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research-article2017

ILRXXX10.1177/0019793917710649Book ReviewBook Review

BOOK REVIEWs

Economics Rules: The Rights and Wrongs of the Dismal Science. By Dani Rodrik. New York: W.W.
Norton, 2015. 272 pp. ISBN 978-0393246414, $27.95 (Cloth); ISBN 978-0-393-35341-9, $16.95(Paperback).
DOI: 10.1177/0019793917710649
This extremely thoughtful short book by Harvard policy economist Dani Rodrik examines several crucial questions about economics as a scholarly discipline and as a profession.
Much of the book should be required reading of all economists and of non-economists who,
even though they may be skeptical about economists’ roles, recognize the importance ofeconomic thinking. The title is a wonderful double entendre, quite descriptive of the book’s
aims of laying out rules for discourse in economics and pointing out why economic research
is so important. Rodrik’s main contribution is to stress the crucial position of model-buildingin economics—historically, the single activity that has separated economic scholarship fromthat of other social sciences.
That many of us hold overly strong beliefs in the generality of our models is a central pointof the book. Rodrik notes with some dismay the too-common belief among economists thatone’s model describes the real world at all times and in all cases. As he makes abundantly
clear, that may be true for a very few models that we construct (e.g., the optimality of competitive equilibrium; simple supply–demand analysis), but the applicability of most models
is time- and/or place-specific. And those beliefs in generality have proven detrimental innumerous cases that he uses to illustrate this point, particularly in terms of policies for economic development in poorer countries, which is his own research specialty.
Rodrik points out that “economics without its critics would be like Hamlet without theprince” (p. 177). He argues, quite correctly in my view, that much of the criticism of economics by non-economists is misguided, stemming either from a misunderstanding of what
economics can—and can’t—do; from a mistaken view of the degree of consensus among
economists on policy issues; or from beliefs that economists are merely cloaking their ideologies in mathematics. He correctly observes, however, that our devotion to and concern forthe mathematical purity of our models mean that we are too often willing to claim too muchfor our work—we bring some of this criticism on ourselves. This tendency is especially true
given our natural enjoyment in being consulted on policy and appearing in the media, evenwhen we know deep-down but fail to articulate the limitations on the advice and opinions
that we offer.
Rodrik never places a value judgment on the overall contribution of economics. That isunfortunate. Despite all its faults, and even given the woeful lack of public understanding ofwhat economists do and what economics is about, the profession has more than justified its
existence. George Stigler (Southern Economic Journal, January 1976) argued that, if nothingelse, the absence of a severe depression after the 1930s can and should be directly attributed
to the ideas of economists. (One might make the same argument for why the Great Recession
did not become the Second Great Depression.) Without stating so, this volume illustrates thisoptimistic conclusion with several cases in which microeconomic ideas, including airline andother deregulation, have led to huge improvements in our lives.
A long review article by a leading economic theorist (Ariel Rubinstein, Journal of Economic
Literature, March 2017) discusses Rodrik’s book from a general perspective, so I refer readers
to that essay for additional insights into its general contributions. What does the book say tolabor economists and others studying labor and labor markets? It is worth noting that laboreconomists, probably more than other economists, are accused of letting their values cloudtheir judgments about economic policy. This accusation no doubt stems from the fact thatthe issues we deal with are more understandable to the layperson and impinge more directly
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on him/her. Doing our job correctly—following Rodrik’s dicta about applying our models
carefully—is the appropriate counter to such criticism. I believe that most, albeit not all,academic labor economists do separate their ideology from their research. Perhaps the best
evidence that we are doing so is when others tar us with conflicting and, to them, derogatorylabels. Having been called “liberal,” “conservative Democrat,” and “racist” in the media andin e-mails in the past few years provides me some assurance that I am not following somedogma.
Economics Rules notes with some approbation the rise of concern among applied economists, and especially labor economists, about causality. It fails, though, to observe that this
newfound concentration has been accompanied, as Jeff Biddle and I show (History of Political Economy, forthcoming 2017), by diminished attention to model-building and to the useof models, which Rodrik rightly views as the centerpiece of economic research. He recognizes, however, that the “causation über alles” approach (my term, not Rodrik’s) has maderesearch in labor economics increasingly time- and place-specific. To a greater extent than inmodel-based research, our findings are likely to be less broadly applicable than those in theareas that Rodrik warns about. Implicit in his views is the notion that the work of labor andapplied micro-economists might be more broadly relevant if the concern with causation werecouched in economic modeling. If we thought a bit more about the “how” rather than paying
attention solely to the “what,” the geographical and temporal applicability of our researchmight be enhanced.
Rodrik’s discussion, and my own concerns about teaching in labor economics, relate towhether we teach or we indoctrinate. I find this worry (which, to be fair, Rodrik does notseem to hold very strongly) to be minor. In one sense, in an introductory micro or undergrad labor course we are indeed indoctrinating; but we are introducing students into logicalthought—the formal analysis that is the hallmark of economics and is what distinguishes thefield. He discusses and weakly approves of spending more time in such courses bringing inhistory, political science, or sociology. Doing so, I believe, would suggest to students that they
don’t need to bother learning the logical edifice of economics. Of course, they should betaught care in applying economic models and research; but, as Rodrik very gently suggests,
this cannot come with an abandonment of logic. He laments the widespread use of algebraic
problem sets with no simultaneous thorough attempt to enhance students’ economic intuition. In the end, the basic idea of the book—that models are our stock in trade—is one that
we need to pay more attention to in our research, our teaching, and our public professional
personae. Without economic modeling, labor and other applied economists differ little fromsociologists who are adept at using STATA.
Daniel S. HamermeshDistinguished Scholar, Barnard College
Network Coordinator, IZA