Hating Economists but Loving Economics

Robert Shiller points to an interesting conflict in economics today: “We are in the midst of a boom in popular economics: books, articles, blogs, public lectures, all followed closely by the general public. Yet this boom in popular economics comes at a time when the general public seems to have lost faith in professional economists – because almost all of us failed to predict, or even warn of, the current economic crisis, the biggest since the Great Depression.” Shiller thinks the best explanation is “that economics has become more interesting because it no longer seems to be a finished and closed discipline. It is no fun to read a book or article that says that economic forecasting is best left to computer models that you, the general reader, would need a doctorate to understand. And, in truth, the public is right: While there is a somewhat scientific basis for these models, they can go spectacularly wrong. Sometimes we need to turn off autopilot and think for ourselves-and, when a crisis occurs, use our best human intellect.” [%comments]


Steve B

One need not hate economists to recognize their's is mostly an industry of wishful thinking and great pretenders. What one might dislike is the pretense of the media and others in trying to offer the wishful thinking of economic forecasts as something reliable. What is the point in repeatedly promoting predictions of others that are mostly wrong? Why not just flip a coin and admit that you too enjoy the pretense? But, please, don't call it journalism.

Eric M. Jones

There is no sense in asking if a model is right or wrong. In fact a model is not even useful for predicting the future (as recent events have demonstrated).

A computer model is just a sort of mechanical village, where creaking wheels and worn-out chains drag little creatures and cars around ersatz landscapes. Watching it gives one the illusion of mastery.

Just imagine what VisiCalc and later Excel did for economists! I am King of the World. Grrrrrr.

Anon

It may also be that Americans just don't like what economists are saying. As Nobel laureate Paul Krugman has noted, there is no economic model supporting austerity or any of the "solutions" libertarians or tea partiers are insisting upon. Therefor, people are rejecting economics so they an substitute their own reality.

Michael Radosevich

Wrong on all counts. For one, people have a lot of "faith" in Paul Krugman the economist, and these people include his academic peers, the Noble committee, and with the hoi polloi.

Second, while "almost all of us failed to predict, or even warn of, the current economic crisis, the biggest since the Great Depression", a few economists both predicted the crisis and warned us about it. Again, Krugman was one, along with Dean Baker and a few others.

Third, using Keynes and Krugman, and Krugman's models, one can easily understand why our current problems arose and why we have not risen to the challenge of fixing those problems. And nobody needs a PhD to understand Krugman's models. The problem with the Austrian-Chicago school is that they often don't use models, and the models they do use are woefully inadequate.

At least Mr. Schiller was frank enough to use the "almost all" qualifier. Krugman, Baker, et al. both foresaw the impending crisis and forewarned us about it.

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Phil C.

Economics is the astrology of the twenty-first century.

A. I have personally witnessed economists at the FED utilize dowsing methods to locate the water-cooler.

B. I would not trust the economy with my money let alone my expectations.

C. Today I received free lunch as part of a promotional offer.

Descartes

Free lunch? A pure analytical study would show that indeed "nothing" is free. Never a more clear or concise example of what went wrong in the first place. People simply have no clue as to what they're talking about.

Doc

I think the problem is that economists can be good at explaining utility-maximizing behavior at the individual level which adds up to micro-economics, but we aren't very good at explaining large systems as in macro-economics. Witness the popularity of Freakonomics, TINTSTAFL, and other books. Are there equally popular macro books?

Scott

As far as people "loving economics", people are interested in economics only to the extent that it greatly affects their daily lives and their future. And just like armchair doctors that swear by hand-me-down cures, EVERYBODY is an expert at economics. So while economists didn't foresee the crisis, I doubt people would have listened anyway because everybody is highly vested in their personal views.

