Sunday, March 1, 2009

Newsflash: economists have seriously fucked up

This is interesting, especially in light of reading The Shock Doctrine. One of the things that keeps coming up in The Shock Doctrine is how free market fundamentalist economists (called the Chicago School after where Milton Friedman taught) always claim that their economic prescriptions are purely scientific in an effort to justify putting in place their programs over objections and without political controls. There are several problems with this (I, for one, always thought that science did not tell us what to do, only what is, and we can use this knowledge to help us get the results we want. In other words science never tells you to cut taxes, it can only say what will happen if you cut taxes.) but it seems that the biggest problem is that it was bad science. Results from models mostly untouched by empirical results are not science, but philosophy. Now economic systems are hard to test in a controlled manner, so a certain amount of reliance on theory and models is perhaps understandable, but all models need to be tested, and it seems that many economists have just assumed their models work for the last ~30 years and proceeded to calibrate their models.

So read that paper, they have many problems with modern academic economics, but the one that I, as someone with a background in physics, found most telling was the lack of empirical support for their assertions.