Monday, December 12, 2011

Culture of Economics Today

This has been my experience as well:
Economists don’t have to be free-marketers. But that ends up being the canonical model, and then everything else ends up being a departure from the canonical model, which you’ve then got to explain why you’re departing from. It’s not because the canonical model is right, it’s because you ask most economists and they’ll say, “At least we understand how that economy works very, very well. So you want to tell me that we’re going to move away from this one and move to something else, that’s fine, but you have to explain why you’re putting in all of these imperfections.” So it’s not that you can’t write those things down, it’s just that there is less of a standard way of doing it. 
Economists essentially have a sophisticated lack of understanding of economics, especially macroeconomics. I know it sounds ridiculous. But the reason why I tell people they should study economics is not so they’ll know something at the end—because I don’t think we know much—but because we’re good at thinking. Economics teaches you to think things through. What you see a lot of times in economics is disdain for other's lack of thinking. You have to think about the ramifications of policies in the short run, the medium run, and the long run. Economists think they’re good at doing that, but they’re good at doing that in the sense that they can write down a model that will help them think about it—not in terms of empirically knowing what the answers are. And we have gotten so enamored of thinking things through that the fact that we don’t know anything needs to bother us more.

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