Why have economists failed society?
Now that is a question that should be asked. It should have been asked in 1907, 1987 and 2007. Economists are good at turning the question around and asking why have the economic models failed society. But that is a diversion because economists design the models that failed.
So we again have to ask why. Why is a system that is shown to be so completely flawed still in use, still generating academic papers, still getting Nobel prizes?
First is that most economists are horribly trained. Their education consists of years of outdated theory that has not withstood the test of time. Their education lacks a sound mathematical background. Their education stresses that 'good' models are simple. And most economists simplify, simplify and simplify their models until they are wrong.
Second is that many economists are ignorant of what is going on in the rest of the world. In particular the extent that other disciplines have moved modeling from the slide rule world of the 1950s to the supercomputer world of the new millenium. Weather prediction and climate modeling have improved because of increased model complexity. The semiconductor industry would be non-existent if it hadn't bitten the bullet and built models based on real device physics and modeled every single device. These models are based on thousands of rules and millions of specific events being models millions of times over.
Third is that economists just don't give a crap. No really. Nobody is holding their feet to the fire. When a company spends a hundred million dollars and up to build a new CPU for a computing device and it fails miserably because it was not models correctly. That company is rewarded by bankruptcy or the very least its CEO and engineer staff is rewarded by pink slips. When an economist gets a prediction wrong they shrug their shoulders and say look so did everyone else. Even worse when a gifted economists gets a prediction right due to good modeling based on large datasets they are rewarded with death threats.
And last is that a few economists do understand that they system is flawed and they know that a more complete model, not even a good model just a more complete model would demonstrate the flaws of the current economic system. That the current system based on interest is forever doomed to repetitive bubbles and crashes, recessions and depressions. And the economists that do understand this have nothing to gain by explaining that to the population at large and everything to lose though a few of them actually do.
So as you might by now have noticed I did not come to praise economists but to eviscerate them in particular the those that helped create a financial crisis then accept no blame and expect praise for working to save their old companies, bosses and paychecks.
To stop here would be a disservice, not to the field of economics or economists in general but to society. It should be clear to any observer that the current acceptance of economics professionals is unacceptable. Something needs to be done. So let me offer a few solutions.
First the vast majority of economists who appear in the media should be flat out ignored. The majority of them did not see any financial crisis in the making and many offered all too cheery predictions for the future. Often to enhance the bottom line of the bank or financial company they are working for. They are fools at best. Why would anyone want to continue to listen to people that are so wrong so often?
Second the current undergraduate curriculum in nearly all collages (in the US and probably many abroad) should be scraped. Many economists, most notably the ones who did see the current financial crisis coming have flatly stated that it teaches wrong theory and ignores the fact that the theories cannot even match historical data let alone have any reasonable chance at identifying future bubbles or financial instabilities. A good case in point is strong efficient market hypothesis.
Third economic models must work with real data. There is a strong pushback from economists when real data is suggested. I suspect that the real reason for all the stonewalling is that it is hard. Well yes it is and economists went into the field to make lots of money while doing as little work as possible. The new economists are looking to developing models similar to what is used in the physical sciences. This should be encouraged and even demanded by the public, not because it is "new and improved" but because it is old and tested. Large models that take into account large numbers of real world variables and constraints have built bridges, put men on the moon and brought them back, put robot vehicles on Mars, and bring your HD television, computers and cell phones. It is a known quantity. What is not known is how to move this complexity into the world of economics. It will take years to develop the tools and simulations but its never too late to start.
One reason I suspect that the level of modeling that can identify a financial bubble or institution that is ready to fail will be fought tooth and nail is because it requires a large amount of accurate information. And it will be easier to identify which information is missing and which information is corrupted. Large financial institutions, governments, and corporations have no interest in providing any information that proves they are cooking the books Enron style or are not worth the valuation their cheerleaders on the business channels are claiming they have.
To prevent the next crisis will take a grass roots effort by us the people who suffer most from economic calamity. We have to start demanding the usual suspects be rounded up and expelled from their jobs and demand that the social science of economics start acting more scientific like they have been claiming all along.