The rise of empirical methods enriches economics but risks narrowing theoretical perspectives, highlighting the need for genuine pluralism and deeper conceptual reflection.
Last week I was graciously invited by the University of Zürich to participate in a teaching workshop on Pluralism in Economics together with a series of inspiring researchers, namely Dina Pomeranz, Florian Bally-Rommel and Suresh Naidu. The workshop was focused on confronting different views on what economics is and should be and it was exceptionally exciting to learn from both, other senior academics as well as student perspectives.
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I admit that such debate-oriented settings are always somewhat vexing to me: I am not a very competitive person and often feel a lot gets lost in a competitive debate; at the same time I probably accept that I hold a position that is controversial among my mainstream colleagues, so some debate seems to be in order ;-). However, aside from my emotional priors there is another thing that is troublesome about these debates, namely lop-sided expectations: you should be aware of mainstream reasoning and research (otherwise there is some danger to be ridiculed), while your mainstream colleague is not expected to know any heterodox arguments.
As a consequence, you always have to wed in explanatory parts in your statements – trying to illuminate how an alternative perspective or reasoning could look like and hoping that you get your point across – at least in conceptual terms. I hardly want to convince someone in such debates, but it would be great if people could start to consider being open to alternative perspectives in a more patient and cooperative way. Somewhat naturally, the competitive setting does not fit this too well; nonetheless it is much to be preferred to the usual case of no to little interaction.
Interestingly, a key point of contention in terms of how to understand contemporary mainstream economics that arose repeatedly during the workshop was related to the empirical turn in economics, i.e. the greater prominence of and appreciation for empirical studies especially in top journals. In the past I have found repeatedly* that active protagonists of the empirical turn often take what effectively amounts to an inductivist position when emphasizing that theoretical textbook economics is no longer dominant in mainstream journals and represents „the economic mainstream of the 1980s“, which is, supposedly, no longer of any relevance.
There is some merit in this view as there are some good things to be said about the empirical turn: it has made economics more empirical in nature, it sometimes produces interesting and useful results (here is a nice example from a heterodox perspective), it has led to an appreciation for a greater diversity of topics and it has induced some (slowly moving) change in the political convictions conveyed by our profession (e.g. in the context of the minimum wage).**
However, and in contrast to many claims, the empirical turn has not rendered theory irrelevant. This is evident in the teaching of economics as eagerly and correctly pointed out by student participants in the workshop. In addition, the claim that „theory has become irrelevant“ does not apply in another realm, namely in economic policy advice. Large parts of economic policy advice – including important stuff, like cost-benefit analyses of infrastructure projects, evaluating tax policies or labor regulations, modeling potential output in the European Union or estimating the welfare impact of future climate damages – critically hinge on the theoretical tools that represent exactly „the economic mainstream of the 1980s“.
Against this backdrop it becomes clear why the new empiricists have difficulties in seeing merits in theoretical pluralism. While they often share some of our skepticism against „the economic mainstream of the 1980s“, they think the problem is solved because they left it behind in their research. Well, kudos for doing so, but it seemingly comes at the price of leaving all theory behind and this is, probably, throwing the baby out with bathwater.
All the best,
* My first encounter with this attitude dates about twenty years back. Back then I was a critical Master student being invited for having beers with the most promising PhD-candidate of the Econ department I was studying with. I wanted to talk about the limits of the textbook; he wanted to speak about the merits of econometrics. After some beers, at about 1:30 AM, he suggested a compromise: he is willing to concede that the textbook is deficient, if I would be willing to concede that the future of Econ lies in causal inference ;-)
** At the same time, we can make some critical observations on (overly) optimistic identification assumptions, lack of external validity or a too strong focus on individual behavior (instead of more systemic approaches and framings). But, all in all, the empirical turn seems like a welcome development.
