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

[fmoseley@xxxxxxxxxxxxx]

Quoting 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.


Jim, I don't think we disagree.  I am not talking about precise
forecasts.  I like you am talking about the general conclusion, which I
have expressed in my writing and speaking for 20 years, that a major
crisis would eventually happen because continued expansion required
ever-increasing levels of debt, and such ever-increasing levels of debt
are not sustainable.

As you say, we cannot predict precisely when a crisis will happen, but
we can predict that the current trends are unsustainable and therefore
that a crisis will eventually happen.

But if one's theory does not include debt, then one misses entirely
this necessity of a future "over-indebtedness" crisis.

Fred



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