It's funny how you never had to worry about adding disclaimers to the Nobel Prize for Economics (not technically!) until Krugman won.

It's like two religious zealots from different persuasions arguing over whose god is better, when neither can see the obvious point that there is no god. Ideology is blinding, no matter what the ideology.

The Nobel Prize in economics isn't a real Nobel Prize - I'm pretty sure this was well known, and cause for mild contempt in scientific circles, long before Krugman won it.

Is Alfred Nobel's money more real than the Swedish government's?

The Nobel Prize in economics isn't a real Nobel Prize - I'm pretty sure this was well known, and cause for mild contempt in scientific circles, long before Krugman won it.

It wasn't created or funded by Alfred Nobel, but it's administered by the same people as the other prizes, for the same reasons, and recognizes the same achievements in its respective field as the other prizes do. It's difference from the rest was always known in the way a factoid of history was always known, but aren't scientists stereotypically dismissive of any field not their own? To everyone else, the difference between the economics Nobel and the rest didn't matter until Krugman won it.

But philosophers have the Schock prize, which is even more prestigious, because it's only awarded every other year.

The "yelling" is because the Chicago Schoolmen have apparently formed the economic equivalent of a Flat Earth Society. What's really strange in this "debate" is that the Chicago Schoolmen are proposing arguments, which are logically false on their face.

This debate doesn't reflect profound disagreement within the profession. Conservative economists with professional integrity, like Martin Feldstein, tell it like it is, based on the shared understanding of the profession.

What the Chicago Schoolmen are doing is bizarre and reprehensible.

I know you think you'll get a "Nice Wolf Parade reference!" comment, but you know, the title is just really forced. Subtlety, man. That's where it's at.

...economists can't go into the lab, start depressions in twenty Erlenmeyer flasks, and dump in different stimulus packages to see what works.

Round-bottom flasks. Chemists create depressions in round bottoms.

"It's not that there isn't disagreement in other scientific areas, but the level of disagreement we're looking at here is something really different. They aren't dickering over some minor proposal or detail."

Oh, come now. There are lots of fundamental arguments in physics with eminent scientists lined up on both sides. String/M theory, the nature of gravity, supersymmetry, inflation - therse are all huge points of contention.

Actually there is lots of data about what to do during an economic downturn, it is just that it exists in other countries.

The insular attitude of US economists shows that most of them are interested in winning political or ideological points, not in doing real research.

Just since the end of WWII we have had numerous collapses in Latin America, Southeast Asia and the former USSR.

In addition a number of policies similar to what is being suggested now have been tried. For example the IMF and WB demanded that taxes be raised to cut deficits and pay off foreign loans. The results were a disaster for the populations which suffered massive unemployment, food shortages and civil unrest.

On the other hand S. Korea and Singapore ignored IMF demands and boosted government spending and pulled out of their downturns with a minimum of grief.

The "shock therapy" put in place in Russia following recommendations of Jeffrey Sachs produced long lasting effects, one of the most notable being the sharp drop in life expectancy.

So if policy makers were really serious about finding out what works and what doesn't all they have to do is look, but the Chicago school is interested in proving (still!) that the New Deal didn't work. Examining data from elsewhere would only weaken their already weak arguments.

economists can't go into the lab, start depressions in twenty Erlenmeyer flasks, and dump in different stimulus packages to see what works.

That's what EVE Online is for. We just need to simulate it all in ISK before we try it in USD.

Also, I think "It's in God's hands, but God doesn't always have the best goddamn plans does he?" would've been a good title, too.

Nice Wolf Parade reference!

Right, Midwest Product, but I'm saving that one for the future.

The Keynesians say the stimulus is essential. The Chicago boys say it makes no difference. Pascal's bet is therefore: do it.

The interesting discussion here is what it does to the academic climate: Krugman and DeLong's position is that the Chicago Schoolies are either arguing in bad faith or ignorant of basic macro.

As Daniel Davies put it: "after this experience, can the Berkeley/Princeton/Obama economists ever really go back to a state of polite terms with the people who have done this to them?"

The problem is, there's no Nobel Prize in Geography. I bet if you gave them Nobels you could get a good show from, say, Billie Turner versus David Harvey on fixing the environment.

