André Orléan on the Legitimacy Crisis in Economics

From the Introduction to The Empire of Value (2014)

The economics profession is presently experiencing a grave crisis of legitimacy. There was a time when it sought to provide sound guidance for democratic societies by improving the effectiveness of reasoned public policy. But now, through its own negligence, it has shown itself to be a source of confusion and error. It allowed a suicidal scheme of financial deregulation to be put into effect, without any prior attempt having been made to assess the scope of the risks involved or to devise appropriate precautions against them. Instead of awakening minds, economics has put them to sleep; instead of enlightening them, it has cast them into darkness. The disrepute in which the profession is held today stands in proportion to its own failure, which is extreme and without precedent. 

The reaction of economists to the scathing criticism that has been directed at them is striking above all for its lack of intellectual courage. Even if a majority is prepared to admit that very harmful mistakes have been made, most economists also persist in warning against throwing out the baby with the bathwater. To be sure, they say, undue reliance on a type of modeling that recklessly overrates the virtues of competition, together with a dogmatic insistence on the hyperrationality of economic actors, is indefensible. But these shortcomings give a distorted picture of the discipline. Economics is perfectly capable of correcting its excesses, by drawing upon new fields of research such as multiple equilibrium theory and experimental economics, even neuro-economics. So say the economists. And yet instruction at the university level remains the same as it was before the crisis; research likewise proceeds on the same assumptions as before, using the same methods as before. However many newspapers and magazines announce the return of Marx, Schumpeter, and Keynes, the fact of the matter is that nothing has really changed. 

None of this should come as a surprise. Science obeys its own rhythms. Economists are not like weathervanes, pointing this way or that with every shift in the winds; they cannot be expected today to teach the opposite of what they professed yesterday. Nor is economic theory a mere collection of recipes that can be sampled in response to changing tastes; it is a highly structured body of propositions built up from falsifiable hypotheses, rigorous methods of proof, and a vast archive of established results—what the historian and philosopher of science Thomas Kuhn famously called a paradigm. Kuhn showed that it is in the very nature of paradigmatic inquiry to resist challenges to its view of the world. For a paradigm to be overturned at a moment of crisis, not only must a persistent series of anomalies have been observed, in contradiction of the accepted wisdom, but, no less importantly, there must be a new paradigm ready to take the place of the old one. Now, the fact that an economic crisis brings previously unsuspected problems to light does not mean that fresh solutions are available on demand. It is true that economists today quote Keynes, Minsky, and Kindleberger more often than they used to. But this ought not fool anyone. No matter that economists now find it convenient to distance themselves from the neoclassical assumption of efficient financial markets, the theoretical framework that organizes their thinking and their teaching remains unchanged. It has been kept in place exactly as it was. 

The present work proposes to make a new beginning. It proceeds from the conviction that the difficulties encountered by economic theory owe nothing to momentary circumstances, but are the consequence of a fundamentally mistaken conception of economic behavior.