As I prepared to deliver the commencement address at the University of Chicago’s convocation in June, I experienced a great deal of stress, and not simply about my performance. I had some concerns as to how well an economist—an economist working in a business school, no less—was going to be received.
The broader public does not trust economists. A 2017 YouGov poll revealed that only 25 percent of people in the United Kingdom trust us. That is in contrast with an 82 percent trust level in doctors, and 71 percent trust in historians. It is only thanks to politicians that economists escape the bottom of the list.
Some of this distrust, and sometimes outright dislike, comes, I believe, from a misunderstanding of what economists study and teach. For too many, economics is equated to a toolbox of tricks, masquerading as a science, that teaches people and companies how to make as much money as possible, at whatever cost to society.
That is not what economics is about. I hope it goes without saying that misleading and cheating should never be part of anyone’s job description, including economists’. Nothing good happens to our economy or our society when some businesses flourish because they cheat while other businesses struggle because they remain honest.
Rather, economics studies how people and companies make choices under constraints. These constraints derive from the fact that the resources we have as a society are limited. There is only so much physical capital, human capital, and time to spread around, and there are only so many natural resources. Given this, economists tend to focus much of their attention on efficiency considerations: given the limited resources we have, how do we best allocate them to maximize people’s well-being? We love markets because markets—with appropriate safeguards—can be truly transformative in this quest for efficiency.
More-sophisticated critics of economics dislike how our discipline dehumanizes people. We treat people, the argument goes, as hyperrational, utility-maximizing robots and base our conclusions about what is or is not efficient on models that are fundamentally flawed, given the unrealistic assumptions they draw about how people make choices.
This hyperrational view of human decision-making does not reflect the field of economics today. To put it humbly, economists have realized their mistakes and now embrace, rather than dismiss, the other social sciences. After multiple Nobel prizes celebrating behavioral economics, it is now apparent even to outsiders that when it comes to how people make decisions, economics has moved toward a more realistic view: that they are lazy, have self-control problems, and are really not that good at statistics.
Beyond the transformational imports economics has received from cognitive psychology via the work of Chicago Booth’s Richard H. Thaler and others, sociology and social psychology have also reshaped the field. Indeed, our understanding of human behavior becomes more complete when we are willing to accept that people care about what others think of them, that their well-being might be a reflection of not just how much money and leisure they have but of how they fare compared to others, or how their choices and circumstances map with their social identity (as fourth-generation coal miners who have been raised to view themselves as the main providers for their family, for example, or as African American boys trying to fit in in the most violent neighborhoods of Chicago).
It is true that the economics we practice today, with all these insights from psychology and sociology, is less disciplined than it was in the past. It is messier, less modelcentric and theory driven. But there is no doubt in my mind that this diminished rigor has come with the benefit of greater realism and an increased likelihood that we are getting some of it right.
It is definitely in this messier type of economics that I feel comfortable.