The bankruptcy of mainstream economics

Banks, home builders, and auto manufacturers are not the only ones going belly-up these days. If we may credit Louis Uchitelle's January 7 report in the New York Times, mainstream economists have, in effect, declared their intellectual bankruptcy. According to Uchitelle,

Frightened by the recession and the credit crisis that produced it, the nation's mainstream economists are embracing public spending to repair the damage – even those who have long resisted a significant government role in a market system. . . . Hundreds of economists who gathered here [in San Francisco] for the annualmeeting of the American Economic Association seemed to acknowledge that a
profound shift had occurred. At their last meeting, ideas about using public
spending as a way to get out of a recession or about government taking a role to
enhance a market system were relegated to progressives. The mainstream was
skeptical or downright hostile to such suggestions. This time, virtuallyeveryone
voiced their support, returning to a way of thinking that had goneout of fashion
in the 1970s.

At this point, one cannot help but recall Proverbs 26:11: "As a dog returneth to his vomit, so a fool returneth to his folly."

Modern economics suffers from a variety of weaknesses and defects, among which faddishness ranks high. The chronic pursuit of fads, however, springs from a more serious problem: the mainstream profession's faulty epistemological foundation – positivist presumptions that lead economists to believe that by aping nineteenth-century physicists they are acting as "scientists." Laboring under this grave misconception, they are destined to be blown erratically by the winds of changing events. So tenuous is the contemporary appreciation of economic verities that the slightest apparent breakdown of the economic order completely befuddles the economists and sends them running about wildly in search of a new model that will predict better than the old, now discredited one.

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