The art of economics

[back2basics]

I have to say I have never studied the subject, I know most people would describe it as an art and not a science.

First we had Michael Waldman an apparently well thought of economist, who concluded that Autism was caused by watching TV.

http://www.time.com/time/health/article/0,8599,1548682,00.html

Then we have SuperFreakanomics, which has me questioning the validity of Freakanomics.

I also know that these are the utter failures and I am not including the vast majority of successful transactions, but very few economists saw the financial crash coming.

Don't these two events and the financial crash show us that economists are not only too confident of their craft, they are also oblivious of its limitations? Was it complacency or over confidence in the system that caused these utter failures?

[drkitten]

I have to say I have never studied the subject, I know most people would describe it as an art and not a science.

I also know that these are the utter failures and I am not including the vast majority of successful transactions, but very few economists saw the financial crash coming.

Actually, that's not true. Lots of economists saw the financial crash coming, some of them even credibly so.

The problem is/was that the people involved in the crash were typically not economists, but lawyers, and the whole structure of the financial crash involved putting risk on some other party, so most of the people involved thought they could pull out of it just before the crash.

Playing "chicken" with the economy, if you will.

It didn't help that a lot of the people who were actually in a position to influence events had been hand-picked for a particular economic theory that is not exactly mainstream. (How many members of W's economic team have won Nobel prizes? It is probably significant that one of the most outspoken critics of W's policies, Paul Krugman of Princeton, has.)


Don't these two events and the financial crash show us that economists are not only too confident of their craft, they are also oblivious of its limitations?

No, any more than it shows that football coaches in general are bad when the Cowboys lose a game.

Was it complacency or over confidence in the system that caused these utter failures?

Neither. Check Greenspan's Senate testimony. It was willful abrogation of responsibility.

[timhau]

Actually, that's not true. Lots of economists saw the financial crash coming, some of them even credibly so.

Yeah. They just didn't know when, because a degree in economics doesn't make one psychic. They weren't surprised that the poo eventually hit the fan, but I've got the impression that the sheer amount of it did surprise quite a few.