The FT has an article under this heading this morning.
Tom Clark of Prospect magazine says it has, echoing Howard Reed. His argument is:
Here's the rub. The great economic problems of our age, perhaps every age, are about uncertainty. The greatest economists have always devised models to prove particular points in one context, then cheerfully discarded them in another. But teaching and assessment has emphasised mastery of models over the critical facilities to take them to bits. The last few cohorts of youngsters who, in England at least, have grown up being spoon-fed for interminable school exams, arrive at university and find that the short-cut to a first-class degree is not critical thinking or even accuracy, but spurious precision.
Chris Giles of the FT (predictably) says all is hunky dory in the world of economics. He says:
Economics is fundamentally a study of how the world works and how to make it a better place. So long as you don't expect soothsaying, it is remarkably successful in this endeavour, shining light on many of the most important and difficult questions facing society.
Which is soothsaying, which he illustrates by adding:
If you want a careful analysis of who really gains and loses from Donald Trump's tax cuts, the dangers inherent in the continued growth of debt, the importance of smartphones for the working lives of people in east Asia or the historical effects of imposing trade barriers, economics informs and economists can give good answers. At last week's Spring meetings of the IMF and World Bank, economic analysis provided interesting evidence on each of these subjects, among many more.
Spot the micro I say.
And he adds:
It is important not to get hung up on mistakes, even big ones.
Oh yes it is Giles: they cost lives, literally. People who have died on trolleys in A&E or from hypothermia because they could not afford to heat their homes are testimony to that.
The FT is asking for contributions to the debate:
As part of an initiative to spotlight our readers' opinions, weare extending this debate to you. Has economics ceased to provide us with useful insights? Send your opinion (maximum 250 words) to ask@ft.com by Sunday April 29. We will publish a selection of the best in the FT next week.
If you want to do 250 words here instead I am open to offers, but I will use my editorial discretion. Your chances of getting published are probably somewhat higher though.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Macroeconomics constitutes a relatively small part of the entire corpus of economic theory and practice. And there are relatively few economists involved in this area – and even fewer are involved in policy formulation. All other other academic economists cover a mind-bogglingly wide range of topics and issues beyond macroeconomics. Most eonomists employed by firms, organsiations and associations simply contribute to achieving the objectives of these entities.
And even among those economists who are involved in the theory and practice of macroeconomics vanishingly few have any real influence. These economists do not exercise political and economic power. So the problem is not really with economics or macroeconomics; it is with what those who exercise political and economic power want the macroeconomists to provide. And the broad thrust of these demands revolve around justifying and facilitating the financialisation of economies, the reduction of workers’ rights, the disempowerment of trades unions, the shrinking of the state’s role (and the privatisation of many of its activities), the reduction of taxation, the design of easily rigged market mechanisms, the application of deliberately ineffective economic regulation, the removal of barriers globally to the movement of capital and to the development of complex supply chains and the regularisation of rent-seeking by all of those in a position to capture economic rents. This is the nature of the demand by those exercising political and economic power so it should not be surprising that there are economists who provide the supply.
Some people lazily describe this as neo-liberalism; but it is simply the latest ugly mutation of capitalism that emerged in response to both the successes and failures of the post-war economic compact in the developed economies.
As always the challenge is to shackle this mutation of capitalism so that it generates economically and socially useful outcomes. Seeking to restore elements of the post-war economic consensus or criticising a small part of the economics discipline or rejecting some elements of the current mutation of capitalism (particularly the relatively few functioning market mechanisms and applications of economic regulation) that have potential to be applied in the public interest will never secure the popular support to democratically shackle this mutation of capitalism.
I think you are spot-on with this analysis Paul and especially the last paragraph . The necessary change is political and will not happen until enough of the populace is moved to secure change . The referendum vote evidently wasn’t that moment and subsequently no politician that I am aware of is articulating in language that covers the broadest range of people, a vision of a future different from the present that they can give an enormous ‘ Yes ‘ to .
“Has economics ceased to provide us with useful insights? ”
I suppose just ‘Yes’ would be rather too succinct to be considered for publication ?
I think so….
