MOVING TO FRONT FROM OCTOBER 1--INTERESTING DISCUSSION, MORE COMMENTS WELCOME
From an article today:
In effect, many of the key ideas underlying economic policy during the Great Moderation — the period of relatively steady growth and low inflation from the mid-1980s to 2007 that also seems to be a high-water mark for economists’ overconfidence — increasingly look to be at best incomplete, and at worst wrong.
It is vivid evidence that macroeconomics, despite the thousands of highly intelligent people over centuries who have tried to figure it out, remains, to an uncomfortable degree, a black box. The ways that millions of people bounce off one another — buying and selling, lending and borrowing, intersecting with governments and central banks and businesses and everything else around us — amount to a system so complex that no human fully comprehends it.
“Macroeconomics behaves like we’re doing physics after the quantum revolution, that we really understand at a fundamental level the forces around us,” said Adam Posen, president of the Peterson Institute for International Economics, in an interview. “We’re really at the level of Galileo and Copernicus,” just figuring out the basics of how the universe works.
“It requires more humility and acceptance that not everything fits into one model yet,” he said.
Or put less politely, as Mr. Rudd writes in the first sentence of his paper, “Mainstream economics is replete with ideas that ‘everyone knows’ to be true, but that are actually arrant nonsense.”
Thoughts from readers?
