Economists — nothing but a bunch of idiots savants

25 December, 2016 at 13:00 | Posted in Economics | 9 Comments

idsavLet’s be honest: no one knows what is happening in the world economy today. Recovery from the collapse of 2008 has been unexpectedly slow …

Policymakers don’t know what to do. They press the usual (and unusual) levers and nothing happens. Quantitative easing was supposed to bring inflation “back to target.” It didn’t. Fiscal contraction was supposed to restore confidence. It didn’t …

Most economics students are not required to study psychology, philosophy, history, or politics. They are spoon-fed models of the economy, based on unreal assumptions, and tested on their competence in solving mathematical equations. They are never given the mental tools to grasp the whole picture …

Good economists have always understood that this method has severe limitations. They use their discipline as a kind of mental hygiene to protect against the grossest errors in thinking …

Today’s professional economists have studied almost nothing but economics. They don’t even read the classics of their own discipline. Economic history comes, if at all, from data sets. Philosophy, which could teach them about the limits of the economic method, is a closed book. Mathematics, demanding and seductive, has monopolized their mental horizons. The economists are the idiots savants of our time.

Robert Skidelsky

Yes indeed — modern economics has become increasingly irrelevant to the understanding of the real world. In his seminal book Economics and Reality (1997) Tony Lawson traced this irrelevance to the failure of economists to match their deductive-axiomatic methods with their subject. As shown by Skidelsky, it is as relevant today as it was twenty years ago.

rocket-science-pic

It is still a fact that within mainstream economics internal validity is everything and external validity nothing. Why anyone should be interested in that kind of theories and models is beyond my imagination. As long as mainstream economists do not come up with any export-licenses for their theories and models to the real world in which we live, they really should not be surprised if people say that this is not science, but autism!

Studying mathematics and logics is interesting and fun. It sharpens the mind. In pure mathematics and logics we do not have to worry about external validity. But economics is not pure mathematics or logics. It’s about society. The real world. Forgetting that, economics is really in dire straits.

Already back in 1991, JEL published a study by a commission — chaired by Anne Krueger and including people like Kenneth Arrow, Edward Leamer, and Joseph Stiglitz — focusing on “the extent to which graduate education in economics may have become too removed from real economic problems.” The commission members reported from own experience “that it is an underemphasis on the ‘linkages’ between tools, both theory and econometrics, and ‘real world problems’ that is the weakness of graduate education in economics,”  and that both students and faculty sensed “the absence of facts, institutional information, data, real-world issues, applications, and policy problems.” And in conclusion they wrote:

The commission’s fear is that graduate programs may be turning out a generation with too many idiot savants skilled in technique but innocent of real economic issues.

Not much is different today. Economics education is still in dire need of a remake. How about bringing economics back into some contact with reality?

Added (GMT 1215): And, of course, Paul Krugman and fellow ‘New Keynesians’ have been fast to tell us that although Skidelsky is absolutely right, ‘basic macro’ (read: IS-LM ‘New Keynesianism’) has done just fine, and that it is only RBC and New Classical DSGE macroeconomics that has faltered. But that is, sad to say, but still, nothing but pure nonsense!

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9 Comments

  1. As a friend of mine would say, they’re idiot savants, without the savant

    • 😃

  2. An enormous challenge is the psychology of why economists are able to read this critique and believe that it does apply to them. This challenge is multi-pronged, but one piece is the way that an undergrate exposure to physics is treated as an understanding of “science” writ large.
    .
    One of the most important lessons of the philosophy of science is the non-reductive nature of different scientific fields.
    .
    It is NOT the case that physics and chemistry are the microfoundations of evolutionary biology.
    It is NOT the case that physics and chemistry are the microfoundations of evolutionary biology.
    .
    There are arguments against this conclusion, but they are not very persuasive. If you want to get deep into the weeds of the philosophy of science and argue about it, that is fine. But for the purposes of economics, the best working understanding of the philosophy of science is that:
    .
    It is NOT the case that physics and chemistry are the microfoundations of evolutionary biology..
    .
    One final fact:
    The science of human behavior is part of evolutionary biology.

    • Or cultural anthropology perhaps.

  3. “The provision of monetary stability would require a reform of the monetary and banking system to eliminate the private creation of money and to subject changes in the quantity of money to definite rules designed to promote stability.”
    .
    http://0055d26.netsolhost.com/friedman/pdfs/other_commentary/Farmand.02.17.1951.pdf
    .
    Allowing monetary policy to be guided by anything other “definite rules designed to promote stability” is to step onto the slippery slope toward collectivism. This is an explicitly political agenda, explicitly articulated as such by Milton Friedman in an explicitly political manifesto.
    .
    But there are no “definite rules to promote stability”. That’s proven to be a mirage. We’re no closer to definite rules to promote stability today than we were when Friedman laid out his political program 65 years ago.
    .
    When reality refuses to cooperate with a political program, then followers must choose either to turn their back on the political program or turn their back on reality.
    .
    Is it really such a mystery when people who have devoted their lives and careers to a political program choose the latter?

  4. This kind of comment by Michael Robinson convinces me that the economists whom he represents have a great fear that when their subject is finally made logical and scientific, they will all be out of jobs. This is not what should happen of course, because with so much more science floating around there will be more unanswered questions than ever before.

    • You can’t pay the rent with unanswered questions.
      .
      Economists concerned about being out of a job will not consider the prospective quantity of unanswered questions, but rather the prospective quantity of money made available for finding answers.
      .
      If science and logic were to demonstrate conclusively that the desired (“definite rules”) answers are not forthcoming, the reasonable expectation would be a consequent sharp reduction in the funds available for finding them.
      .

  5. […] So reading a blog-post from my old friend Pålsson Syll seems appropriate to link to. The title is “Economists — nothing but a bunch of idiots savants” and I am especially fond of the Robert Skidelsky quote in the beginning. Read and weep, and […]

  6. The connection that economists have missed is scientific, the impact of the energy land resourse as a factor of production, GDP-prosperity and monetary creation. Adam Smith knew it as did Ricardo and Malthus, but this was lost in both Neo-classicals and Marxists both of which focused on distribution and neglected production. Read The Energy Within Economics & The Bubble Envelope Theory of Human Prosperity (amazon 2012) by Carlos Rossi for a full explanation of a scientific approach to economics. You will learn among other things that both the industrial and energy revolution were both 2sides of the same coin; that the depletion of fossil fuels really has had a devastating impact on OECD economic growth and that energy is the lien of money. You will also know that infinite growth in a finite planet is just not possible by the principles of thermodynamics. The book also discusses solutions to this but before you read them I suggest you read Small is Beautiful by EF Schumacher first, because I build on that extraordinary book.


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