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

[Jim Devine <jdevine03@xxxxxxxxx>]

Fred Moseley wrote:
> 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.

I beg to differ. No, don't get me wrong. I totally agree that
mainstream economic theories are BAD and that two major reasons for
this badness are the absence of profit and debt in their theories.

The problem is that we lefties, who do have profit and debt in our
theories, aren't good at predicting, either.  It's more than the
"Marxist economists have predicted 10 out of the last 3 recessions"
problem. In fact, most Marxists have stopped predicting crises all the
time, in response to this reputation. (Calling Dr. Henwood!)

The problem is summarized by something I read in the ECONOMIST a long
time ago: if you're going to predict a recession, you can predict
_that_ it's going to happen but you can't predict _when_. Fred and I
both knew that the housing/debt bubble of the 2000s was unsustainable
and would eventually pop. (In don't know about Fred, but I've been
saying it in public speaking since the 1990s.)[*] But neither of us
knew when the popping was going to happen.

This problem is why 99% of forecasting is nothing but extrapolation of
trends. This problem is the reason why most academic macroeconomists
don't even touch forecasting.

I think they are right. Economic forecasting is a mug's game or a
version of astrology. But I do think that Fred and I understand what's
going on right now -- and the _options_ for future paths of the
economy -- much better than than do the economists who leave out the
role of profit and debt.
-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.

[*] Yes, my predictions back in the 1990s were wrong. The 2001
recession was relatively mild, especially compared to the current Big
Meltdown. But I couldn't imagine that the Fed would make such a
gigantic effort to push the crisis I was predicting further into the
future (making it even worse).
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