RBA loses the plot – Treasurer should use powers under the Act to suspend the RBA Board’s decision making discretion
It's Wednesday, and we have a few observations on recent events including a music feature.…
Regular readers will know that I have spent quite a lot of time reading the literature in social psychology trying to understand how groups of scholars become crippled with the patterned behaviour that Irving Janis identified as Groupthink in his ground breaking study published in 1972. I feel that my own profession is dominated by this catastrophic syndrome, which has biased the policy scene towards destructive outcomes. However, even after some major calamities, which the mainstream economists were blind too (such as the GFC), the Groupthink is so entrenched and powerful that academic economists actively engage in purges of what they consider to be ‘fringe ideas’, which they dismiss as the equivalent of homeopathy (that is, witchcraft in their eyes). I read an example of this behaviour this week which indicates to me that we are a long way from seeing fundamental change in the academy which might restore the credibility of my profession in the public milieu. My advice to parents – keep your children away from studying economics!
The early Groupthink reference is Janis, I.L. (1972) Victims of Groupthink, New York, Houghton Mifflin.
He found that some communities of scholars develop a dominant culture, which provides its members which a sense of belonging and joint purpose but also renders them oblivious and hostile to new and superior ways of thinking.
These communities develop what Irving Janis identified in 1972 to be ‘Groupthink’, which drives the ‘mob-rule’ that maintains discipline within paradigms.
Groupthink is a “mode of thinking people engage in when they are deeply involved in a cohesive in-group, when the members striving for unanimity override their motivation to realistically appraise alternative courses of action” (Janus, 1982: 9) and “requires each member to avoid raising controversial issues” (Janis, 1982: 12).
It has also been defined as “a pattern of thought characterized by self-deception, forced manufacture of consent, and conformity to group values and ethics” (Merriam-Webster on-line dictionary).
Groupthink becomes apparent to the outside world when there is a crisis or in Janis’s words a ‘fiasco’.
In this blog post – Fake surveys and Groupthink in the economics profession (March 19, 2019) – I considered how the maisntream profession reinforce their mob rule through the misuse of survey data.
An academic discipline that falls into Groupthink becomes degenerative (in the terminology of Imre Lakatos) in that it systematically fails to match its theoretical and predictive framework with the reality around us.
It systematically fails to provide meaningful knowledge but hangs onto dominance through control of the narrative, through the power of the senior professors, through the control of research funding, control of publication editorial positions, control of promotion processes within the academy and control of who enters the academic hierarchy.
That control is insidious and powerful and mostly filters out aberrant voices.
In the scheme of things, I am a significant outlier in the profession given that I am a senior professor with a long record of attracting research funding.
If I ever get round to writing a memoir I will tell you how I was able to get around the Groupthink.
When I was a graduate student, a senior professor called me in and said: “Bill, you are very bright but you are becoming a pop sociologist”.
He was reading me the riot act.
It didn’t work.
My secret was that I was good at mathematics and mathematical statistics, which meant I could beat them at their own game while having plenty of time to read Marx!
Back to it.
If we were to assemble a report card on how well mainstream economics has performed in this period of increased insularity it would be a sorry story.
The grade FF would be given on all dimensions:
1. Theoretical consistency – New Keynesian macroeconomics is ultimately not even macro – see my post – Mainstream macroeconomic fads – just a waste of time (September 18, 2009).
Several components of mainstream theory (marginal productivity theory, capital theory to name two) are plain wrong and deliver inconsistent inference.
2. Empirical accuracy – clearly FF. Mainstream economist failed to see the largest economic crisis in recent history (GFC) coming and considered even more financial market deregulation was in order.
3. Relevance – counting angels on a pinhead is not at all relevant.
What prompted me to write today’s blog post was an Op Ed from two New Zealand economists which demonstrates how remote the mainstream of my profession is from reality – Fringe economics, like homeopathy, needs a dose of reality (published May 23, 2023).
This remoteness is dangerous because of the power the mainstream profession holds in the public debate.
It also demonstrates how far alternative viewpoints have to go to change the narrative.
The article is certainly ‘hubristic’.
Its contention is that they can identify a gap between what NZ policy makers think and what academic economists want them to think.