Is it economics that has failed or is it economists, or certain economists or just particular models? Steve Keen in “Debunking…” explains why neoclassical economics is a complete failure. Geoff Davies in “Sack the economists” says: “Economists don’t know how businesses work, they don’t know how financial markets work, they can’t begin to do elementary accounting, they don’t know where money comes from nor how banks work, they think private debt has no effect on the economy, their favourite theory is a laughably irrelevant abstraction and they never learnt that mathematics on its own is not science. They ignore well-known evidence that clearly contradicts their theories.” He admits that’s not all economists. And that’s the point. There are economists who refute economics as “soothsaying” (otherwise we wouldn’t be reading this blog) and try to describe the “real” world with “real” people trying to make sense of their predicament. But the noise from a powerful clique with vested interests in their own survival as economists supported by those who have benefitted from belief in their nonsense drowns them out. The king continues to wear his new clothes without self-awareness.
Quite so
@ G Hewitt – well articulated in a nutshell. Says it all.
G Hewitt – you know that, I know that and lots of other people know that but unfortunately those people running the show either don’t know that or just don’t want to admit they know it because they will find themselves with no raison d’etre.
Has economics ceased to provide us with useful insights?
No. Here’s 5 things that I have mostly learnt from economists.
1. Money is not real – it is information, resources are real but the most important resource of all is human knowledge and information.
2. We are not rational (it costs too much effort to do a Bayesian update) – Kahneman, Giegerenzer and Thaler.
3. Health and education cannot be treated as a commodity – Samuelson and Deaton.
4. Climate change is the biggest market failure the World has ever seen.
5. Wealth and income distributions are inherently unstable – Piketty.
I could think of more or better ones but I am ‘thinking fast’ rather than being rational!
But what you have learned is that mainstream economics is wrong on these issues….
Yes, I agree, but I could also argue that many academic economists have moved on – isn’t the heterodox the majority now? Isn’t problem rather that the politicians, the mainstream media, and vested interests either do not care, or choose to ignore recent developments and prefer instead to deliberately to deceive their citizens. Attacking economists is wasted effort in my view. We should focus our wrath on the politicians, they make the rules.
I wish I could share your opinion on this Charles, but I can’t: I see the hegemony alive and well, and oppressing students
The politicians, or at least some of them, do not realise that their role is principally form; rather than substance. For example, we have had equal pay legislation (for women) for decades. We do not have equal pay, or anything like it. This is simply one example. Need I continue? Reality is quite different from appearance; and politics has become show-business; light entertainment to distract attention of the electorate from “reality”. This is not new.
John S Warren says:
The politicians, or at least some of them, do not realise that their role….[….] has become show-business; light entertainment to distract attention of the electorate from “reality”. This is not new. ”
But kind of interesting. In the same sort of way the ‘Overton window’ shifts from time to time, it would seem the revolving door has shifted. From business and finance to entertainment and ‘media’.
Perhaps in future we’ll see fewer PPE, and more Media Studies and Drama school alumni making their way in politics. ( 🙂 )
Incidentally worth reading the review of economist – Mariana Mazzucato’s new book.
https://www.ft.com/content/e00099f0-3c19-11e8-b9f9-de94fa33a81e
There are plenty of insightful voices out there.
On my to read list now
I subscribe to 38 Degrees which is a campaigning organisation. I think that the following part of an email I received tells you all you need to know about the failure of economics.
“Dear John,
Wow. Already 35,000 people have taken the survey to decide whether 38 Degrees should campaign for a small tax increase to help pay for our cash-strapped NHS.
The staff team will sit down to look at the results this week. So please will you have your say right now? Here’s the first question to get you started:
Do you think there should be a tax rise to fund the NHS?”
The obvious answer is no because as MMT says taxes do not fund spending. When you have a progressive organisation like 38 Degrees promulgating this claptrap then you know that the level of economic literacy is pitifully low.
Agreed
@ John Collins I have the same email. I told them I wouldn’t suport a tax increase and they’ve now sent me a follow up to say I’m part of a small minority and will I tell them why?
I have and I hope you will too!
I admit I dropped out of 38 degrees: the style alienated me in the end
I too got that email but took the ‘Other’ option and in the box provided, explained the error of their ways and lack of understanding of what the real situation is.
I haven’t had an email follow up!
When you read blogs like the following I find myself believing that the major problem is with the union of most politicians and the educated ignorati (eg bbc / guardian / etal).
That there are plenty of smart people who know enough but not the whole picture and thereby make more than enough to live comfortably.
Links:
http://www.alhambrapartners.com/2018/04/23/the-yield-curves-round-trip/
http://www.alhambrapartners.com/2018/04/23/the-official-world-moves-a-little-closer-to-the-eurodollar/