Wow. Paul Romer’s blog post congratulating Elinor Ostrom for yesterday’s Nobel is dramatic. And, in my view, entirely accurate. I really appreciate his “skyhooks and cranes” invocation:
Most economists think that they are building cranes that suspend important theoretical structures from a base that is firmly grounded in first principles. In fact, they almost always invoke a skyhook, some unexplained result without which the entire structure collapses. Elinor Ostrom won the Nobel Prize in Economics because she works from the ground up, building a crane that can support the full range of economic behavior.
Romer is more eloquent on the perils of our methodological hegemony than I was in my earlier post this morning:
To make the rules that people follow emerge as an equilibrium outcome instead of a skyhook, economists must extend our models of preferences and gather field and experimental evidence on the nature of these preferences.
Economists who have become addicted to skyhooks, who think that they are doing deep theory but are really just assuming their conclusions, find it hard to even understand what it would mean to make the rules that humans follow the object of scientific inquiry. If we fail to explore rules in greater depth, economists will have little to say about the most pressing issues facing humans today – how to improve the quality of bad rules that cause needless waste, harm, and suffering.
Bravo. And thanks to Russ Roberts for the link.