They consider any economic approach other than the New Keynesian mathemetised GIGO appraoch to be equivalent to “homeopathy” – that is, voodoo junk not worthy of merit.
They report a “worrying” survey of members performed by the New Zealand Association of Economists which found that:
Government-employed economists who answered the survey tended to favour, or be uncertain about, fringe concepts such as doughnut economics, mission-based economics, and the circular economy, whereas academic economists tended to disagree or strongly disagree that these concepts improve economic policy analysis.
Their assessment is that the academic economists “do know what they’re talking about” and they conduct their work “rigorously” in a “technical” way (implying quality) in a consensual manner.
This appeal to consensus is a characteristic of Groupthink.
Conversely, they claim that fringe groups in economics – like doughnut economics – has influenced policy makers and may “have devastating effects as it can lead to policy recommendations not based on rigorous, scientific methods”.
Prominent New Keynesian, Olivier Blanchard summarised these “rigorous, scientific methods” in his August 2008 article – The State of Macro.
He said economists follow:
… strict, haiku-like, rules … [the economics papers] … look very similar to each other in structure, and very different from the way they did thirty years ago …
Graduate students are trained to follow these ‘haiku-like’ rules, that govern an economics paper’s chance of publication success, which then determines academic ppointments, promotion, grant success, and other elevations of influence (becoming chief economist in IMF etc).
So we get a formulaic approach to publications in macroeconomics that goes something like this:
This is effectively what these so-called “rigorous, scientific methods” involve.
When I started economics after some study in mathematics I couldn’t believe how trivial the mathematical techniques being used by economists were.
Most students were non-plussed though because they were weak in the techniques and struggled.
The Op Ed claims that the survey that the NZ Association of Economists conducted proves that the “fringe ideas” in economics (like doughnut etc) are basically worthless and dangerous to deploy in a policy making setting.
The academic respondents, in particular, strongly disagreed that these fringe ideas had merit.
They claim that in policy circles many analysts are not trained in economics (that is, been indocrinated into the Groupthink) and so:
Many do not have the training to know when they are dealing with the economic equivalent of homeopathy.
Politicians are seduced by the equivalent of “bedroom stories” which means they follow poor advice and implement poor policy.
The Op Ed concludes that only mainstream economics can provide the ‘scientific’ basis for policy – because it provides “expert understanding” and allows us to “avoid costly mistakes”.
So there is Groupthink in action.
There is an element of ADHD involved here too – the poor darlings fear that some others will get the consultancies and the platform.
For what it is worth, I too have problems with ideas such as doughnut economics.
But only because it is incomplete and lacks a defensible macroeconomics.
But that just motivates the communication between Modern Monetary Theory (MMT) economists and the doughnut economists to broaden the analytical framework.
Which brings into highlight the next part of the story.
There are several research papers that analyse so-called citation analysis within the social sciences.
Citation analysis considers how often one academic discipline might cite other disciplines (in the social sciences).
For example, how often do sociologists in their written output include reference to, say, the research of psychologists, or political scientists.
A higher cross-citation rate is an indication of a broad, open approach to academic research, while a low count indicates insularity.
In a recent article – Patterns of interdisciplinary citations and asymmetry between economics and the neighboring social sciences from 1959 to 2018 (published 2022) – we read:
Citation analysis is a quantitative technique that answers for a bibliometric effort to understand how communication flows within a given scholarly network.
The social sciences are “a specific network of scholars, journals and academic departments” usually considered to comprise “anthropology, economics, political science, psychology, and sociology”, although social work is also cognate.
The evidence is particularly damning for economics which has the lowest cross citation record of all the social sciences.
They conclude that:
… knowledge exchange appears asymmetric, and economics is considered more insular than its neighboring disciplines … [researchers] … identify economics as the least interdisciplinary discipline in relation to other social sciences.
The extant research literature on this topic finds that:
1. “economics is that, along with psychology … discipline had the lowest rates of interdisciplinary borrowing, the highest levels of intradisciplinary citations, and an insignificant number of citations from fellow social sciences.”
2. “economics exhibited high levels of intradisciplinarity, engaging in an allegedly asymmetric citation exchange with other social sciences.”
The various academic journals where social scientists publish are able to be ranked for ‘openness’.
The main journals in economics score poorly.
