Can Economics "Raise Its Game"?

Tim Harford wonders whether economics could become more broadly relevant for populations in general, so poses some questions:

How can economics become a more insightful discipline? Should it aim to be more like physics, with its precision and predictive power? Or should economists emulate anthropologists or historians, immersing themselves in the details of the particular and unquantifiable?

Clearly, while more attention of late has been given to precise measure, both matter. Harford noted that the economist George Akerlof believes too little attention is being given to "soft" questions which aren't easy to answer on mathematical terms. That said, I respect the "hard" approach, and likely would have utilized it, had life circumstance been different. Unfortunately my interest in economic issues didn't gain traction until middle age, which proved too late to learn the (now) necessary math. Not only does math has its own intriguing qualities, it sets up Twitter economist conversational patterns which are generally beyond my comprehension. For one thing (among many), I would like to have understood in concrete terms, how dependent service sector markets (in a dominant revenue position) influence the natural interest rate.

Hence I was surprised that the late Gary Becker, as a college student (according to Harford's post), found sociology "too difficult" and consequently remained with economics studies, where he provided useful mathematical framing for specific sociological issues! Indeed, some perennial economic problems haven't responded well to a hard approach. Some examples from Harford:

What are the obstacles to social mobility? Where does innovation come from? Can we strengthen the institutions that matter for prosperity?

What also prompted today's post, was a recent Politico article which seems to speak to these concerns. Diego Zuluaga emphasized how loans supposedly meant for those with low income levels, have instead been given to higher income customers. In the process, neighborhoods gentrify as older homes in desirable areas are renovated - a process which gradually pushes out lower income levels altogether. Yet some of this isn't the fault of the banks, given their incentives. How has the Community Reinvestment Act fallen short of its intentions?

Banks are supposed to lend in low-income areas without incurring additional risk. Absent this safeguard, public policy would cause banks to make ill-advised loans, leaving taxpayers to pick up the eventual tab. Even with the statutory language, some evidence has accumulated over the years showing that the CRA does sometimes encourage risky lending. But by directing credit to higher-income "gentrifiers" in CRA-eligible areas, banks can meet the letter of the CRA without increasing the amount of likely losses on their balance sheets. 

This practice may, however, unwittingly end up accelerating the displacement of poorer residents. Consider, for example that in five tracts in D.C.'s Park View and Petworth neighborhoods, more than 80 percent of mortgage loan volume in 2017 went to borrowers earning more than the CRA threshold, even though all of these tracts have median incomes well below that threshold.

It's bad enough that so many among the marginalized end up displaced. But even worse is the fact they have so few reasonable options afterward. Where might they go, that is safe and offers reasonable hope for a good life? In particular, how can they contribute to wealth building via institutional tools for incremental ownership, instead of loans? The lack of dynamic options where those with limited resources could successfully engage with their world, is a problem crying out for a productive response. All the more so, since low income levels will be part and parcel of our economic realities for the foreseeable future. As long as improvement is framed in a "living wage" mindset, we're essentially stuck. Real wage gains depend on real economy innovations which take local consumption potential into account for community design.

Even more important: In order for economic dynamism to further evolve, the marginalized will need to work with ownership potential on terms that are well within their reach. By way of example, old housing in need of extensive remodeling is not always optimal for those with limited resource capacity, even though it is less expensive than new traditional housing. The fact gentrification has already continued apace for decades, informs us that conversations re simpler ownership options are long overdue. Further, outside investors aren't necessarily well situated to create environments where the marginalized might gain new purpose. Yet all too often, outside investors have been expected to perform this miraculous feat, even if it supports a status quo not necessarily amenable to social mobility and innovation. When ownership is deemed the social responsibility of high income levels, further economic evolution can become difficult indeed.

So how might economics raise its game? I believe it would greatly benefit from a more practical and applied approach - one that could also redress the sectoral imbalances which now impede long term growth. Both human capital and physical capital need simpler formats for ownership potential, so that wealth creation remains viable at all levels of skill and income.

And despite the relevance of math for economics as a discipline, it is still a conceptual tool which responds to broader conversations of social meaning. Said another way: Math illustrates concepts, it is not the actual concept. If economic thought is guilty of suppressing its own important conversations due to a preference for math, chances are that vital conversations are being suppressed in other areas of life as well. Likewise, some citizens now shun the value of knowledge in a society where "losers" supposedly don't even need to work with knowledge. Economics may in fact need to broaden its purpose, if for no other reason than citizens now question the hard won economic logic that has contributed to centuries of prosperity.