The Land of Make-Believe

I often tell my students that economics is a way of thinking.  In order to do well in my economics classes, they need to realize that when they enter the classroom they are entering “Econ World”.  Some of the material will not make sense if they think about it the same way they do in the “Real World”.  We need to remember this whenever we talk about modern economic theory.

As usual, I am right on point with this recommendation.  In this article on, a former central banker admits that modern macroeconomics is bullshit crap worthless:

White said:

The analytical underpinnings of what we [mainstream economists] do are actually pretty shaky. A reflection of that fact, is that virtually every aspect you can think of with respect to monetary policy, about best practice, has changed and changed repetitively over the course of the last 50 years. So, this stuff ain’t science.

“Think about what’s happened recently. One, its completely unprecedented. People are making it up as they go along. This is hardly science – building on the pillars of the past.

“Secondly, what they’ve been making up as they go along actually differs across central banks [The Bundesbank, for example, is fighting the threat of high inflation, whereas the Fed is more concerned about the prospect of deflation]. They can’t even agree amongst themselves about what’s the best way to do things.

I’m becoming more and more convinced that all of the models we use are basically useless.  (They are actually worse than useless — RJ)

“It’s surprising that we’ve had this huge crisis that the mainstream didn’t predict. It’s gone on for years, which the mainstream absolutely didn’t predict. I would have thought this was a basis for a fundamental rethink about what we used to think we believed. But that hasn’t happened.

The mainstream didn’t predict it, because they have financial incentives to not predict it.  If you say that the housing market is in a bubble, you won’t get any grant money to study the housing market.

Economics is not a science, it’s pseudo-mathematics.  And the whole field of economics has been corrupted into it’s current form by failed Mathematics and Physics PhD candidates who refuse to admit that human action is the basis of economics. Human action cannot be modeled by economists as it is dynamic and unpredictable, not static and unchanging as their models predict.


Categories: Economic Schizophrenia, Economics

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