Disciplines such as sociology and political science demonstrate a “high and growing interdisciplinarity”, which means they read and incorporate the findings of research outside their own disciplines within their own work.
Economics is low on this ranking which means there is an “asymmetry of knowledge transfer between economics and the social sciences”.
And, moreover, this is bad for the other social sciences because the Groupthink that cripples economics infiltrates the disciplines of political science and sociology and infests research in those areas with the fictions that mainstream economics perpetuate.
This has been labelled “economics imperialism” and a view among economists that the other social sciences are deficient unless they conduct their own work using “the tools of economics”.
The other point is that in the “first half of the 1900s”, economists were much more open to learning from and communicating with other disciplines.
In the 1960s and beyond, economics became “more and more hubristic” and “compartmentalized” in its approach.
coincides with the transformation of economics into a highly mathematical discipline, with a compulsion toward logical rigor … This resulted in the narrowing of economics’ search for insights within other social sciences, as the discipline came to define itself more in terms of its methods than in terms of its subject matter … the upswing of a mainstream as strong as economics’ generates a path dependence that hinders the search for alternative arguments both in the outskirts of economics itself and beyond its boundaries.
I discussed the way that mainstream economics has beomce a narrow exercise of formulaic GIGO in this blog post among others – The evidence from the sociologists against economic thinking is compelling (November 12, 2019).
Also, in this post – MMT economists do not seek to enumerate how many angels can dance on the head of a pin (November 4, 2021) – I extended the discussion to include Modern Monetary Theory (MMT),
That is enough for today!
(c) Copyright 2023 William Mitchell. All Rights Reserved.
This Post Has 13 Comments
Bill, is there a reason for leaving philosophy out of social sciences or it’s simply an omission?
Dear Demetrios Gizelis (at 2023/05/25 at 4:13 pm)
Philosophy is normally categorised as a Humanity discipline, like Linguistics, English, History etc.
Economists are also notoriously bad at learning from those disciplines as well more to their loss.
Thanks for this.
In the early 1990s I was taking both economic geography and economics papers. It was at the time when the most extreme neoliberalism was bring pushed in New Zealand. The better (i.e. reflecting what was actually happening to people and communities and why) was from economic geographers, often using a marxian basis for their analysis. Back then geography and economics were both in the School of Social Sciences, and the economic curriculum included economic history.
Forgot to mention ask if you meant to say “ Mainstream economist failed to see the largest economic crisis in recent history (GFC) coming and considered even more financial market regulation was in order” or whether you meant even more financial market deregulation.
I believe that groupthink is nothing more than an oportunistic way to keep your job.
If you’re an economist and you work for some public or private entity, you got to comply with what your boss says he stands up for – or else…
So, we got to look up the hierarchy to understand groupthink.
We got to look at the elite.
And you find yourself with the ones that are profiting from neoliberalism, from finance capitalism, from real estate, from rent, from debt, from high-pay jobs.
The ones that make the laws for you to obey – but not for them to obey.
I’ve seen brave progressive economists in tv debates, cronfronting mainstreamers, usually like 1 progressive to 3 mainstreamers.
Anything the progressive says that doesn’t comply with the neoliberal “religion” and they’re yelling “marxist!”.
3 to 1 and he shuts up.
The intellectual fraud of mainstream economics, as ever, is well laid out by you Bill. A necessary exercise.
But you lead with this, which imo misses a major point about the source of all this ‘groupthink’ fraud…
“.. I feel that my own profession is dominated by this catastrophic syndrome, which has biased the policy scene towards destructive outcomes….”
Well, it’s only ‘destructive outcomes’ for the ~90% of pop. labour class masses, isn’t it?
The richest 10% have only got ever richer these last 40+ years.
What we need to realise is that society governance, despite a ~century of universal suffrage, has not changed in its underlying model of operation going back 1000s of years.
Exactly the same MO continues today, regardless of a bit of progress for the labour class (in developed economies). Progress that never took place out of any kind of generosity of the rich as some people mistakenly believe, but rather only because technology advancement meant a more expensively educated & longer lived labour force was a necessity, not least to ensure military adequacy in a world of no lesser ruling psychopaths than any other century.
