Economics Has a Surprising Mental Disorder [View all]
http://www.alternet.org/economy/economics-and-gender
The typical mainstream economist is about as good at making predictions as a monkey reading tea leaves. Exhibit A: The financial crisis, which only a few economists outside the mainstream saw coming, despite oceans of papers, prognostications and plumb academic assignments.
The question is, why?
Researcher Vinca Bigo decided to investigate, and found a surprising explanation: the profession of economics is suffering from a collective mental disorder, causing practitioners to project their pathologies onto the rest of us. Which is very costly for you and me.
Lets explore.
Pathological Math
In a fascinating paper, Bigo hones in on the fact that economists are in love with mathematical models, despite the glaring fact that they often dont work in their field. The problem starts when researchers base their models on arbitrary and often ridiculous assumptions about how people and institutions behave, which leads to conclusions that are airily detached from reality. The complexities of the real world then come along to blow up those fancy models, rendering them all but useless. Yet this never stops the mainstream economist, who just goes on to make more models.
Now, this wouldnt be so bad if these phantasms didnt lead to policies that affect your pocketbook. But they do. According to the predictions of mainstream (often called neoclassical) economists, the 2007-'08 financial crisis wasnt supposed to happen. I bet it felt pretty real to you, didnt it? When asked by Congress why he was unable to warn Americans among the coming sh*tstorm, Alan Greenspan offered an uncharacteristic admission: the model he had used to assess the economy for decades was not worth a hill of beans.