01/30/09 - RealClearMarkets by Frank J. Tipler, Professor of Mathematical Physics at Tulane University.
[edited] The inability of macroeconomic theories (about an entire economy) to make accurate predictions means that those economists do not know what they are talking about. Our leaders are being advised by macroeconomists, and they haven’t got a clue where they are leading us. Their actions may lead us out of the current recession, or they may lead us into a depression as bad as the Great Depression.
Franklin Roosevelt is often given credit for experimenting with the economy in a scientific manner. He did nothing of the sort.
Any experiment involving human beings has to be a controlled experiment, as in medicine. Half the patients are given the new medicines and the other half, the controls, either the old medicine, or a placebo. Then, and only then, can one tell if the medicine actually improves the condition over doing nothing (the placebo), or is making matters worse.
In contrast, today’s economic advisors to the President, like Roosevelt, propose to apply their economic medicine to the entire economy. This is astrology, not science. The professors of economics have no true, experimentally confirmed knowledge of macroeconomics.
The widely touted macroeconomic “experts” are no experts at all.
Is Macroeconomics a Science?
02/26/10 - WSJ.com by Russ Roberts, professor of economics at George Mason University
Fred: Why did the Great Depression last so long?
Economist: I just don't know, but I'm willing to guess.
[edited] Which theory is the "right" way to think about the boom and the bust? Or are they all wrong?
I once thought applying statistics to economic questions would settle these disputes, and the truth would out. Econometrics is used to measure the impact of one variable while holding other factors constant. I now believe that we don't have data on too many factors. There are too many connections between the variables which we don't understand and can't model or identify.
We should expect less of economists. Economics organizes thinking about the complexity of the world around us. That should be enough. We should admit publicly what we know, what we don't know, and what we may never know. That is the first step toward respectability.
The Economic Test
01/04/11 - Cafe Hayek by Russ Roberts
[edited]: Suppose the economy does well this year. Say growth is robust and unemployment falls. What would be the reason for the improvement? Can any model of the economy identify the cause? It could be:
- The natural rebound of an economy after a longer than expected downturn.
- The stimulus finally kicking in.
- The psychological or real impact of extending the Bush tax cuts.
- The psychological or real impact of the November election results.
- The steady hand of Obama at the tiller.
- All of the above.
Macroeconomics is not a science and is not even scientific, because the question I pose above is not answerable.
If the economy improves, there will be much talk about the reason. Data and evidence will be trotted out in support of the speaker’s viewpoint. But that is not science. We don’t have a way of distinguishing between those different theories or of measuring their independent contributions.