The means of holding power is as it ever was – rich elites controlling the propaganda to deliver public opinion in just sufficient quantity to ensure the masses don’t revolt with sufficient numbers or coherence of purpose to actually change anything of the rule by rich elites.
Occasionally, violent force is used to suppress the masses. But the primary tool has always been monopoly control of mass media. In the early days religious priesthoods carried out this role. Today we have mass media multi-national corporations & an entire class professional ‘stenographers to power’ (Pilger) masquerading as ‘journalists’. (Though it doesn’t stop there – the whole ‘entertainment’ industry, esp. film & TV, is dominated by similar intent – propaganda to justify positions of rich & psychopathic/sociopathic elites.)
When William of Orange landed with an army on South coast of Britain in 1688, his primary weapon of conquest was the printing press he brought with him that flooded the path to London with propaganda. (England’s 1st Eng. language press according to Dr Lucy Worsley.) He took the English Crown without firing a shot.
But now, we’re running out planet…. MMT & any other challenge to rich elites rule-by-propaganda are getting nowhere.
Unless we diversify the mass media space to include genuine labour class interests, and with equal prominence to rich elites’ monopoly, *nothing* will change, and the human species is finished. (The hubris, arrogance & psychopathy of rich means they aren’t even capable of acting in time to save themselves or their descendants.)
I know of only one properly effective way to do this – create a true Commons, Common Ownership structured mass media sector, of comparable (say equal) GDP size to the incumbent rich class monopoly. And ensure it’s rooted in ‘democratic’ administration by having Gov annually gift every citizen a Commons media voucher which they may use to sponsor Commons media providers of their choice. (No other source of income permitted, from any source. Loan finance strictly regulated & limited to multiple non-interfering sources.)
As MMTers, we know Gov can finance a Commons sector without constraint, and as publishing requires minimal ‘real resources’, we can discard any objection on that basis as well.
> “fringe concepts such as doughnut economics”
the outer ring of the donut is pure Earth Science derived limits, known as the planetary boundaries! All eleven boundaries known about for decades if not centuries.
The idea is so simple even an economist could grasp it if he might wedge open the enclosure of prejudice and institutional conditioning for just a moment. As the planetary boundaries are pushed beyond in eleven specific areas (GHGs, ocean life depletion, water resources, soil carbon on arable land, etc) we start destroying the natural capital from which all human production and capital is transformed and transformed again, until such time it is just streams of waste (heat and toxic flows of chemicals, plastics etc) and again there are boundaries to how much the planet can absorb (net) our wastes without losing it’s ability to keep producing life supports and raw materials for the capitalist engine.
Imagine, 1,000 golden geese laying golden eggs every day and then us just deciding to kill one of those geese per month just for a little extra cash to gamble at the ASX & FOREX casinos just because ”why not? who cares?“.
It’s a fools game. For professors of economics active in academia to not get it is shameful enough, but to ridicule those heterodox economist daring to make economics relevant to the project of a just and caring humanity again, a project that might help stop us running to 3 ºC this century and more beyond (end of life as we know it basically based on paleoclimate data), well that just seems like these people are living inside a holodeck and need to be released from their delusions.
The idea and quantification of planetary boundaries and based on the work of entire fields of atmospheric chemistry and physics, ocean and marine sciences, ecologists, on and on. the sort of theorists who record precise real world data and report on it, hoping to understand fundamental mechanisms and laws of chemistry and physics underneath, such as entropy or more formally the second law of Thermodynamics. When mainstream economists invoke homeopaths, it’s presumably from a position of assuming themselves to be men (nearly always men) of hard science and mathematics who employ the most rigorous of intellectual standards, but put them up against Earth Scientists responsible for the outer ring of Raworth’s donut concept and these orthodox economists look much more like the high priests of a cult religion than homeopaths, who at least have a system of observations, actions, and then ask, did their potions have any effect or not. That’s a question the monetary policy religious cult brothers need to get back to. Cause and effects. Stock and flow consistent modelling, another concept that economics has borrowed from Earth sciences.
Mainstream economists put their three centuries of folksy-wisdom (Adam Smith et al), conjecture, er micro-economics consistent principles into large econometric models that have next to zero predictive power* and crank the handle to come up with the same old ideas every time, and low and behold what is the result this year? just like last year, the rich syphon wealth, convert it to real assets that can be rented back to the increasingly marginalised working poor when the workers need to off-load their assts due to wage decline in real terms against cost of living inflation (which never quite seems to capture the impact of ever increasing housing rents and mortgages against income in the CPI basket of goods). TINA in other words.
