"...as if introductory physics courses assumed a world without gravity, because everything becomes so much simpler that way."

Nice one!

It seems to me that as long as academics like Rodrik are taken into the fold of economists and he is not told to shut up, then the science is doing alright.  I would worry if there is no objective way to contest the theories and assumptions.  As long as you have access to STATA and can show us where we are wrong, let the discipline stay as it is.

QUOTE: Applied appropriately and with a healthy dose of common sense, economics would have ... pointed us in the right direction to fix what caused it.

Which is not the same as getting us out of it.  When you are in a hole, there are two good ideas; climb out of it, and fix what caused it by filling it in so you don't fall in again.

But you have to do them in the right order.

Much current economic punditry does, as you say, present easily digestible observations without clearly defining the context within which they are relevant. It can effectively misinform an audience that overestimates the scope of validity of those observations.  This problem is not helped by economists who are accustomed to having the context recognised by their peers, and so take it for granted, or by lesser economists who may not fully understand the developing arguments but have learned and recite the rules of thumb.

Analysis of what got us here can be irrelevant.  Nobody would dream of recommending to a critically injured pedestrian that what he needs to do to get well is to learn to cross the road at the crossing.  Nobody would dream of telling an ambulance driver to take it steady on the way to the emergency centre because it was speed that caused the accident.  Yet similarly irrelevant counsel is heard - of which the latest to cross my path was "You can't borrow your way out of debt" presented as an argument against investing in the means of getting out of debt. 

Sadly, much of the fashionable punditry is about how we got here.  As far as the victims are concerned this is an entertaining placebo - at best providing them with a misleading feeling of comfort that somebody knows what to do about it.  Some of it is developed into how we avoid getting here again - fiscal probity, taxing the casino - but precious little is what we are going to do to get out of it.  So not only does it come with only the thinnest veneer of intellectual respectability, it comes with no useful plan.  The best anybody seems able to do with it is to plan to come up with a plan...

Alpert, Hockett and Roubini have shown "The Way Forward" for the USA.  Where has this disappeared to?  Where is the popular version of it?  Where are the parallel versions for Europe or the UK?  Are we lost between the populist press that relishes every twist and turn of the crisis so much that it does not want it to end and the politicians hooked up with advisors who are busy maximising their particular advantage by feeding and exercising the cow they are milking? 

We need Academia to be the fifth estate - to present honestly and completely, in terms understood by legislators, regulators, arbitrators and publicists, the options facing us.  When asked, they must similarly explain their reasoning, the probabilities as far as they are knowable, and the extent of the unknowable risks.  This must be presented in a palatable way so that the audience, in its turn, will be prepared to listen.   Most of what we need to do this exists, and academics have access to it. 

So, economists, please step up to the plate.  Do better than this lone voice, which recommends:

Greece - sell your climate to the North Europeans by developing your leisure business.  Earn their support rather than begging for it.

Europe - buy your own bonds - at least that way the 7% stays in the family, and does not impoverish the EZ if you do save the Euro.

UK - invest in your coastline and reliable 365-24-7 tidal power generation to reduce your import bill.

USA - Read Alpert, Hockett and Roubini and DO IT!

All - plant trees to store the reliable solar energy you get even on cloudy days, invest in water treatment so that we borrow it rather than use it, and plan for the leisure that comes from increasing efficiency instead of having it hit you as unemployment..

In any situation, it depends on who you are talking to about economics. If it is a fellow economist, you can discuss the inner workings of models and theories, if it is someone who is not part of the economics dicipline, then you should stay on the surface of theories and models so that person can easily understand what it is your trying to say. Any good economist knows this.

I would say that economics is dangerous for the general public, just look at how politicians and people of power abuse the theories and models that economists have worked very hard to establish. I believe that is the root of the cause for the financial crisis.

If we could unify or consolidate economic theory to a point where professionals within the discipline agree, we could start to do away with economics that lead to bad policy.

Is this an admission of the ultimate irrelevance of academic economics? Not even political science is so larded with ideological bias. Kudos to the students for walking out on Mankiw.

To JakeLopata

Quote: "stay on the surface of theories and models so that person can easily understand what it is your trying to say"

Jake - I think you have to do more than that because unless the reason why you say it is also understood, there is the danger of successive versions of it bending to suit some outside agenda. 

