Economics seems incapable of answering the great questions of our time. Are we heading for deflation or inflation? Jeremy Warner
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...
In a devastating recent analysis, the American economist Paul Romer asserted that macro-economics has been going backwards for more than three decades, with economic modelling succumbing to what he has called “mathiness”,
an obsession with mathematic laws and equations which bear very little relation to the real world, ignore the lessons of other disciplines and are frequently out of touch with the inherently unpredictable nature of human behaviour.
As Andy Haldane, chief economist at the Bank of England, pointed out in a recent lecture, economic models provided an exceptionally poor guide to economic dynamics at the time of the financial crisis.
Even after the crisis erupted, the profession seemed oblivious to its likely consequences. Virtually all the economic forecasts produced in the final quarter of 2007 – that’s after the collapse of Northern Rock - were not just mildly wrong about the coming year, but spectacularly so.
Jeremy Warner 4 January 2017
Economic theory discredited
The conceit of modern economics is that it sees itself as an evidence-based science...
In a devastating recent analysis, the American economist Paul Romer asserted that macro-economics has been going backwards for more than three decades, with economic modelling succumbing to what he has called “mathiness”,
an obsession with mathematic laws and equations which bear very little relation to the real world, ignore the lessons of other disciplines and are frequently out of touch with the inherently unpredictable nature of human behaviour.
As Andy Haldane, chief economist at the Bank of England, pointed out in a recent lecture, economic models provided an exceptionally poor guide to economic dynamics at the time of the financial crisis.
Even after the crisis erupted, the profession seemed oblivious to its likely consequences. Virtually all the economic forecasts produced in the final quarter of 2007 – that’s after the collapse of Northern Rock - were not just mildly wrong about the coming year, but spectacularly so.
Jeremy Warner 4 January 2017
Economic theory discredited
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