Economics Economyths: The Five Stages of Economic Grief

[applegrove]

(After the 2007 economic meltdown)

Economics

http://evonomics.com/economyths-five-stages-economic-grief/

"SNIP......


It therefore comes as something of a relief to us critics that some economists at least may be proceeding to the penultimate, more passive stage of the grief process, depression. Evidence is provided by a paper by Paul Romer, ‘The Trouble With Macroeconomics’ (he had also been reading Smolin’s book, hence the title), a 2016 preprint of which caused a considerable stir in economics circles. Sounding almost Economyths-like in style, the first sentence of the abstract announces that ‘For more than three decades, macroeconomics has gone backwards’. It goes on to describe the author’s ‘pessimistic assessment of regression into pseudoscience’ and mention the ‘serious failure’ of top economists. Decidedly non-upbeat section titles include ‘Post-Real Models’, ‘Loyalty Can Corrode The Norms of Science’, ‘Back to Square One’, and ‘The Trouble Ahead For All of Economics’. No concrete solutions are proposed for what sounds, to an outsider, like a rather dysfunctional state of affairs.

In the same way that elegant but unfalsifiable string theory has, as Smolin showed, taken over high-energy physics, so mainstream economics has increasingly emphasised elegant but unfalsifiable mathematical models over experimental reality. Most of the parameters in the models cannot be determined from observations, but are simply made up to give the desired answers. Events such as crashes are assumed to be caused by external shocks, rather than internal dynamics. The models can’t make sense out of even basic things like monetary policy, which according to theory – since money plays no significant role in these models – should have little or no effect.

However, the problems are as much sociological as they are mathematical. Just as string theory is characterised by what Smolin described as ‘groupthink’ about the correct way to approach problems, so some economists see it as ‘an extremely serious violation of some honor code for anyone to criticize openly a revered authority figure … neither facts that are false, nor predictions that are wrong, nor models that make no sense matter enough to worry about’.

Romer, who is now chief economist at the World Bank, notes that he sees himself more as a practitioner rather than an academic, so feels free to speak out and tell it like it is, but many people are afraid to criticise a ‘revered leader’ because of the ‘unpleasant reaction’ that it may evoke. He relates a story of running into a colleague who was so angry with him for criticising a paper by Robert Lucas that ‘at first he could not speak. Eventually, he told me, “You are killing Bob.”’ Yikes. So much for that self-image of economists being open to criticism. In fact Romer says he was inspired to write the paper after seeing a documentary about the Church of Scientology.



...........SNIP"

[Hortensis]

1. Interesting article, thanks. I initially just wondered how saying goodbye to beef

these days worked for others, and when I'd arrive at acceptance of probably never again serving prime rib, but it's actually a lot more interesting than that.

Note, read it knowing this overview of where the economics field is now has a strong left bias.

[applegrove]

2. Actually I think the right has made up economics to suit the rich starting

with the Laffer Curve. They've given up on tight money policies and Keynesianism so the rich get more and more power and wealth. Those things worked. For the people.

[Hortensis]

3. I've read that hard-right economic concepts once considered ridiculous

and far from respectable have been increasingly taught in universities across the country for the past few decades. This was accomplished by members of the exploding ultrawealthy class buying them in, through large donations and especially by founding new "schools" within colleges that taught these concepts. This happened in many disciplines, not just econ, as part of a systematic attempt to move the whole nation right. So our colleges and universities have been increasingly graduating students inculcated with hard right, anti-liberal ideas for 30 years now.

Funny that you mention Laffer's theories. When I took intro macro looong ago, our text was a new edition and the first day of class, the very first thing, our professor had us go to page whatever and cross out the section on the Laffer curve. He didn't explain what it was, just cross it out in our shiny, expensive new books. This was so long ago that the huge Laffer experiment under Reagan hadn't even failed and plunged us into debt yet, but our professor already knew it was bogus. And here it was being presented in the newest edition of a textbook used in many colleges, for all the world as if it was a widely observed and accepted dynamic.

[hatrack]

4. Economists - The Physicists Of Dry Water

.