Nosybear

I believe the differences are more fundamental. Behavioral economics actually deals with the way people respond economically to incentives, how they act in their own self-interest given the limited knowledge they actually have, how their reactions are rational taken in the framework of limited human knowledge and experience. Classical economics deals with constructs that do not exist such as efficient markets and homo economicus. The fundamental principles of the science are flawed, despite beautiful mathematics and brilliant communications. Additionally, there are those zombie ideas like trickle-down economics still floating around in the collective consciousness, still being used in policy making despite failure to survive contact with reality, still contributing to the collective distrust in the dismal science. Economics' failure to predict the economic catastrophes of the last decade, indeed their contributions to them, can be compared to physical theory failing to predict an object released at a height will fall. It's a laughable failure and relegates classical economics to the physical equivalent of phlogiston theory.

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AaronS

Economists are the secular version of prophets or fortune tellers. We never remember when they're wrong; we never forget when they're right.

John Blow can write a book called "Why The Market Will Crash in 2011" (the non-religious version of "Why Jesus Will Come Back in 1988"). If the market crashes, egads!--we have a genius, guru, prophet, savior.

If the market waits for six more years to crash (as it does from time to time), we hear, "Joe Blow was right...only his timing was off."

Same thing happen in the Christian TV world. A "prophet" can say 100 different things. If just one comes to pass--the old "throw enough things against the wall and something's bound to stick" game--we'll forgive all the 99 false predictions.

Of course, if their are "false prophets," then it stands to reason that there must be true ones. Likewise, with economists: some actually do know what they are talking about. Probably no more than four or five though--ha!

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Some Random Economist

I think most of the popular resentment of economics comes from the fact that people didn't understand in the first place that economics isn't "a finished and closed discipline".

random economist two

It's the difference between macro and micro as pointed out above. People love books that primarily deal with micro, not macro. Popular books such as Freakanomics don't address macro issues but rather the "fun" stuff that has nothing to do with the bigger picture. Seems pretty obvious to me.

Marcia

If the majority of the economics profession had predicted the GFC, would it have happened at all? That is, surely if thousands of economists had loudly announced in 2003 that excessive credit, ninja loans etc would lead to a crash in 07-08, people would have been more prudent in their borrowing and lending, removing the catalyst for a crash and then economists would be berated for falsely predicting a crash?

hal

I don't have any hatred or even dislike for economists. However, what I like least about them is their insistence on decoupling models made in the image and likeness of Rube Goldberg from reality. Any boom and bust economy can be predicted by simply observing biological systems work by real-world principles. Regulating to prevent geometric growth has, as its end point, the prevention of boom and bust. Thus, the economists who advocate a self-regulating market are denying reality for the thrill of watching stratospheric expansion of the building blocks in their model until it reaches sufficient instability to collapse. My three-year-old does the same thing.

Mike C

It's a Black Swan world! Some economists may see what looks like a gray swan approaching in the dark and say, "look a swan is approaching!" A few may even say that they believe the swan approaching to be black. Once the swan has arrived, however, and it is found to be black, that is when the bulk of economists dissect it and find out what hit us. Then, like generals, economists get busy analyzing the last black swan and they build their findings into their new and improved set of models. And so it will continue ad infinitum!

Tom

There were many highly regarded economists who predicted the financial crisis. Im an undergrad and the whole financial crisis is perfectly consistent with the models we learn.

The problem, as Krugman has said many many times, is what was once known was forgotten,(banking instability - diamond dybvig etc). We seem to be in a macroeconomic dark age where beauty was mistaken for truth in the form of the efficient markets,when all markets suffer from major pitfallsof human cognative bias, so while the models may in themselves be robust, the agents they model aren't subject to things like overconfidence and confirmation bias.

I think we will see a rise in Game theory and Behaviour economics to account for our shortfalls in modelling human behavioural and psychological distortions. Macro can account for our preferences, but give no explanation for why we hold them. This needs to be explored further.

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Mike S

Economics presumes that people act rationally, and that is often not true.

Nosybear

Love economics but will begin to believe it is really a science when we stop referring to economists as "conservative" or "liberal." Science has no ideology so when the ideology becomes the key modifier of title and key indication of what you're about to read, the practitioner loses credibility as a scientist.