Economists' Misplaced Faith in an Invisible Hand

Abstract

In academia most economists practice technical crafts. Academic incentives strongly favor such crafts, and economists pursue academic rewards, perhaps with a faith in the applicability of "the invisible hand" to their own "industry." But the crafts are mostly irrelevant to policy issues and contribute little to society.

The invisible hand works well when supply - of, say, shoes - caters to customers who purchase with their own money product for their own use. Competing suppliers prosper by best serving demanders. In academia, however, the demand for academic product comes from journal editors, referees, and university departments. The demand is the expression of other suppliers. It is as though shoe demanders were only other shoe makers, who demand shoes not for how well they wear but for aesthetic niceties fancied by the guild. Academic economists tend to favor peers whose crafts exalt their own handiwork. In the social sciences and humanities, demand and supply are highly interlocking, circular, and self-legitimating. The "industry" is more of a craft circle or club. And the club subsists on tax and tuition dollars. The grounds for faith in an invisible hand are rather slight.

Society would gain a great deal if economists became more relevant. Most economists are wiser about economic policy than the average voter. The public needs their help. And in being relevant, economists would better learn economic judgment and become yet wiser.

Keywords: Economists, character, relevance, invisible hand