Economists have been stumped by the past dozen years.
The Dotcom collapse was an early warning that economists, as a class, were not clued in. Sure a handful recognized that there were budding problems — think Bob Shiller — but he was notable as an exception.
Then we had the entire debacles of 2000s — derivative implosion, housing collapse, credit crisis, market crash — and we found that the vast majority of economists are academic theorists who were completely blindsided by events in the real world. And those were the good ones, as opposed to the biased hacks whose goals have nothing to do with discerning objective reality.
We need to admit that Economists, as a profession, are stumbling around in the dark.
To quote Edward Hadas, “Policymakers and pundits still make confident pronouncements, but the conclusions are radically different. The expert disagreements give away the truth: ignorance reigns.”
Hadas identifies six questions which professionals should stop pretending they can answer:
1) What creates retail inflation?
2) How do financial asset prices affect the real economy?
3) Do big fiscal deficits damage the economy?
4) What does quantitative easing actually do?
5) How much leverage is too much?
6) How to deleverage without damaging the economy?
If economists cannot explain the basic workings of the economy, perhaps we should be relying on them much less for policy advice . . .
Admit economic ignorance
By Edward Hadas
Reuters, October 31, 2012
To Find the Answers, Look Beyond Economics . . . (May 8th, 2011)
Letter from Chicago: F (January 5th, 2010)
How Economists Got It Wrong (September 6th, 2009)
Read It Here First: “What Good Are Economists?” (April 25th, 2009)
RIP Chicago School of Economics: 1976-2008 (December 23rd, 2008)
The Illusory World of Economic Forecasting (September 19th, 2006)
Mystery of the Awful Economists, part 2 (April 2005)
Mystery of the Awful Economists (Part III) (April 2005)
2004: A test of Supply Side economics (December 27th, 2003)