But even though I believe an understandable explanation must be available, it can be an optional extra for an audience predisposed to accept the conclusions where there are no counter-arguments.

It would, as you imply, be most herlpful if economists could agree in the way that scientists can agree on the outcome of classical experiments.  But like meteorolgy, economics is at the mercy of more variables than can be quantified in time to produce a useful prediction.  It will always have an element of unpredictability.  Different forecasters with different experiences will see different patterns in the data, and will have different views on what should be done.  So we keep returning to good old macro for those elements which truly are the sums of their parts.  But macro can obscure the cause, effect, and common cause issues of dependent and independent variables - so even in this safe and stable part of the subject, careless economists can disagree, and sadly, not always nicely.

And nothing devalues the good work many economists do than the impression that they cannot even agree amongst themselves.

Which is why I believe it is not sufficient for your audience to understand what you are saying.  They also need to know why you are right.

Mainstream economics is a sham.....a fabrication, as it fails to take into account the other factors in a society such as the political and societal dimensions that determine how 'value' is created and distributed (extracted/stolen is more apt) and consequently cannot adequately explain how asset bubbles emerge and the enduring and negative impact they have.

Milton Friedman created an economic dogma based on a concept called 'instrumentalism' and got a Nobel Prize. In effect he made up his own philosophy to fit the 'facts' and the 'philosophy' of Monetarism was then used to underpin the wave of privatisation, IMF and World Bank stealing of the 'commons'. Mainstream philosophers have had fun picking instrumentalism apart.

Also economics drops into the absurd by applying simplistic 'rationalist' notions to what are very complex systems and then hiding this simplicity with a veneer of complex mathematical models. This type of intellectual vacuum thinking leads to the odd notion that public debt is irrational and bad and all private debt is perfectly rational. Modern economics lacks an epistemological base.

Of course, the open minded amongst us are now realising that individuals do not make rational decisions based on a total understanding of a whole economy and collectively we all make bad decisions as we are witnessing. Furthermore, a lack of public investment has denuded the US, Australia, etc, of good public infrastructure and privatisation has eliminated 'public goods' and the 'commons' (we now pay through the nose for things we have already paid for and should share as a community). If you analyse the Australian 'hero' treasurers of the last decade you can see the con in terms of the hidden and massive build up of private debt (160% of GDP) which is set against a backdrop of declining or limited public infrastructure. Modern economic 'punditry' is meaningless waffle and merely pushes vested interests when done in this context - a 'economics' pundit from a bank is merely a messenger of the vested interest he or she represents.

It is only recently that newer thinking is starting to look at complex systems theory and how we all collectively make decisions and the potential outcomes of those decisions. It is also pointless trying to correct the current systemic problems we face from within the current paradigm as neither the right (austerity be damned) or left (Keynesian debt cycle to reflate) has an answer. The real calamity we are facing is perhaps revealed more clearly through the work of M.K. Hubbert and his paper - 'Exponential Growth as a Transient Phenomenon in Human History' is illustrative.

The true cost of debt (skimming of value, market manipulation, irrelevant financial products, overexploitation of scarce resources, distorted reward outcomes, etc.) is not visible as the means by which surplus value is spirited away from us all. Economists like Prof. Keen in Australia are opening a door to in this illusion through his rigorous empirical analysis. The amusing thing is that vacuous and self aggrandising politicians base 'their' economic success on something called 'GDP' and even the individual that invented the concept in the US in the 30's warned against it being used as a measure of a society's well being.

As Harvard is so heavily endowed by so many bastards benefitting from capitalism's apologists, Mankiw will almost certainly never have to walk out himself. (Is there even a union representing faculty at Harvard?) But as "necessary austerity measures" further strip funding away from state schools, one wonders whether the mainstream bourgeois economists there will ever join the picket lines.

On the other hand, as corporations sit on $3 trillion dollars of value stolen from workers, it is quite possible that the apologists will have convinced everyone that the coming "lost decade" is a necessary feature of "deleveraging."

