Rethinking Economics or Rethinking My Economics by Angus Deaton

Introduction

• Angus Deaton, a Nobel laureate in economics, discusses the need to rethink economics.
• Emphasizes that questioning one's views as circumstances evolve is positive.

Achievements and Current Disarray

• Economics has developed significant theoretical and empirical understandings.
• However, it failed to predict financial crises and may have contributed due to overconfidence in markets.
• Disagreements among economists are prevalent.

Key Themes in Rethinking Economics

Power

• Importance of power in setting prices, wages, and influencing politics.
• Lack of analysis on power leads to inadequate understanding of inequality and modern capitalism.

Philosophy and Ethics

• Modern economists focus more on efficiency than on ethics or human well-being.
• Tendency to equate well-being with income or consumption, neglecting broader human relationships.
• Historical economists like Adam Smith integrated philosophical thought.

Efficiency

• Efficiency is prioritized over social justice and equity.
• Keynes emphasized reconciling economic efficiency, social justice, and individual liberty.
• Economic recommendations often favor upward wealth redistribution, leading to potential "plunder."

Empirical Methods

• The credibility revolution in econometrics emphasizes local effects and overlooks broader mechanisms.
• Current methodologies may miss important, long-term economic mechanisms.

Humility

• Economists often exhibit overconfidence in their methods.
• Need for recognition of competing accounts and learning how to evaluate them.

Second Thoughts by Deaton

Unions

• Deaton reflects on his past views on unions as a nuisance.
• Recognizes their historical role in raising wages and power for working people.
• Notes their decline has led to negative social and economic impacts.

Trade and Globalization

• Skeptical about the benefits of free trade to American workers.
• Questions the narrative that globalization reduced global poverty.
• Critiques ethical judgments on trade-offs between domestic and foreign workers.

Immigration

• Challenges previous consensus on immigration benefits.
• Recognizes historical context and long-term impacts on inequality.

Conclusion

• Advocates for greater engagement with philosophers, historians, and sociologists.
• Economists should broaden their perspectives to include a wider range of disciplines.

Author Background

• Angus Deaton is a professor emeritus at Princeton University and a Nobel Laureate.
• His opinions do not necessarily reflect IMF policy.