David B. Shemano wrote: >> While I am writing, to those of you complaining about the bankruptcy of the >> economics professions for failing to forsee the events of 2008, what >> conclusion are you drawing? The conclusion that I draw is that if thousands >> of very smart people devoted to understanding our economy couldn't >> accurately predict what was going to occur, why do we think a few dozen >> government officials could do any better?<<
raghu: > Maybe those people were not "devoted to understanding our economy", > but were rather involved in a propaganda exercise to justify existing > power relations? Or maybe they were not all that smart after all > (irrespective of what they scored on an IQ test)? Some of that is true, though I think a lot of the role of propaganda is that economists believed in their own propaganda: they _wanted_ to believe that free-market capitalist could attain a "Great Moderation" so they didn't just tell students and the media about it. They believed it. Among other things, it made them look good. Part of the problem here is "group think" and part of the problem is that if you're a Dean Baker-type, you're unlikely to be promoted or get tenure because you don't believe in markets as the be-all and end-all or you don't do high-tech math. And few rich fellows are willing to finance a think-tank for you, because it doesn't fit with their goals. Another part of the problem is the standard academic one of over-specialization (which I'd bet applies to law, too). A lot of smart people do research in the structure and performance of the brewery industry (or whatever) and then can't say anything about (say) macroeconomics. They tend to rely on the consensus developed by others, encouraging group-think. One kind of specialization that is so important in economics is that of specializing in studying things that can be easily described in mathematical terms or in terms of standard Gaussian statistics. These make it hard to deal with sudden changes, like the current quantum leap downward. All of these (and I may have left some out) mean that a lot of economists didn't (or don't) understand what was happening as the Great Moderation morphed into a possible Great Depression II. But most of the economists who advise the government about what to do on macroeconomic issues are the policy-oriented and relatively practical types (like those who publish in the BROOKINGS PAPERS ON ECONOMIC ACTIVITY). If they're dealing with macro issues, they're more likely to be macroeconomics specialists. The intelligent ones know that macro-models are never enough, that in real-world practical policy matters, there's always a fudge factor. If they're appointed by DP politicians, they're likely to reject the Chicago-school or Austrian ideologies that hobble macroeconomic understanding. Dean Baker-types are more likely to be hired (though likely not as independently-minded as he). Finally, the macroeconomic policy issues are relatively limited in number, so they can be figured out relatively easily. It's not like they are setting up a new GOSPLAN or anything like that. The big problem, of course, is that these economists have to change their ideological gears, from IMF-style neoliberalism to Keynesianism. They may not be able to do this, so that they cling to the eternal non-verities. Maybe the breadth, depth, and intensity of the current financial/macroeconomic shock will push them... (My essay on so-called "autistic economics" mentions this possibility. See http://myweb.lmu.edu/jdevine/JD-2002-AutisticEcon.pdf. ) Of course, in the end it's not the expertise of these experts that determines what the government does. It's politics, including the power of moneyed interests behind the politicians. Because of this, even having really smart economists making policy may have no impact at all. Of course, if the private-sector performance deficits continue to get worse and worse, even the politicians and the vested interests they represent may be pushed to do the right thing (or something like it). That assumes, of course, that this system can be saved. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