Or, finally, maybe Corzine will miraculously discover the missing billions once he has been given immunity from prosecution and create a newly endowed chair in economics--"the Jon Corzine Chair for Crisis Capitalism" and all the unemplyed ecoomics professors frm state schools will await the word fro on high as to why they are looking for lower level service jobs.

Mierda!

I received an undergraduate education in Economics, and while I would say the obvious bias of an inherently free-trade-promoting field was certainly pervasive, I strongly disagree with the author's assessment. 

First, the primary principle I learned regarding economics is that it is not a field of good or bad. It is a field that studies THE MOST EFFICIENT movement and utilization of resources. That is all. It is up to government policy to apply rules and regulations to maximize the wellbeing of its citizens. We cetainly learned that there are many complexities to this, many complexities to government impact on a free market (dead-weight loss, moral hazard, tragedy of commons, etc.) in short all the subtle elments that the author claims aren't imparted. 

I find it comical that at Harvard the OWS takes its form of a petulant "walking out" of a class that any true OWS protester most certainly should take. But it is emblamatic of OWS as a movement to be unable to tolerate looking at opposing views. This is what markrs them as a extremists (much like the tea party, etc.) and makes it unlikely they will have lasting impact. You must undersantd the ideology that you are fighting to have true success. Childlike tantrums and dramatic gestures do not lead to successfull outcomes in and of themselves.

I would hope every OWS protester studies economics as this would certainly help them better understand the forces at play that have led to our current situation.

Actually, introductory physics courses often assume a world without the effects of relativity and quantum mechanics. The main difference is that politicians, journalists and activists who only took Economics 101 need to have an opinion on economics, whereas - as a general rule - anyone without graduate level education in physics would steer clear of commenting on how to account for relativity effects when calculating the trajectory of a space ship going to Mars.

handro--

you admitted that there was little questioning of the capitlaist orthodoxy in your economics education. so how is it that OWS has somehow not "listened to the other side." we are drenched in paeans to capitalism from birth. aren't they walking out precisely because, even in a university course, the hymnbook has only one song? i would say it is precisely becaue they would like to hear alternative economic theories presented that they walked out. it's not ows that's extremist; it's economics professors who, even in the midst of a severe crisis that is driving millions into poverty, cannot spend time considering rival economic theories.

aavaenboxtel is correct: policymakers need to have an opinion about economics. since schools like harvard are primarily responsible for reproducing Amerikkka's class structure they produce many policymakers. well, i wonder what sort of opinions about econmics they will be exposed to at hu? if the students' response to mankiw's class is any indication or if the academic profiles of economics faculties at universities are any indication, i think we can conclude that economics is devoutly committed to offerig policy makers opinions that uphold the status quo.

Introductory physics courses may not assume a world without gravity but they do assume a world without friction, which is perhaps as big an assumption as can be. Moreover, given the limited time Professors have to pass along a message to economics student and given the human mind's ingrained biases preventing a good understanding of economics, it is understandable that they would have to simplify and package a few key foundational ideas of economics. However a lack of nuance this may entail, it is preferable to no knowledge of economics at all. If students are interested, let them follow post-graduate advanced economics classes, and let them then learn that the world is more complicated than they thought.

Introductory physics courses may not assume a world without gravity but they do assume a world without friction, which is perhaps as big an assumption as can be. Moreover, given the limited time Professors have to pass along a message to economics student and given the human mind's ingrained biases preventing a good understanding of economics, it is understandable that they would have to simplify and package a few key foundational ideas of economics. However a lack of nuance this may entail, it is preferable to no knowledge of economics at all. If students are interested, let them follow post-graduate advanced economics classes, and let them then learn that the world is more complicated than they thought.

How could anyone not recognize the delusional nature of mainstream financial economics with its efficient market theories? Or indeed, of the two "competing" Keynesian and monetarist schools? The number of orthodox (ie non-Marxist) economists who predicted a perfectly predictable crisis can probably be counted on one hand; the number of corrupt yes-men is limitless, see the movie Inside Job for a few choice examples. Now we face a fresh collapse in Europe and the economics profession has nothing to say about changing the system. I encourage everyone to walk out of classes where all you learn is how to obey your "superiors" while averting your eyes from the reality, which is extreme class polarization, growing impoverishment and the ecological disaster that has resulted from the underlying doctrine of growth at all costs.

