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Most Economists Fall Back Into Neoclassical Stupor ... "If They Don't Know Anything, Then Why Should We Listen To Them?"

George Washington's picture





 

Washington’s Blog

When the economic crisis hit in 2008, economists started to admit that neoclassical economics was wrong.

Specifically, they started to admit that the assumption that the economy is inherently stable is false, and that their models were faulty and needed to be adjusted. See this, this, this, this, this, this, this, this, this, this, this, this, this and this.

But now that - on the surface (here's what you may see if you scratch below the surface) - things seem to be improving, most economists are falling back in their neoclassical stupor.

For example, two PhD economists - Steve Keen and Dean Baker - recently attended the annual meeting of the American Economics Association. They are both exasperated that most economists have not learned anything at all from the crisis.

Keen reported on his surreal experience on the Max Keiser show, stressing that most economists still use defective models and believe the fairy tell of the inherent stability of the economy:

 

 

And Baker writes:

The American Economics Association held its annual meeting in Denver last weekend. Most attendees appeared to be in a very forgiving mood. While the economists in Denver recognised the severity of the economic slump hitting the United States and much of the world, there were few who seemed to view this as a serious failure of the economics profession.

 

The fact that the overwhelming majority of economists in policy positions failed to see the signs of this disaster coming, and supported the policies that brought it on, did not seem to be a major concern for most of the economists at the convention. Instead, they seemed more intent on finding ways in which they could get ordinary workers to accept lower pay and reduced public benefits in the years ahead. This would lead to better outcomes in their models.

 

***

 

The willingness of economists to so quickly embrace this darker future is striking. After all, one of the reasons that we have economists is, ostensibly, so that we don't get such unpleasant news about a "new normal". This is like a football team calmly accepting the sports writers' prediction that they would have a winless season, and deciding that their new goal was to minimise the margin of defeat.

 

***

 

If economists did their job, they would be pushing policies to get the economy quickly back to full employment. Instead, they just repeat lines about how "we" will just have to accept some rough times. Unfortunately, no one ever asks the economists who preach austerity how much time they expect to spend in the unemployment lines.

 

If they don't know anything, then why should we listen to them?

 


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Wed, 01/19/2011 - 03:50 | Link to Comment AnAnonymous
AnAnonymous's picture

Economics are like physicians circa 1600: treat people through elaborated thesis. Any outcoume reinforce the validity of the elaborated thesis.

Wed, 01/19/2011 - 00:19 | Link to Comment bruiserND
bruiserND's picture

PLEASE , don't tell me that economists don't know what they are talking about.

NEXT YOU'LL BE SAYING ENVIRONMENTALISTS ARE GOOFY TOO

 http://www.youtube.com/watch?v=ElJFYwRtrH4

Wed, 01/19/2011 - 00:14 | Link to Comment bunkermeatheadp...
bunkermeatheadprogeny's picture

20 years ago, I heard an academic joke in one of my undergrad biz classes, "Economists exists to make weatherman look good."

Tue, 01/18/2011 - 21:25 | Link to Comment margaris
margaris's picture

I also had such a "cash for gold" advertisment in my post. I had to laugh out loud!

 

Tue, 01/18/2011 - 22:04 | Link to Comment snowball777
snowball777's picture

Don't be so hasty...maybe they'll pay 15% over spot.

Tue, 01/18/2011 - 23:36 | Link to Comment margaris
margaris's picture

they were in town for two days in a hotel/conference room. open 4 hours every day.

It was all prepared for a fast exchange, so of course you would get very bad price for your gold.

Its mostly for people who have NO IDEA how much PM really cost.

They visit town after town and rip off people.

Tue, 01/18/2011 - 20:52 | Link to Comment max2205
max2205's picture

Don't get me started

Tue, 01/18/2011 - 20:10 | Link to Comment Bubbles...bubbl...
Bubbles...bubbles everywhere's picture

Sorry, but central planning and crony capitalism were not part of my curriculum. I guess I should have gone to an Ivy League school.

Tue, 01/18/2011 - 19:53 | Link to Comment Andy Lewis
Andy Lewis's picture

Their job is not to "learn anything."  Their job is to make sure we don't learn anything.

Seminar shrimp cocktail bitchez!

 

Wed, 01/19/2011 - 03:49 | Link to Comment AnAnonymous
AnAnonymous's picture

That is very likely that. Adding noise on the line, covering up for stuff...

Tue, 01/18/2011 - 19:48 | Link to Comment Bubbles...bubbl...
Bubbles...bubbles everywhere's picture

You cannot predict the outcome of anything when the markets are artificially manipulated.

Tue, 01/18/2011 - 19:43 | Link to Comment Eternal Student
Eternal Student's picture

"They are both exasperated that most economists have not learned anything at all from the crisis."

Yes, isn't that something? It should be added that this was the biggest economic event of their careers as well. And nearly all of them haven't learned anything.

 

Tue, 01/18/2011 - 19:41 | Link to Comment Convolved Man
Convolved Man's picture

The economists are in a quandary.  They do not know whether the problem is inherent to the divination bones or with their interpretation of casted patterns.

 

Tue, 01/18/2011 - 19:55 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

In all honesty, rolling them dry bones would be a step up because it would introduce stochastic process into the current abyss known as the dismal science.

Tue, 01/18/2011 - 20:31 | Link to Comment Convolved Man
Convolved Man's picture

 

The sacred interpretation manual currently used in casting and reading the divination bones:

Monetary Policy Alternatives at the Zero Bound:  An Empirical Assessment

The analysis of Fed speak, using communications policies to shape public expectations about the future course of interest rates, is truly enlightening.

 

Tue, 01/18/2011 - 19:31 | Link to Comment ATrillionSavedI...
ATrillionSavedIsATrillionEarned's picture

We should outsource the economics profession to China?

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