Economics Rules: Why Economics Works, When It Fails, and How To Tell The Difference PDF
Preview Economics Rules: Why Economics Works, When It Fails, and How To Tell The Difference
Economics Rules also by dani rodrik The Globalization Paradox: Why Global Markets, States, and Democracy Can’t Coexist One Economics, Many Recipes: Globalization, Institutions, and Economic Growth In Search of Prosperity: Analytic Narratives on Economic Growth Towards a Better Global Economy: Policy Implications for Citizens Worldwide in the 21st Century Franklin Allen, Jere R. Behrman, Nancy Birdsall, Shahrokh Fardoust, Dani Rodrik, Andrew Steer, and Arvind Subramanian Economics Rules Why Economics Works, When It Fails, and How To Tell The Difference Dani Rodrik 1 3 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Dani Rodrik 2015 The moral rights of the author have been asserted First Edition published in 2015 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2015948055 ISBN 978–0–19–873689–9 Printed in Great Britain by Clays Ltd, St Ives plc Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work. To my mother, Karmela Rodrik, and the memory of my father, Vitali Rodrik. They gave me the love of learning and the possibilities for embracing it. p r e fac e a n d ac k n ow l e d g m e n t s This book has its origins in a course I taught with Roberto Mangabeira Unger on political economy for several years at Harvard. In his inimitable fashion, Roberto pushed me to think hard about the strengths and weaknesses of economics and to articulate what I found useful in the economic method. The discipline had become sterile and stale, Roberto argued, because economics had given up on grand social theorizing in the style of Adam Smith and Karl Marx. I pointed out, in turn, that the strength of economics lay precisely in small-scale theorizing, the kind of contextual thinking that clarifies cause and effect and sheds light—even if partial—on social reality. A modest science practiced with humility, I argued, is more likely to be useful than a search for universal theories about how capi- talist systems function or what determines wealth and poverty around the world. I don’t think I ever convinced him, but I hope he will find that his arguments did have some impact. vii preface and acknowledgments The idea of airing these thoughts in the form of a book finally jelled at the Institute for Advanced Study (IAS), to which I moved in the summer of 2013 for two enjoyable years. I had spent the bulk of my academic career in multidisciplinary envi- ronments, and I considered myself well exposed to—if not well versed in—different traditions within the social sciences. But the institute was a mind-stretching experience of an entirely differ- ent order of magnitude. The institute’s School of Social Science, my new home, was grounded in humanistic and interpretive approaches that stand in sharp contrast to the empiricist positiv- ism of economics. In my encounters with many of the visitors to the school—drawn from anthropology, sociology, history, philosophy, and political science, alongside economics— I was struck by a strong undercurrent of suspicion toward econo- mists. To them, economists either stated the obvious or greatly overreached by applying simple frameworks to complex social phenomena. I sometimes felt that the few economists around were treated as the idiots savants of social science: good with math and statistics, but not much use otherwise. The irony was that I had seen this kind of attitude before—in reverse. Hang around a bunch of economists and see what they say about sociology or anthropology! To economists, other social scientists are soft, undisciplined, verbose, insufficiently empiri- cal, or (alternatively) inadequately versed in the pitfalls of empir- ical analysis. Economists know how to think and get results, while others go around in circles. So perhaps I should have been ready for the suspicions going in the opposite direction. viii preface and acknowledgments One of the surprising consequences of my immersion in the disciplinary maelstrom of the institute was that it made me feel better as an economist. I have long been critical of my fellow economists for being narrow-minded, taking their models too literally, and paying inadequate attention to social processes. But I felt that many of the criticisms coming from outside the field missed the point. There was too much misinformation about what economists really do. And I couldn’t help but think that some of the practices in the other social sciences could be improved with the kind of attention to analytic argumentation and evidence that is the bread and butter of economists. Yet it was also clear that economists had none other than themselves to blame for this state of affairs. The problem is not just their sense of self-satisfaction and their often doctrinaire attachment to a particular way of looking at the world. It is also that economists do a bad job of presenting their science to others. A substantial part of this book is devoted to showing that economics encompasses a large and evolving variety of frameworks, with different interpretations of how the world works and diverse implications for public policy. Yet, what noneconomists typically hear from economics sounds like a single-minded paean to markets, rationality, and selfish behav- ior. Economists excel at contingent explanations of social life— accounts that are explicit about how markets (and government intervention therein) produce different consequences for effi- ciency, equity, and economic growth, depending on specific background conditions. Yet economists often come across as ix
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