People inside the federal government sometimes describe Washington as a battleground between economists and lawyers. Case in point: when I was reporting recently on the new Consumer Financial Protection Bureau, some Washington hands spoke of the agency not in theoretical terms—as an institution that represents a reaction against deregulatory thinking in finance, say—but in terms of turf: as a place where there were too many lawyers and not enough people with econ Ph.D.s walking around.
The financial crisis has probably helped the lawyers’ side in the Washington turf war. As Betsey Stevenson and Justin Wolfers write in Bloomberg, “it has been an embarrassing few years for the economics profession.” But what’s interesting, I think, is how well the economics profession has weathered this crisis of legitimacy—and how it has done so. It’s at least partly because economics has done the opposite of close ranks. By absorbing the insights of behavioral psychology, political science, sociology, and other disciplines, economics has become a bigger tent since the crisis.
In the process, economics has sacrificed some degree of orthodoxy. But these moves have arguably helped it maintain its turf. (Case in point again: the Consumer Financial Protection Bureau may be run by a lawyer, but many of its biggest ideas come from behavioral economics.)