Is the economics profession “stuck in a kind of Nash equilibrium”?

When it comes to climate change and research related to what many consider to be the most pressing issue of our times, the economics profession appears to have its head in the sand. Based on a 2019 study of leading journals of economics, only a handful of articles have been published related to climate change. The study of economics journals done by economists Andrew Oswald and Nicholas Stern led the authors to issue a wake-up call to their colleagues. They described their profession as “stuck in a kind of Nash equilibrium” of avoidance of the problem of climate change.

A Nash equilibrium is what economists use to describe a situation where someone has zero incentive to deviate from what that individual is currently doing. The incentive structure in place rewards that individual for not changing course — as long as others don’t change course. Applied to the behavior of economists, this means that there is no reason for economists to research and publish articles pertaining to the economics of climate change because they individually benefit by avoiding the topic, assuming others apply the same strategy and avoid it as well. The profession, it would appear, has avoided the issue of climate change because individually it is self-serving to do so because others continue to behave the same way.

Looked at another way, the profession has no internal incentive to deviate from its current path. As the authors of the study write:

We suspect that modern economics is stuck in a kind of Nash equilibrium.  Academic economists are obsessed with publishing per se and with pleasing potential referees.  The reason there are few economists who write climate change articles, we think, is because other economists do not write climate change articles.  

However, the real irony here is missed by the authors. The mainstream economics profession (in its journals and textbooks) promotes the idea that if individuals are allowed to pursue their own self interest, then collectively they will advance our wellbeing. Applied to economists as individuals, if a professional economist pursues his or her own career (by maximizing publishing of articles aimed at “pleasing potential referees”), this should be adding to overall societal well-being. But, as the article makes clear, these individual career choices by economists appear to be producing a perverse outcome of academic avoidance of the elephant in the living room (i.e., climate change). And at society’s expense!

Let’s take a look at some highlights of this latest study of mainstream economic journals and climate change articles. The authors in 2019 scanned 77,000 articles published in general economics journals. The most notable result was that there were zero published articles on climate change in the Quarterly Journal of Economics, the profession’s leading journal. This journal is where you would want to be published if you are an academic economist seeking status in the profession because it is the most cited. Your future depends on being published in this peer-reviewed journal. Apparently, there is no interest in climate changes in the AJE based on this record. And if we apply the logic of being stuck in an Nash equilibrium, this is because there is no benefit to doing so for economists’ regardless of whether it would be beneficial to the rest of us.

With zero articles ever published on climate change in the QJE (and only a handful in the other leading journals, as the study showed), this suggests that economists may be more of the problem than any potential solution. This is true especially given the enormous clout the profession has in terms of influencing policymakers and politicians, in addition to impacting the minds of thousands of their students each year.

With all this economist brain power ignoring the subject of climate change, as if it were somebody else’s analytical problem, the profession runs the risk, as the authors suggest, of “being judged harshly by the humans of the future- including by our own offspring.”

It is time for our profession to live up to its responsibilities.  Economists have been too silent on the greatest problem of our age. If we do not move quickly, we think the discipline will be judged harshly by the humans of the future – including by our own offspring.  

We need to break out of the dismal prevailing Nash equilibrium.  Action by the editors of journals and senior professors in our universities is required.  New incentives are needed.  Now, not tomorrow. 

Actually, new incentives were needed yesterday, as now it may be too late. I can remember arguing for action in 1981 as a young environmental activist and then often getting odd looks from conventional economists — some of whom were my undergraduate mainstream teachers. At the time I was passionately explaining to many people how individuals privately making use of shared resources could collectively produce anti-social and anti-ecological outcomes. It is known as the “tragedy of the commons.”

But this was the dawn of the Reagan era of free markets-know-best ideology, so it often just fell on deaf ears. Of course, I was not alone, and the concern has been around a lot longer than the last forty years. But you would not know that from reading mainstream (American Economics Association) economics journals. Actually, reading these journals would lead you to believe there is no problem. As many ecological economists maintain, and I would concur, establishment economists are enablers of the problem. And in an insidious manner.

I have wondered why there was so little concern (as measured by lack of published articles) inside the profession. Unfortunately, it seems that what matters most in this competitive business is advancing your career by serving the prevailing thinking. Not that economists don’t care, of course. Many economists probably figure that technology would come along to fix things and that the marketplace would sort it all out and produce the fabled “best of all possible worlds” outcome of individual choice making and profit seeking. But this is wrongheaded — a one-size-fits-all approach that will no longer suffice.

Today we need the forceful hand of a truly democratic society to steer policy and markets in a direction that thwarts the pernicious side effects of capitalist markets. And to counter a profession that provides ideological and analytical justification for an “invisible foot” effect of markets — where corporate profit seeking stomps all over our wellbeing in the name of advancing the public good. Given the costs and risks associated with climate change, society can no longer afford to have economists ignoring the problem.

But even if more attention is paid to the problem, conventional economists will need to break out of their narrowly focused models, and the math that goes with them. The problem requires a more holistic approach involving modeling the economy and ecology together as complex systems. For instance, we need to begin to address how modern capitalism may now be destroying more of the planet each year than the value of goods and services created.