Economists pretending to know

14 March, 2014 at 18:50 | Posted in Economics | 1 Comment

economists pretend to know

We are storytellers, operating much of the time in worlds of make believe. We do not find that the realm of imagination and ideas is an alternative to, or retreat from, practical reality. On the contrary, it is the only way we have found to think seriously about reality. In a way, there is nothing more to this method than maintaining the conviction … that imagination and ideas matter … there is no practical alternative”

Robert Lucas (1988) What Economists Do

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  1. There can be a deep, compound pathology in this “pretending to know”, when what economists pretend to know is an a priori null result, which is then used to undermine critical thinking about the economy (– the economic system as it exists, as opposed to the dogmatic thought system of neoclassical economics).

    Economists can claim to be experts in economics, without knowing much of anything about the economy. This sort of scholasticism would be bad enough in its isolation, but neoclassical economics has elaborate justifications for not knowing anything about the economy, and for denying that anyone else could ever know anything. The Efficient Markets Hypothesis (and, relatedly, Rational Expectations) are regularly wielded in this way.

    On 8 March, you linked to a Noah Smith blog post defending mainstream macroeconomics’ response to the GFC of 2007-8. Noah’s number one common criticism of mainstream macro, which macroeconomics has allegedly fended off, was: “Macro didn’t predict the crisis.” And, he confidently and complacently opines, ” I don’t think many people inside or outside of the profession thought in 2007 that macro was able to predict recessions, financial crises, etc.”

    The breathtaking absurdity of claiming expertise, while denying responsibility for actually knowing anything, would be comical, if it wasn’t so destructive in political practice. Scott Sumner has several blog posts in defense of the Efficient Markets Hypothesis, as applied to the GFC of 2007+, in which he demonstrates just how woolly and self-justifying this solipsistic skepticism can become. is one.

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