Re: [Pen-l] What good are economists?

[fmoseley@xxxxxxxxxxxxx]

Quoting Louis Proyect <lnp3@xxxxxxxxx>:

> http://www.businessweek.com/magazine/content/09_17/b4128026997269.htm
> What Good Are Economists Anyway?
> Why they failed to predict the global economic crisisâand why their
> help is still crucial to a recovery
> By Peter Coy
>
> Economists mostly failed to predict the worst economic crisis since
> the 1930s. Now they can't agree how to solve it. People are starting
> to wonder: What good are economists anyway? A commenter on a housing
> blog wrote recently that economists did a worse job of forecasting
> the housing market than either his father, who has no formal
> education, or his mother, who got up to second grade. "If you are an
> economist and did not see this coming, you should seriously
> reconsider the value of your education and maybe do something with a
> tangible value to society, like picking vegetables," he wrote on
> patrick.net.


The reason why mainstream macroeconomists failed to predict the current
economic crisis, and continue to fail to understand and explain it, is
that their THEORIES ARE BAD.  There are two main reasons for this
theoretical failure:  their theories DO NOT HAVE PROFIT as a variable,
and these theories DO NOT HAVE DEBT as a variable.  How can one hope to
understand capitalism, and especially capitalist crises, without taking
into consideration profit and debt?!  This theoretical inadequacy of
mainstream macro has become all the more clear to me as a result of
this crisis.

Business Week also argues that mainstream macro theories are
inadequate, but for a different reason:  because it fails to take into
account âthe human elementâ (human emotions).  A big new book by
Schiller and Akerloff is entitled âAnimal Spirits:  How Human
Psychology Drives the Economyâ.  No profit or debt in that theory
either.  Although human emotions no doubt play a role in booms and
busts, the fundamental  objective determinants of booms and busts (and
on which human emotions are based) are the rate of profit and the ratio
of debt to income.  Without these key determinants, mainstream macro
will continue to wander in the crisis-ridden wilderness.

If doctors knew as little about diseases as mainstream economists know
about crises and depressions, we would be in serious trouble.  It would
be like having a theory of diseases without taking germs into account.

Fred




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