Beatrice Cherrier comments on Esther Duflo’s AEA lecture, “The economist as plumber.”

She wanted economists to reconceive economic agents, policy-makers and bureaucrats as bounded “humans” embedded in wider power structures and cultures, and to realize that thinking goods ideas is not enough to improve the latter’s welfare. “Incentive architecture” is thus needed, and economics expertise is especially relevant because it deals with behavioral, incentive and market equilibrium issues. The recent success of (some) “nudge” has given some salience to benefits of crafting incentives carefully, for instance by fixing regulations to prevent firms from exploiting loopholes. Plumbing was also beneficial for economics as science, she continued, as it helped generate counterfactuals by randomizing on entire markets. Plumbing also shines the spotlight on issues theorists had previously ignored, like how important the default scenario is. Economics as plumbing requires a more pragmatic and experimental mindset, she concluded, as it requires them to make decision without having a full knowledge of the system to be tinkered (“tinkering” was one of the keywords of the speech).

I recommend the whole post. Pointer from Mark Thoma.

When I think of trial-and-error tinkering to try to solve a problem, I think of an entrepreneur.

In fact, we might be better off thinking of policy-oriented economists as state-backed entrepreneurs. That is, while ordinary entrepreneurs have to convince investors to back their ideas and convince customers to pay for their offerings, state-backed entrepreneurs have to convince politicians to back their ideas.

I am not very enthusiastic about state-backed entrepreneurship. I believe that the market does a more rigorous job of experimentation, evaluation, and evolution.

I am glad to see alternatives to the image of the economist as a white-coated scientist. However, I do not think it should be replaced by an image of droopy-pantsed plumber. I am afraid that a more accurate image is of an entrepreneur who is trying to short-cut the market by pitching business ideas to a political audience. And we should be cognizant that politics is an inferior arena for trying out entrepreneurial schemes.