Should We Trust Economists? Are they charlatans, to be scorned as medieval cranks? – deliberates professor of finance Noah Smith

“To start, we need to talk briefly about what it is economic theorists do. Essentially, they make models, which are mathematical tools that are supposed to describe how the economy functions. The problem is that economists haven’t really built a model of the whole economy that works. A lot of smart people have spent a lot of time creating tools with names like “dynamic stochastic general equilibrium.” But as of this moment, those models can’t really forecast the economy like our meteorologists can forecast the weather. Furthermore, they contain a lot of obviously wrong assumptions… Economists include things like that to make the models easier to use, and they hope that those zany assumptions are actually decent approximations to the way the world really works. But even with these kludges in place, none of the existing models can do much to predict the economy… When an economist tells you something that is based on a theory or a model, you should be very, very skeptical. And the more complicated the theory or model is, the more you should be suspicious.” (To the full piece)

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