Barry Ritholtz sends us to Brad DeLong using a sports analogy to criticize the economics profession:
The first principle of success in practically any endeavor is to move not toward where the ball is, but where it is going to be. Economists, as a rule, ignore this principle, indulging in the likely-to-be-vain hope that policies that would have worked yesterday will still work tomorrow
The only sport I have much understanding of is soccer, and this principle is far from correct in soccer. I have long felt that economists are seriously handicapped by their failure to follow basic team sport principles, so here’s my sports analogy for economics.
In soccer, the job of every player on the field is to move the ball to the position that maximizes the likelihood of scoring. The job of a coach at the developmental level is to teach the players to “see the field” before the ball is received in order to read where the ball needs to move next . Usually there are only one or two good answers to this maximization problem. Good players create danger by making the right choices of where to pass, and mediocre players don’t. (If you want to see a realization of this maximization process in action, watch Germany’s 2014 World Cup games.)
So “the first principle of success” in soccer is to create scoring opportunities by moving the ball effectively (and not always forward) on the field. (The second principle of success is to move when you don’t have the ball to a position that will make you the optimizing choice for the player receiving the ball. That is, contra DeLong, a good player creates the place where the ball will be next.) The problem with the economics profession is that it plays like Spain in the 2014 World Cup, it’s very good at passing side to side, but much weaker when it comes to creating and finishing scoring opportunities.
Thus, the economics profession must, first, define the scoring opportunities — or the big questions that economics must answer — and, second, the profession needs to play as a team always trying to move the ball into a position so that your teammate can score — except in the unusual case that you are best positioned to take the shot.
This, I think, is one way to understand Paul Romer’s critique of the economics profession. He is concerned that the current process promotes prima donna-like behavior, where the authors of articles set themselves the task of dribbling through four defenders and succeed only at losing possession of the ball entirely. And when there is team play it is wasted, dithering about, not even trying to answer important questions.
In short, the economics profession has an extraordinary wealth of formal analytic tools. Now that those tools have been developed, the challenge is to deploy them effectively to answer the big — mostly macroeconomic — questions. In order for this deployment to be effective, teamwork is necessary. The masters of the formal tools need to stop passing the ball laterally and start working on deploying them to answer the big questions. (The segment of the profession that seems to me to be making the greatest progress in the latter effort is “new monetarism.”) The proponents of big questions need to stop sniping at the formalists, acknowledge the weaknesses in their own economic toolbox, and, I would argue, set to work building models that take money and finance more seriously than New Keynesian models do.
I am optimistic that this challenge can be met. Teamwork was in evidence when the New Keynesian models were developed. And post-crisis, there is widespread acknowledgment of the need for better incorporation of finance into economic models, and many steps along this path have already been taken. But the economics profession needs to remember that the fastest way to progress is to act always with awareness of where the goal is, with a broad view of the entire field of players, and with each individual making careful decisions as to how to move the ball so that someone else can score.
Synthetic Assets 