David Deming, a Harvard economist and author, sheds light on the concentrated power held by elite universities in shaping economic narratives. He argues that this 'Big Econ' monopolizes perspectives, stifling competition and innovation. The discussion critiques traditional economic theories, particularly regarding income inequality and minimum wage policies. Deming emphasizes the need for diverse voices in economics to address real-world challenges and promote effective societal change. His insights call for a reevaluation of how economics is taught and practiced.
The dominance of elite universities in economics creates a monopoly that stifles innovation and diverse perspectives essential for progress.
Shifting from trickle-down to middle-out economics can foster broader economic growth by empowering the middle class as the main driver of transformation.
Deep dives
The Disillusionment with Trickle-Down Economics
The reliance on trickle-down economics over the past 50 years has been deemed ineffective, resulting in growing inequality and political instability. This approach has failed to provide widespread economic growth, as it primarily benefits the wealthy instead of the middle class. As a corrective measure, middle-out economics is proposed, emphasizing that the middle class drives economic progress rather than merely benefiting from it. By focusing on boosting the middle class, this approach aims to create a more robust and inclusive economic environment.
Concentration of Power in Economics
The field of economics is criticized for becoming overly centralized, with a handful of elite institutions, such as Harvard, dominating the landscape. This concentration has led to a lack of diversity in thought and representation within the field, reinforcing the status quo. Many economists from less prestigious backgrounds are often overlooked, which stifles innovation and creativity. There is a call to break up this concentration to ensure a more diverse and dynamic discourse in economics.
The Challenge of Bridging Theory and Empiricism
The conversation highlights a disconnect between economic theories and empirical evidence, stressing that many established theories do not align with real-world outcomes. This gap is particularly evident in discussions around minimum wage policies, as traditional models predicted job losses with wage increases, which have not materialized in practice. The importance of combining rigorous empirical validation with theoretical frameworks is emphasized to foster a more accurate understanding of economic phenomena. By integrating both approaches, the profession can advance toward more reliable insights that cater to public welfare.
Rethinking Incentives in Economics Research
To improve the economics profession, a shift in funding and recognition towards impactful, practical research is proposed. Current incentives often prioritize publication in prestigious journals over research that directly addresses real-world economic issues, thus neglecting significant contributions that can generate public value. By supporting projects that enhance data accessibility and market implementation, the field can produce research that benefits society as a whole. This reform aims not just to diversify the profession but to align it more closely with its societal responsibilities.
A small group of elite universities holds an outsized influence over the field of economics, shaping research, policy, and the broader economic narrative. But is that concentration of power stifling innovation and reinforcing the status quo? This week, Harvard economist David Deming joins Nick and Goldy to discuss his recent Atlantic article, in which he argues that Big Econ functions like a monopoly—limiting competition, excluding diverse perspectives, and making it harder for new ideas to take hold.
David Deming is the Isabelle and Scott Black Professor of Political Economy at the Harvard Kennedy School. Deming is also a research associate at the National Bureau of Economic Research and Associate Editor of the Journal of Economic Perspectives.