* as Prof Mitchell states, The Fed didn’t see the GFC coming even when it had begun collapsing, even when Wall St was in a meltdown and The Fed was bailing out Lehman Brothers and another private lending institution “too big to fail” the EXPERTS at The Fed, the biggest currency issuing central bank (CICG) in the history of mankind still couldn’t see what was going on around them and urged the panicked world of finance just to “stay calm and carry on, the worst of it is over, now”, right before the entire system collapsed around their swish offices full of expensive macroeconomic models that had zero-predictive power, forwards or backwards, and coinicdetialny no visibility of banking or money (base money or credit money) in the models.
@Andrew R, well perhaps Scott Morrison can go back to geography-economics for an earner, seems to be really bad at marketing having been fired from last few jobs he had involving politics and/or marketing (I think in his mind they’re pretty similar fields, a la Trump).
Mamas, don’t let your babies grow up to be economists…
But Bill, conventional economics is working out so well for the people who count! Why change?
I was the only economics student in my year at the University of Newcastle that studied History of Economic Thought. I’d assume it’s a similar situation 20 odd years later.
If these were like ancient times, no doubt, your knowledge, wisdom, and experience in your field would have immediately elevated your status to ‘those who foretold the future’ – admired for achieving immortality.
In today’s times, we may not recognise immortaliy but we do recognise and appreciate your continued willingness to pursue the education of everyone beyond ‘the lost sheep’ about esoteric knowledge; not for the faint hearted.
“Christianity” gets a bad rap, however, thats because it has been twisted and contorted from the teachings of Jesus and other prophets who were ridiculed and tormented in their endeavours to teach ‘the lost sheep’ how lost and empty their times were. Over the millenia many believers have discovered the natural light but it is through the internet that allowed many to congregate together in their collective studying to bring mass awareness that the prophets and apostles all identified as Israelites, kept God’s sabbath day, and warned against adopting the current false teachings and customs – realigning to the ideals of living in harmony.
As with many revolutions it starts from within, but the exponential growth comes from the creative dispersment to resonating outsiders who bring with them varied knowledge and experiences that others within may not have had the time or opportunity to acquire. You are certainly one of histories chosen few who were sent from the beyond; as Nietzsche said ‘some men are born posthumously’. Your continued efforts are never in vein.
Despite the lack of acknowledgement, initial resistance, and deliberate corruption, we have gradually institutionalised a lot of the Israelite values that perhaps would not otherwise have happened for the people in this world were it not for the early perseverance from these immortals. The results of continually exposing the MMT universe to ‘the people’ will elevate our collective foundation so that we can clearly see how we can achieve the ideals of our collective journey deeper and further than we thought possible (ministers have been embracing the principles of MMT which certainly helps to ‘spread the word’).
Whilst the trajectory of society is fluctuating in what we perceive as empty space, there will be brought forth brighter and brighter lights from all angles in order to fine-tune our fluctuating frequencies. One of your advantages over the ancient immortals is that the momentum of this revolution coincides with the budding of the internet – its existence changes the depth of communication to instantly transform the world through our collective essence that forms it.
The collective public mind is still transforming. As the Israelites put it, “Do not be misled: “Bad company corrupts good character.” Come back to your senses as you ought…” 1 Corinthians 15:33:34 ‘That we henceforth be no more children, tossed to and fro, and carried about with every wind of doctrine, by the sleight of men, and cunning craftiness, whereby they lie in wait to deceive; But speaking the truth in love, may grow up..’ EPHESIANS 4:14:15 ‘Then will the eyes of the blind be opened and the ears of the deaf unstopped. Then will the lame leap like a deer, and the mute tongue shout for joy. Water will gush forth in the wilderness and streams in the desert.’ ISAIAH 35:5:6
Sorry I don’t include this in the above post but it Just dawned on me that I once watched a talk you gave where you literally used a score card, geez they were good, takes me back!
Bill, how did you manage to attract research funding with ideas that are so inimical to the mainstream and without courting financiers and banks?