For a precise critique you can read while being locked out of the classroom by students with greater intelligence, check out Philip Mirowski's latest:

http://www.nakedcapitalism.com/2011/12/philip-mirowski-the-seekers-or-how-mainstream-economists-have-defended-their-discipline-since-2008

In talking about economics, why does noone ever talk about power and money ?

Without being personal, but as an example, makiw has a pretty good gig: he sells his textbook for an astonishing sum to a captive audience; gets a great salary from Harvard, gets to lord it over students and those dependent on letters of recomendation (and we should all know that power is a good thing for job satisfaction) he has chances to go to washington and be a bigshot...its a great world

and a lot of math is like a union card or a mafia: you reduce competiton (keeping salarys high) and keep your work from being scrutinized (I mean i sure as heck don't understand the math...)

there is also this wierd datalessness to intro econ; for instance, we see "demand curves" that are totally generic - we never see an actual demand curve, for a real product, with *units* on the axis; this sort of datalessness strikes me as bad science (although you see rxn co ordinate plots in chemistry, but they are rare, and stand out as unit less theory by contrast)

Mankiw should make way. Occupiers are right.

Economics is guilty of creating two big fallacies: "Free trade is good" and "The unrestrained free market is the most efficient."  These have both gone out the window along with "housing prices only go up."

An unconstrained free market's drawbacks include monopoly/oligopoly, suppression of workers rights and salaries, unrestrained offshoring of jobs, excessive bubbles, and imposition of externalities (e.g., pollution) on those not using the product or service, among others.

Free trade has resulted in offshoring of millions of jobs from developed countries to developing countries.  The U.S. $650 goods trade deficit at $50k per job represents about 13 million jobs or most of our unemployment problem.

We need to start taxing corporations that offshore jobs for the wage differential and bring those jobs home.  We have forgotten that economies are built on job at a time.  We created only 2 million net new jobs 2000-2010, versus 15-21 million jobs in each of the 3 preceding decades.

Globalization and free trade may be good for top executives who have more of the income, but not the rest of us.

assumption of scarcity of resoures is the original sin.

Prof. Rodrik himself is just as guilty of pre-concieved assumptions and distortions as many of his colleagues.  Just reading his article on "Milton Friedman's Magical Thinking" made his own "Magical Thinking" quite blatant.

I am a graduate-level trained economist (University of Chicago many years ago for full disclosure).  What has dismayed me about economists in general, though, is their excessive focus on 'models' and 'policy'.  The lack of humility is incredible.  The assumption that such a complex system as an economic one can be 'controlled' or 'steered' is delusional. 

The study of economics would benefit greatly from a resurgence in the study of history (and not just economic history) by economists, done in an investigative manner.  A few economists have understood this (e.g. Reinhart and Rogoff).  Elegant math does not dominate in this inquiry though numbers should appear more often than they do (which seems in turn to be a major problem for many historians).  Behavioral economics is a welcome contributative approach, but the basics really do lie in history itself.

Well, free trade between country x and country y is not appropriate because y does not fully as trade freely as x. Therefore, x should exercise its sovereign right to tax appropriately y to make up the shortfall and protect its social cohesion, just as y has the sovereign right to trade less freely, to protect its infant industries, move its population from abject poverty, and guide against social instability.

I wonder if they ever teach economics graduates humility. It seldom occurs in reality, that economics principles pan out exactly as expected, there are simply too many variables to control. I probably should have studied this.

@Pascal 08:04 29 Dec 11,

I promise, I did not read your comment before posting mine, but as you can see, I do agree.

Re: RE3-Economy for a Small Planet

Any planet is a small planet if anything on that planet has an exponential rate of growth.

RE3 (ree 3) is a description of a non-growth society

R3 is: re-cycle, replace, and re-invent.  This may involve 40% or less of the working populace in these manufacturing industries.
E3 is: education, entertainment, and enformation.  This may involve 60% of the working populace in these service industries.

In part, this scenario is based on the first Harvard President’s address to the first graduating class.  He said, “It is not our intent to educate you, for that is your responsibility and a lifetime job,...”

I would hope that all citizens would have available to them a lifetime of free education.