Jeremy Warner at The Telegraph reckons The economists have had another terrible year. It's time for a complete re-think
As a discipline, the dismal science has quite simply lost the plot. All over the shop, economics seems incapable of answering the great questions of our time. Are we heading for deflation or inflation? Are we locked in secular stagnation or have we finally put the financial crisis behind us?
The conceit of modern economics is that it sees itself as an evidence-based science, yet if it could ever be such a thing, it is today no nearer its goal than when Adam Smith penned the ‘Wealth of Nations,’ and in some respects, a good deal less so.
When he wrote his treatise, Adam Smith was not an economist at all, but a professor of moral philosophy, yet many economists have come to believe that they should be as divorced from moral judgement as scientists – that economics should be a technical discipline free of ethical concerns. In the battle between moralism and mechanism, mechanism won. Unlike science, however, it doesn’t appear to have delivered anything remotely useful.
Few of the profession’s more recent failings should have come as any great surprise, for they merely follow the monumental breakdown in economic analysis exposed by the financial crisis. The Queen’s faux naïve question of economists at the time – “how come nobody saw this coming” – has yet to be answered.
The risks of this serial inability to diagnose what’s happening in the economy lie not just in the social costs of extreme events, or in wrong-headed policy response to them. It has also made mainstream macro-economics the object of political derision, which is in turn undermining public trust in key aspects of institutional and policy orthodoxy, including central bank independence and inflation targeting, which by and large have served us well.
Already we see some of this backlash in Trumponomics… [whose] cranky alternatives threaten even worse outcomes than the faulty economics of the past…
[Pic and caption by The Telegraph. Hat tip Julian D.]