A new book by Joe Earle, Cahal Moran and Zach Ward-Perkins “The Econocracy : The Perils of Leaving Economics to the Experts” aims to highlight the failure of Economics as taught in Universities to keep pace with the reality of events.
Nothing revolutionary there you might think. Most of us probably think that education fails to keep up with trends and reacts rather than leads the debate. Economics though has particular problems. It failed spectacularly to foresee the 2008 crash. OK a small minority may have been predicting something but this can largely be put down to the randomness of some “experts” predicting a contrary view to the majority rather than a “true” reading of the “facts”.
The mathematisation of economics has been a disaster for the subject. The trend which took hold from the 1960’s onwards was an attempt by economists to assert that economics could be scientifically explained by a series of ever more complicated equations much as Physics could by and large theoretically explain the physical universe and real world experiments could be run as “proofs”.
Economics cannot and has not done this. At best economics can only act as a discussion of social phenomena at worse it is little better than alchemy or astrology. In the lead up to the crash there should have been some sort of consensus which should have given rise to a prediction that given the specific state of the economic fundamentals that a collapse was likely even if the timing of such a collapse could not be specified. Instead the experts put out a number of conflicting views some professing that the age of boom and bust had been banished forever and others which offered up a series of lukewarm warnings which hedged the probabilities.
The fact is economics has more in common with horse racing predictions than a serious science based theory. With horse racing there are many experts each with views as to which animal is going to win based on a number factors effecting the outcome. These factors can be the draw, the course, the going, the breeding line, the weight, the jockey, the trainer and others but in the end these experts predictions are no more likely to be accurate than a guess. Economics is sadly the same. The number of factors that might have an influence on any given economic occurrence are so numerous and their effect so difficult to interpret from any given starting point that to attempt to put into mathematical terms is quite simply impossible.
Perhaps universities should start running courses in the prediction of horse races rather than scientific attempts to understand economics. At least there are numerous repeatable “experiments” to test any theory. The danger is that the tests may just prove that the outcome is random.
Economics can never be more than a question of interpretation much like History or any other social science. The attempt by academics to turn economics into a mathematical discipline has meant the subject is a laughing stock.