THANK YOU, MKD (1st commenter)
i made the same comment the day he won when some PK hater mentioned that.

Burton, you jerk.

Ginger, of course there are disagreements in physics about very fundamental topics. That's not what the issue is, though.

Physics, by and large, has already generated a great deal of testable (and tested) answers to the great physical questions, and siphoned those off into engineering. We get these computer thingies from that.

Economists can't answer a question as simple as what we should do when faced with a depression, in one of those rare times when economics is most needed. A fundamental, 70 year old question. It's hard to come up with something equivalent in physics--maybe about how small particles interact with each other, a topic where physicists would all agree is quantum mechanics.

Anonymous is on the right track. It has to do with well-confirmed theories that (a) admit of precise quantitative confirmation, and (b) can be used to reliably predict and control phenomena.

There are no quantitative laws in economics. To make a closely related point: there are no numerical constants in economics, unlike in physics, which is loaded with them.

You cannot reliably produce quantitatively specified outcomes in economics by manipulating certain factors according to some mathematical model. Again, show me who has done it. If no one has done it, show me why you think we can start doing it.

It's another question why it is this way, but clearly, it is this way.

I did my own philosophy dissertation on the subject some moons ago. Short answer: human beings and human action are the subject matter of economics. Economics attempts to create generalizations of human behavior. These will never result in the kind of laws that physics has, because human beings can change any concrete regularity of action that you care to describe. I don't mean vague statements like "people do what is in their rational self interest," but concrete, measurable, testable statements with predictive import. Not one of these regularities is unvarying, nor will it ever be so long as we continue to think about what we do and respond to circumstances (including the circumstance in which someone finds a pattern in your behavior and tries to exploit it...we have the option of shifting the patten).

When on a tour in Sweden to see the town hall where the Nobels are presented, the tour guide claimed Alfred Nobel considered giving a prize for Economics, but his wife had had an affair with a banker, so he decided against it.

No idea if this is true, but that was the story from the guide in Stockholm who was specifically there to deal with us Nobel gawkers.

Mike, I've heard that joke with mathematicians before. I think it's apocryphal either way.

I'm an economist and my honest reaction to the arguments of Fama, Cochrane and Lucas is Uh oh our dirty little secret is out. I assume the current low public esteem for economics will get even lower if they keep speeking up.

I agree with some commenters and disagree with others -- blame and ideological rigidity are not equally shared in this debate. DeLong and Krugman are harsh, but there criticisms are specific criticisms of the contributions to the debate of Fama and Cochrane *and* were universally accepted as correct by economists a month ago.

The arguments made by Fama and Cochrane are inconsistent with Chicago school macro. In fact, I don't believe that there is a model which any macroeconomist takes seriously in which increased Government spending doesn't caues increased GDP.

In RBC models, this increase is from the socially optimal level to a higher level, but GNP will increase roughly unless
1) Employment is exogenous -- no involuntary unemployment or voluntary fluctuations in labor supply.
2) Government spending is a perfect substitute for private consumption or investment *and* is just as efficient.
or
3) people react to winning the lottery by taking a second job.

I think that there isn't an economist working for U Chicago who believes 1, 2 or 3. I would guess that you could count the economists in the world who believe 1, 2 or 3 using no numbers greater than 1,2, or 3.

When on a tour in Sweden to see the town hall where the Nobels are presented, the tour guide claimed Alfred Nobel considered giving a prize for Economics, but his wife had had an affair with a banker, so he decided against it.

No idea if this is true, but that was the story from the guide in Stockholm who was specifically there to deal with us Nobel gawkers.

Posted by: Mike Silva | January 30, 2009 4:47 AM

Mike, I've heard that joke with mathematicians before. I think it's apocryphal either way.

It is definitely apocryphal. Alfred Nobel never married.

Have to agree with the comments by Robert Waldmann and Bruce Wilder above.

Any decent undergraduate in economics will find the 'arguments' of Fama et. al. embarrassing.

Fama was routinely considered to be a candidate for the Nobel. After this, he will probably never be taken seriously again.

