Economists: the King’s alchemists?

Delong:

One of the embarrassing dirty little secrets of economics is that there is no such thing as economic theory properly so-called. There is simply no set of foundational bedrock principles on which one can base calculations that illuminate situations in the real world. Biologists know that every cell runs off instructions for protein synthesis encoded in its DNA. Chemists start with what the Heisenberg and Pauli principles plus the three-dimensionality of space tell us about stable electron configurations. Physicists start with the four fundamental forces of nature. Economists have none of that. The “economic principles” underpinning their theories are a fraud–not bedrock truths but mere knobs twiddled and tunes so that th right conclusions come out of the analysis.

What are the “right” conclusions? It depends on what type of economist you are, for [there] are two types. One type chooses, for non-economic and non-scientific reasons, a political stance and a political set of allies, and twiddles and tunes their assumptions until they come out with conclusions that please their allies and their stance. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones and the skeleton that emerge will teach lessons and suggest principles that will be useful to voters, bureaucrats, and politicians as they try to guide our civilization as it slouches toward utopia.

There’s a third type of economist that cooks a pot of history to discover interesting patterns for the sake of discovering interesting patterns. Ironically, given the existence of the first type of economist, you should only listen to the third type for policy advice.

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