Re: [Pen-l] How the Entire Economics Profession Failed

[Jim Devine <jdevine03@xxxxxxxxx>]

I forgot to add: the abstraction and unreality of much of economics
and econometrics makes a lot of economic research totally useless to
the wealthy vested interests which Madrick refers to. But I guess they
see that as the cost of having so much political support from
economists.

Jeff Madrick writes:
>>...  the exceptions [to the Econ. profession's smug consensus] were partial at best, and they [Shiller, Roubini, Baker, etc.] prove the rule. What most economists can't seem to acknowledge is that they have been overcome by free market ideology over the past thirty years. Such ideology is especially beneficial to wealthy vested interests. But economists are purportedly dedicated to objective empirical and statistical analysis. Ideology has little part in the work of these serious empiricists, but surely there was no buttering up of the rich and powerful that provide jobs and grants.<

I wrote:
> There is a significant percentage of economists who are not dedicated
> to "objective empirical and statistical analysis." Instead, they build
> abstract models of an idealized world, sandcastles in the air. More
> generally, instead of valuing knowledge or wisdom, the profession
> values and rewards mathematical technique, including those of
> statistics.
>
> And even those committed to "objective empirical and statistical
> analysis" most often use statistical models that assume merely
> Gaussian randomness, with no Keynesian uncertainty and no Mandelbrot,
> while believing that the future world is simply a continuation of the
> observed world of the past. The classic result of this kind of
> thinking is the case of LTCM,[*] which failed in 1998 (led by a raft
> of "smart" economists, including two who won "Nobels"); its disaster
> was repeated on the gargantuan scale 10 years later.
>
> [*] This was a modern version of the Holy Roman Empire, which was
> neither holy, nor Roman, nor an empire. It wasn't long-term in its
> perspective, it didn't deal with capital (long-term instruments), and
> didn't really manage as much as arbitrage. It also wasn't a hedge fund
> but rather a speculative fund that made its relatively high profits
> via leveraging.
> --
> Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
> way and let people talk.) -- Karl, paraphrasing Dante.
>



-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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