2024-08-30 17:16:28
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The standard advice from economists about concentrated market power is that it is inefficient, unfair, and should be broken up or regulated. The standard retort about concentrated industries is that they are simply extremely efficient at what they do.
But what if the concentrated business is the economists themselves? study The study documents a “high and rising density” of Nobel laureates at a handful of top universities in the U.S.: More than half of their careers are spent in eight economics departments. Similar indicators for other disciplines, from natural sciences to humanities, show the opposite trend.
There are other signs that economics is becoming an elite, closed field: the few journals that serve as gatekeepers for career development are largely controlled by economists from the same top departments, who also mostly enter decision-making positions through a revolving door.
This cartelization may have similar causes to concentration elsewhere, from the “superstar” dynamic enabled by information technology to the compounding tendencies of financial advantage. But does it lead to wasted resources and inferior output, as it does in other markets?
Economics has many virtues. Over the past century, it has greatly improved governments’ ability to manage business cycles and limit the rise in unemployment. Its commitment to logical arguments and careful use of data (even though the data are often imperfect) can hold public policy accountable in ways that other social sciences cannot.
Yet economists have also been criticized for collectively failing to detect the global financial crisis, being slow to respond to warnings about inequality and rent-seeking, placing too much faith in people to act in their informed interests, and having very different views on the economy than economists and the public. The question is to what extent these shortcomings are caused by institutional concentration.
Of course, it stands to reason that narrow gatekeeping and rigid prestige hierarchies can breed groupthink, overseen by a self-perpetuating priesthood. After all, economics itself has models—from information cascades to herd behavior—to explain how the critical influence of a few can entrench inferior outcomes. When professional incentives and social pressures concentrate influence in a small group of people, neither major policy mistakes nor petty personal attacks should surprise anyone.
Of course, the elite institutions have their detractors: Dani Rodrik (Harvard) disagrees with trade and financial liberalization, Raghuram Rajan (Chicago) disagrees with financial deregulation, and Richard Thaler (Chicago) argues that people do not behave in a way that economists have traditionally modeled.
Yet the exceptions largely prove the rule: their insights are largely refuted by their peers until the evidence is compelling. As for broader disagreements—such as the “saltwater-freshwater” divide over macroeconomic policy—they are strictly confined within the bounds of accepted methodology.
Geography is also important: even for non-US economists, if they want to have influence they must go through the top US departments, thereby missing out on opportunities in competing intellectual traditions.
It is said that success has many roots, but failure has no roots. The opposite is true in economics: its weakness is what economists call “causal overdetermination”—many factors could be to blame. A less concentrated economy might just mean more diffuse failure. Still, the principle that diversified systems are more capable of self-correcting, and faster, is worth holding on to, both in business and in the production of knowledge.
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