Macroeconomics may be the only applied field within economics in which more training puts greater distance between the specialist and the real world, owing to its reliance on highly unrealistic models that sacrifice relevance to technical rigor. Sadly, in view of today’s needs, macroeconomists have made little progress on policy since John Maynard Keynes explained how economies could get stuck in unemployment because of deficient aggregate demand. Some, like Brad DeLong and Paul Krugman, would say that the field has actually regressed.
Economics is really a toolkit with multiple models — each a different, stylized representation of some aspect of reality. One’s skill as an economist depends on the ability to pick and choose the right model for the situation.
Economics’ richness has not been reflected in public debate because economists have taken far too much license. Instead of presenting menus of options and listing the relevant trade-offs — which is what economics is about — economists have too often conveyed their own social and political preferences. Instead of being analysts, they have been ideologues, favoring one set of social arrangements over others.
Furthermore, economists have been reluctant to share their intellectual doubts with the public, lest they “empower the barbarians.” No economist can be entirely sure that his preferred model is correct. But when he and others advocate it to the exclusion of alternatives, they end up communicating a vastly exaggerated degree of confidence about what course of action is required.
Paradoxically, then, the current disarray within the profession is perhaps a better reflection of the profession’s true value added than its previous misleading consensus. Economics can at best clarify the choices for policy makers, it cannot make those choices for them.
When economists disagree, the world gets exposed to legitimate differences of views on how the economy operates. It is when they agree too much that the public should beware.
Dani Rodrik is a professor of political economy at Harvard University’s John F. Kennedy School of Government and the first recipient of the Social Science Research Council’s Albert O. Hirschman Prize.
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