The apocryphal* story I heard about Nobel prizes is that ole Alfred intentionally decided against establishing one for Biology because he didn't consider it a "real" science. At the time, he might well have been right. (Historians of science can chime in on that question. That ain't me.) Anyway, I've been hearing crap about "the Economics prize isn't a real Nobel prize" for years. There's a dedicated bunch of cranks out there (some of them cranky for very good reason about very real problems, but they let their crank spill over) who treat this as the mother of all conspiracy theories. Some of their claims pretty much boil down to: "If only the Nobel Prize in Economics could be un-done, democracy and egalitarian, grassroots, ecologically sustainable economic development would emerge throughout the world." I don't begin to understand this misplaced infatuation with something that couldn't matter less. As if being a Nobelist meant that Krugman had any more "in" with Bush et al, or that it will give Lucas any more "in" with Obama. Seriously--why give a rat's ass if the Economics prize is "really" a Nobel?

*Please recall, good friends, that "apocryphal" does not necessarily mean untrue. It just means either probably not true or outside the officially recognized cannon of true. Merriam Webster: 1) of doubtful authenticity. 2) of or resembling the Apocrypha.

"They're talking about whether or not we should dump nearly a trillion dollars' worth of stimulus money into the economy. And it isn't a question that should be sitting at the far cutting edge of research, like how many dimensions your string theory needs to have."

That is exactly why there is so much discussion. Imagine that we are going to build a trillion dollar space ship to travel to a distant star system and the engine that will allow the ship to make the trip will only work if the number of dimensions in your string theory is correct. If you insert that number incorrectly then you just wasted all your resources for nothing. Since we have no evidence about the number of dimensions then we have no idea if we should put 4, 10, 11 or 26. Hence we are not building a 1 trillion dollar space ship (although I do not discard the possibility that the Senate might include it in the stimulus package). Now economists do not have that choice. We have an asteroid coming towards earth and they have to build the space ship to deflect it. They have no choice to make an uniformed decision, the type no other scientist will have the guts to make.

Economists can't answer a question as simple as what we should do when faced with a depression, in one of those rare times when economics is most needed. A fundamental, 70 year old question. It's hard to come up with something equivalent in physics--maybe about how small particles interact with each other, a topic where physicists would all agree is quantum mechanics.

How about an answer to this questions?

* How did the Universe start?
* Is it possible to move faster than light?

Or maybe we should dismiss Doctors because they cannot offer an answer to a simple question like what is the cure for AIDS?

The questions can be simple but the answers ... that is another thing.

I'd say the problem with the Nobel prize in economics is that it is, in practice, awarded to an economist not awarded for a discovery.

The science prizes are awarded for a discovery (the will says in the past year showing that Nobel had no idea how long it takes to confirm an alleged discovery).

This is very important, because the economist then gets authority to make semi-authoritative declarations on all questions in economics.

In fact there is a case of a fundamental issue in biology/chemistry with Nobel laureates on both sides -- does HIV cause AIDS. That's important. Long after the hypothesis was treated as fact in say newspapers, Nobel prize winning biochemist Kerry Mullis said it was not supported by any evidence and probably false.

He was almost completely ignored (news story in Science magazine did not appear either in the peer reviewed scientific literature or the popular press. He was out of his field of specialization and didn't know what he was talking about (he was clearly not familiar with the relevant evidence).

His Nobel prize for PCR clearly didn't imply that his views on HIV should be taken seriously (although PCR has provided the most rock solid undisputed evidence that HIV is the cause of AIGS). His views weren't taken seriously.

The fact that the science prizes are awarded for a discover also implies that theoretical contributions aren't recognised until they have striking empirical support

(the physics committee has cheated at least twice awarding the prize to theorists but claiming it was for a minor empirically confirmed bit of theory so Einstein got the prize for "discovering" the photoelectric effect and 3 string theorists "coincidentally" got the prize one year officially for relatively minor theoretical contributions other than string theory which have been confirmed).

In economics it is absolutely not required that a theory corresponds to the evidence for the committee to award the prize to the theorist.

We have an asteroid coming towards earth and they have to build the space ship to deflect it. They have no choice to make an uniformed decision, the type no other scientist will have the guts to make.

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