Friday, September 04, 2009

How Did Economists Get It So Wrong!

Krugman has written a clear explanation of the poverty of the economics profession that has trained almost 3 generations of economists since the last World War. Read here.

To someone who long ago left that profession behind to join the "real world" I can only lament the many wasted hours in graduate school struggling with arcane mathematics to understand better how the world worked.

It took courage to realize what I was being taught had little to with that world. It had to do with what Krugman called a "beautiful" idea: a perfectly logical, mathematically solid argument based on a number of assertions (humans were perfectly rational, information was perfectly distributed and known to all and so on).

I know plenty of famous professors who have penned hundreds of scholarly papers and have written books how to "develop" the Third World and yet cannot explain in simple language how to solve any real world problems without starting with "suppose we had this and assuming we had that, then we might be able to....". And even then what they end up saying is rather common sensical that did not at all follow from their many mathematical models.

It took a major economic crisis to explode the myths of Nobel prizes in economics as self-evident proof that they are 'sages" whose words could be taken as truth. So many of them are more like the proverbial emperors without clothes.

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