Technobabble economics

26 Aug, 2018 at 13:05 | Posted in Economics | Comments Off on Technobabble economics


Deductivist modeling endeavours and an overly simplistic use of statistical and econometric tools are sure signs of the explanatory hubris that still haunts mainstream economics.

In an interview Robert Lucas says

the evidence on postwar recessions … overwhelmingly supports the dominant importance of real shocks.

So, according to Lucas, changes in tastes and technologies should be able to explain the main fluctuations in e.g. the unemployment that we have seen during the last six or seven decades. But really — not even a Nobel laureate could in his wildest imagination come up with any warranted and justified explanation solely based on changes in tastes and technologies.

The Chicago übereconomist is simply wrong. But how do we protect ourselves from this kind of scientific nonsense? In The Scientific Illusion in Empirical Macroeconomics Larry Summers has a suggestion well worth considering — not the least since it makes it easier to understand how mainstream economics actively contribute to causing economic crises rather than to solve them:

technoA great deal of the theoretical macroeconomics done by those professing to strive for rigor and generality, neither starts from empirical observation nor concludes with empirically verifiable prediction …

The typical approach is to write down a set of assumptions that seem in some sense reasonable, but are not subject to empirical test … and then derive their implications and report them as a conclusion …

What then do these exercises teach us about the world? … If empirical testing is ruled out, and persuasion is not attempted, in the end I am not sure these theoretical exercises teach us anything at all about the world we live in …

Serious economists who respond to questions about how today’s policies will affect tomorrow’s economy by taking refuge in technobabble about how the question is meaningless in a dynamic games context abdicate the field to those who are less timid. No small part of our current economic difficulties can be traced to ignorant zealots who gained influence by providing answers to questions that others labeled as meaningless or difficult. Sound theory based on evidence is surely our best protection against such quackery.

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