Friedrich Hayek said in his Nobel lecture that it was silly of economists to ignore theory and intuition. Keynes also had a similar view.
This column sometimes points out that economists are overdoing the empirical thing. Many of them have said this is not the case, and that without empirics there is nothing.
I have no better answer to them than to cite the following research, all culled from the Bulletin of Aging and Health of the National Bureau of Economic Research, US. I think it proves my point adequately.
Two of the papers referred to below are by David G Blanchflower and Andrew Oswald. The third is by Inas Rashad and the fourth by Andrea Matozzi and Antonio Merlo.
Blanchflower and Oswald ask two questions. The first1 is whether our sense of well-being is U-shaped over the span of our lives. It seems it is, at least for Americans and Europeans. "Ceteris paribus, well-being reaches a minimum, on both sides of the Atlantic, in people's mid to late 40s.
The paper also shows that in the United States the well-being of successive birth-cohorts has gradually fallen through time." I think this is known as the mid-life crisis.
The second2 question they ask is whether countries where the incidence of hypertension is low are happier than countries where it is high. Thus, the paper finds that "happier nations report lower levels of hypertension." Denmark, it seems, comes at the top. But what causes hypertension to be lower income countries?
Inas Rashad3 says cycling is good for you, and gives you an economic reason why - it costs almost nothing compared to petrol, diesel and so on. "Using bivariate probit and propensity score methods, I show how cycling can lead to improved physical health outcomes. This in turn may carry policy implications in terms of improved public awareness and city planning."
In the fourth paper4, Matozzi and Merlo, as perhaps befits Italians who produce very bad politicians, ask whether political parties prefer the mediocre over the bright. (Do you really need data to "prove" that?) Anyway, this is what they say. "A political party may deliberately choose to recruit only mediocre politicians, (even though) it could afford to recruit better individuals. We argue that this finding may contribute to explain the observation that in many countries the political class is mostly composed of mediocre people."
There seems to be only one reason for these people to have written these papers - the data were there. Since many Indian economists also think that data is all, perhaps these cases of empiricist extremism will serve as a cautionary note.
It is worth pointing out, too, that even Friedrich Hayek was of the view that it was silly to rely too much on empiricism and ignore theory and intuition. He said economic processes are far too complicated and to think that they are stable over long periods of time, that too because some time series suggests so, is folly. To take just one quote from his lecture, "There may be few instances in which the superstition that only measurable magnitudes can be important has done positive harm in the economic field." Keynes also thought so, at least if Axel Leijonhufvud is to be believed. So do many others. I can do no more than to quote Hayek once more:
"It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences - an attempt which in our field may lead to outright error."
Yes.
- 1Is well-being U-shaped over the Life Cycle? NBER Working Paper No.12935, February 2007
- 2Hypertension and happiness across nations, NBER Working Paper No. 12934, February 2007
- 3Cycling: An increasingly untouched source of physical and mental health NBER Working Paper No. 12929
- 4Mediocracy, NBER Working
- Paper No. 12920
