Mark D. White
Recently, at The Weekly Standard, David M. Smick opined in a piece titled "The Death of Economics" on the decline of the field over the last 50 years, focusing on the last decade in particular and the increasing hubris among policy-oriented economists:
For decades, hubris has been the common currency of the economic policy world. It is killing the economics profession. In the 1960s and 1970s, for example, liberal economists believed they could eliminate all poverty. In the 1980s, conservatives thought tax policy could permanently raise the savings rate. It turns out other factors also influence a person’s decision to save.
In the first decade of this century, some central bank economists thought they could engineer monetary policy (with the help of global capital inflows) to eliminate the U.S. business cycle. What happened? The underpricing of financial risk helped lead to the global financial crisis.
After outlining the perilious state of the world economy (for those who haven't noticed), he asked some probing questions, such as how we can know when much debt is too much debt; how we can hope to understand entrepreneurship and its relation to regulation; and how we can stop making "the little guy in America the permanent fall guy." He concluded:
An economic policy rethink won’t be easy. But the first step is to deep-six the hubris. This year should mark the death of all government five-year economic forecasts.
I agree, as I've written before. As Smick stated in the beginning of his piece, a five-month forecast might be reasonably accurate, but a five-year forecast... fuggedaboutit.
But I found this statement from the middle of the piece more intriguing:
So at worst, the field of economics is dying. It is becoming less a science and more an art.
Let's not go that far... yet. Economics is dying only if one conceives of it as a science like physics in the first place. If one doesn't, however, one can see economics emerging from this internal crisis a more holistic, thoughtful—and yes, ethical—discipline.
- An economics which doesn't purport to understand and model the entire economy in precise quantitative terms (reflecting the hubris Smick decries), but one which uses sound qualitative judgment, based on experience, to move economic indicators by small increments in the desired direction, reflecting improvement in people's lives.
- An economics that doesn't claim to have "the solution" to a crisis, but has a good idea what to do to get there (in the sense described above).
- Finally, an economics that will assess its own progress and will admit when the first choice of action has failed and it needs to move to the second one.
If economics were reconceptualized along these lines, it would resemble neither science nor art, but rather practical philosophy—which, after all, is how it all started. While economists trained in the current quantitative, positivistic paradigm would resist it, I believe this approach to economics would recapture people's faith in its predictions and recommendations—in no small part based on its humility rather than hubris.