: “Any economist who makes a broader argument about the fairness, justice, or moral worth of markets that is based on economics proper is simply engaged in malpractice.”
I found Rodrik’s discussion of economic models to be engaging, deep, and accessible. He draws on pioneers in the field, like Smith, Marshall, and Keynes. He uses a wonderful one-paragraph short story by Jorge Luis Borges (“Del rigor en la ciencia”) to illustrate that the simplifications in models are a crucial element of their value. He uses an essay by philosopher Isaiah Berlin to distinguish between hedgehogs, who see the world as making sense through a single idea (such as free markets), and foxes, who draw on a wide range of models, always seeking the right model to understand a specific situation. “Economics needs fewer hedgehogs and more foxes engaged in public debates.” He mounts a spirited defense of the field, together with a few critiques of his own. He ends with ten commandments for economists (“Economics is a collection of models; cherish their diversity” and “Do no confuse agreement among economists for certainty about how the world works”) and ten for noneconomists (“When an economist makes a recomendation, ask what makes him/her sure the underlying model applies to the case at hand” and my favorite, “If you think economists are especially rude to noneconomists, attend one of their seminars”). Rodrik also has a healthy discussion of the benefits (and the limitations) of the rise of randomized controlled trials in applied microeconomics.
Here are a few quotes:
- “When models are selected judiciously, they are a source of illumination. When used dogmatically, they lead to hubris and errors in policy.”
- “Economists use math not because they’re smart but because they’re not smart enough.”
- “If you think economists are especially rude to noneconomists, attend one of their seminars.”
- Quoting Keynes: “If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!”
- “Models are never true, but there is truth in models.”
- “Economic science is merely disciplined intuition — intuition rendered transparent by logic and hardened by plausible evidence.”
I recommend the book for economists, economics students, and interested non-economists.
What have others said about the book?
Reviews by other people
Clive Crook, Bloomberg: “It’s full of good insights, and has some sage advice for producers and consumers of economic knowledge. … But I think is mischaracterizes one important aspect of the problem.”
Kirkus: “A hopeful contribution to the reconstitution of a profession whose reputation has been seriously damaged, both fairly and unfairly.”
Martin Sandbu, Financial Times: “Rodrik convinces with his patient insistence on just how rich and versatile a library of models economists possess. … Rodrik’s book cannot fully dispel the scepticism.”
David Leonhardt, New York Times: Dani Rodrik “sets out to explain the discipline to outsiders (and does a nice job). Yet in surveying the larger “rights and wrongs” of economics, to quote his subtitle, Rodrik has diagnosed the central mistake that contemporary libertarians have made: They have conflated ideas that often make sense with those that always make sense.”
Publishers Weekly: “Excellent little primer”
N. Emrah Aydinonat: “Economics Rules is an excellent book; a must read for economists, philosophers of economics, and policy makers, and of course for economics students. And if you consider yourself as a critical economist, a heterodox economist, or a social scientist who is critical of the way in which economists work, behave, etc., the book has a lot to offer to you too (probably a lot to disagree about, but also a new perspective on economic models).”
It’s also Tyler Cowen’s list of the best non-fiction books of 2015 on Marginal Revolution.