Tuesday, September 27, 2011

Paul Krugman Despairs the Economics is Not a Science

Paul Krugman has devoted his career to economics and has won a Nobel Prize, but he fells that he is living through a "Dark Age" in which economics has unlearned the lessons of the past. He is really despondent. Here is the relevant piece from a post on his NY Times blog:
I’ve never liked the notion of talking about economic “science” — it’s much too raw and imperfect a discipline to be paired casually with things like chemistry or biology, and in general when someone talks about economics as a science I immediately suspect that I’m hearing someone who doesn’t know that models are only models. Still, when I was younger I firmly believed that economics was a field that progressed over time, that every generation knew more than the generation before.

The question now is whether that’s still true. In 1971 it was clear that economists knew a lot that they hadn’t known in 1931. Is that clear when we compare 2011 with 1971? I think you can actually make the case that in important ways the profession knew more in 1971 than it does now.

I’ve written a lot about the Dark Age of macroeconomics, of the way economists are recapitulating 80-year-old fallacies in the belief that they’re profound insights, because they’re ignorant of the hard-won insights of the past.

What I’d add to that is that at this point it seems to me that many economists aren’t even trying to get at the truth. When I look at a lot of what prominent economists have been writing in response to the ongoing economic crisis, I see no sign of intellectual discomfort, no sense that a disaster their models made no allowance for is troubling them; I see only blithe invention of stories to rationalize the disaster in a way that supports their side of the partisan divide. And no, it’s not symmetric: liberal economists by and large do seem to be genuinely wrestling with what has happened, but conservative economists don’t.

And all this makes me wonder what kind of an enterprise I’ve devoted my life to.
I'm stunned that the field has shown itself that incompetent in the face of the 2008 financial crisis. But the academics fell in love with their models, the math, and the simplifying assumptions required to make the math and the models work. They took their eye off what is critical to any real science: the facts. They've turned economics into a branch of theology where the divines of the field debate the number of angels dancing on the head of a pin. They've gotten away from the hard insights of Keynes from the Great Depression. Tragic.

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