What good are economists anyway?
22 Apr 2009, 1655 hrs IST, BusinessWeek
Economists mostly failed to predict the worst economic crisis since the 1930s. Now they can't agree how to solve it. People are starting to wonder: What good are economists anyway? A commenter on a housing blog wrote recently that economists did a worse job of forecasting the housing market than either his father, who has no formal education, or his mother, who got up to second grade. "If you are an economist and did not see this coming, you should seriously reconsider the value of your education and maybe do something with a tangible value to society, like picking vegetables," he wrote on patrick.net.
Take that, you pointy-headed failures! Go jump off a supply curve!
To be fair, economists can't be expected to predict the future with any kind of exactitude. The world is simply too complicated for that. But collectively, they should be able to warn of dangers ahead. And when disaster strikes, they ought to know what to do. Indeed, people pay attention to economists at times like this precisely because of their bold claim that they know how to prevent the economy from sliding into a repeat of the Great Depression. But seven decades after the Depression, economists still haven't reached consensus on its lessons. The debate has only intensified in recent weeks.
To fight the downturn, Federal Reserve Chairman Ben Bernanke, Treasury Secretary Timothy F. Geithner, and National Economic Council Director Lawrence Summers are attempting an unprecedented combination of massive fiscal stimulus and extreme monetary policy. If it produces a sustained recovery, and there are some early signs of hope, they will look like heroes. For now, though, it's disturbing that they've had to resort to policy measures that in scale and scope are way outside what the economics profession had studied or even contemplated in recent years.
The rap on economists, only somewhat exaggerated, is that they are overconfident, unrealistic, and political. They claim a precision that neither their raw material nor their skill warrants. Too many assume that people behave like the mythical homo economicus, who is hyperrational and omniscient. And they take sides in quarrels that freeze the progress of research. Those few who defy the conventional wisdom are ignored.
22 Apr 2009, 1655 hrs IST, BusinessWeek
Economists mostly failed to predict the worst economic crisis since the 1930s. Now they can't agree how to solve it. People are starting to wonder: What good are economists anyway? A commenter on a housing blog wrote recently that economists did a worse job of forecasting the housing market than either his father, who has no formal education, or his mother, who got up to second grade. "If you are an economist and did not see this coming, you should seriously reconsider the value of your education and maybe do something with a tangible value to society, like picking vegetables," he wrote on patrick.net.
Take that, you pointy-headed failures! Go jump off a supply curve!
To be fair, economists can't be expected to predict the future with any kind of exactitude. The world is simply too complicated for that. But collectively, they should be able to warn of dangers ahead. And when disaster strikes, they ought to know what to do. Indeed, people pay attention to economists at times like this precisely because of their bold claim that they know how to prevent the economy from sliding into a repeat of the Great Depression. But seven decades after the Depression, economists still haven't reached consensus on its lessons. The debate has only intensified in recent weeks.
To fight the downturn, Federal Reserve Chairman Ben Bernanke, Treasury Secretary Timothy F. Geithner, and National Economic Council Director Lawrence Summers are attempting an unprecedented combination of massive fiscal stimulus and extreme monetary policy. If it produces a sustained recovery, and there are some early signs of hope, they will look like heroes. For now, though, it's disturbing that they've had to resort to policy measures that in scale and scope are way outside what the economics profession had studied or even contemplated in recent years.
The rap on economists, only somewhat exaggerated, is that they are overconfident, unrealistic, and political. They claim a precision that neither their raw material nor their skill warrants. Too many assume that people behave like the mythical homo economicus, who is hyperrational and omniscient. And they take sides in quarrels that freeze the progress of research. Those few who defy the conventional wisdom are ignored.
