Problems with prescription economics

Readers of this blog will note that I am very careful about any claims to be an economist. Yes, I have a masters in the subject. Yes, I worked as a professional economist for many years. Yet I am careful about any claim to still be an economist. I just don't understand much of the stuff that now appears under the term economics.

I did my training in a simpler world.

The waves of mathematics, the complex economics of the financial markets, were just entering on the scene. Yes, I learned enough econometrics to at least understand issues associated with modelling and quantitative studies. Later, I actually worked on finance markets stuff. However, I lacked the technical skills  required to really understand some of the more complex work.

I could and did negotiate participation in a leverage lease when working on exchange  as manager, corporate finance, with a merchant bank. We were offered a good deal, many basis points higher than that offered our parent company, but that wasn't economics. I didn't need to be able to do the actual modelling, I just needed to be able to understand the principles, to apply common sense, to be able to test.

When I started economics, an economist was expected to know something about history: the history of the discipline, economic history, broader history. I learned that economics was a way of thinking, of asking questions. Models were simply a means to an end, of simplification, of test. To the bemusement of my history colleagues, my history honours thesis involved the application of economic concepts to traditional Aboriginal life in Northern NSW.

Today we have what I call prescription economics. I say this with a degree of care. After all, I am remote from the profession. Yet I believe it to be true.

Prescription economics involves the sometimes blind application of concepts and models to management or policy. Instead of using economics as a tool, as a way of asking questions of the world, the world is expected to fit with the model. Economics as a form of thought, of asking questions, has been lost.

Maybe I am too harsh, but it is a deeply held view.

By its nature, economics is a human construct, a way of asking questions of, of better understanding, certain forms of human behaviour.

I listen to the business economists on TV. I try but fail to understand some of the more arcane complex financial arguments. I listen to the intellectual warriors telling me that all will be right if we just cut the deficit, just reduce Government borrowings. I listen to those on the other side saying that all this is crap.

  I suppose that the thing that stands out is that when you go to prescriptions, the original mission of economics as a way of thinking about aspects of human behaviour is lost. By its nature, economics cannot be prescriptive.

How can it?  It deals with human behaviour that changes all the time. It is a process, not a prescription.

I really miss economics. When I look at what my  eldest daughter studies at a major Australian university, it is not economics. There is no coherence. It is just another set of chunks that may or may not be relevant to what she does later on.

Can we ever get it back? Or am I just another old fart that time has passed by?