Table Of ContentEconomics
Rules
also by dani rodrik
The Globalization Paradox:
Why Global Markets, States, and Democracy Can’t Coexist
One Economics, Many Recipes:
Globalization, Institutions, and Economic Growth
In Search of Prosperity:
Analytic Narratives on Economic Growth
Towards a Better Global Economy:
Policy Implications for Citizens Worldwide in the 21st Century
Franklin Allen, Jere R. Behrman, Nancy Birdsall, Shahrokh
Fardoust, Dani Rodrik, Andrew Steer, and Arvind Subramanian
Economics
Rules
Why Economics Works, When It Fails,
and How To Tell The Difference
Dani Rodrik
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© Dani Rodrik 2015
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First Edition published in 2015
Impression: 1
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To my mother, Karmela Rodrik,
and the memory of my father, Vitali Rodrik.
They gave me the love of learning and the possibilities
for embracing it.
p r e fac e a n d
ac k n ow l e d g m e n t s
This book has its origins in a course I taught with Roberto
Mangabeira Unger on political economy for several years at
Harvard. In his inimitable fashion, Roberto pushed me to
think hard about the strengths and weaknesses of economics
and to articulate what I found useful in the economic method.
The discipline had become sterile and stale, Roberto argued,
because economics had given up on grand social theorizing
in the style of Adam Smith and Karl Marx. I pointed out, in
turn, that the strength of economics lay precisely in small-scale
theorizing, the kind of contextual thinking that clarifies cause
and effect and sheds light—even if partial—on social reality. A
modest science practiced with humility, I argued, is more likely
to be useful than a search for universal theories about how capi-
talist systems function or what determines wealth and poverty
around the world. I don’t think I ever convinced him, but I
hope he will find that his arguments did have some impact.
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preface and acknowledgments
The idea of airing these thoughts in the form of a book finally
jelled at the Institute for Advanced Study (IAS), to which I
moved in the summer of 2013 for two enjoyable years. I had
spent the bulk of my academic career in multidisciplinary envi-
ronments, and I considered myself well exposed to—if not well
versed in—different traditions within the social sciences. But the
institute was a mind-stretching experience of an entirely differ-
ent order of magnitude. The institute’s School of Social Science,
my new home, was grounded in humanistic and interpretive
approaches that stand in sharp contrast to the empiricist positiv-
ism of economics. In my encounters with many of the visitors
to the school—drawn from anthropology, sociology, history,
philosophy, and political science, alongside economics— I was
struck by a strong undercurrent of suspicion toward econo-
mists. To them, economists either stated the obvious or greatly
overreached by applying simple frameworks to complex social
phenomena. I sometimes felt that the few economists around
were treated as the idiots savants of social science: good with
math and statistics, but not much use otherwise.
The irony was that I had seen this kind of attitude before—in
reverse. Hang around a bunch of economists and see what they
say about sociology or anthropology! To economists, other social
scientists are soft, undisciplined, verbose, insufficiently empiri-
cal, or (alternatively) inadequately versed in the pitfalls of empir-
ical analysis. Economists know how to think and get results,
while others go around in circles. So perhaps I should have been
ready for the suspicions going in the opposite direction.
viii
preface and acknowledgments
One of the surprising consequences of my immersion in the
disciplinary maelstrom of the institute was that it made me feel
better as an economist. I have long been critical of my fellow
economists for being narrow-minded, taking their models too
literally, and paying inadequate attention to social processes.
But I felt that many of the criticisms coming from outside the
field missed the point. There was too much misinformation
about what economists really do. And I couldn’t help but think
that some of the practices in the other social sciences could be
improved with the kind of attention to analytic argumentation
and evidence that is the bread and butter of economists.
Yet it was also clear that economists had none other than
themselves to blame for this state of affairs. The problem is not
just their sense of self-satisfaction and their often doctrinaire
attachment to a particular way of looking at the world. It is
also that economists do a bad job of presenting their science to
others. A substantial part of this book is devoted to showing
that economics encompasses a large and evolving variety of
frameworks, with different interpretations of how the world
works and diverse implications for public policy. Yet, what
noneconomists typically hear from economics sounds like a
single-minded paean to markets, rationality, and selfish behav-
ior. Economists excel at contingent explanations of social life—
accounts that are explicit about how markets (and government
intervention therein) produce different consequences for effi-
ciency, equity, and economic growth, depending on specific
background conditions. Yet economists often come across as
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