Feb 17, 2012

Mainstream amnesia

Econ4 team member Gerald Epstein writes for TripleCrisis on the “Memento syndrome” in orthodox macroeconomics:

Like the protagonist in the movie Memento, who has no memory but is trying to solve the mystery of his wife’s murder, and has to remind himself every minute about what happened the minute before by writing notes and even tattooing himself , mainstream macroeconomists’  write themselves articles and books after every crisis and they then promptly forget what they wrote (no tattoos as far as I know).

I believe there is a reason for this: the mainstream never changes its underlying theory which is based on the erroneous ideas that financial markets are, by and large, perfectly self-governing and efficient and that the market economy has strong self-equilibrating forces that always bring the economy back to full employment… Since they won’t change their basic framework, they have nowhere to put the new information they get after each crisis. So, they forget it just as soon as they can…  The tragedy is that it is these same economists who still control the elite economics departments, the main economics journals and hold the key policy making and research positions in our public institutions such as the Federal Reserve. Their stranglehold must be broken if we are going to break the Memento syndrome that is hindering sensible economics and economic policy.

Read his piece here.

1 Comment

  • I just read a very good article by Steve Levitt and John List at U Chicago, published in a major field journal, on measuring social mores of fairness using laboratory experiments — an empirical methodology that was seen as naive before Vernon Smith in the 1960’s.

    The idea that nothing has fundamentally changed in economics, or especially its politics (which were never particularly conservative in the first place, most economists having come to the discipline with a sociological concern for human welfare), is egregiously mistaken.

    But of course that’s the kind of evaluation we might expect from people who recommend traipsing around economics departments pulling high-school pranks instead of taking up a serious study of the discipline and adding to an already-evolving conversation.

    Anyone is right to claim that economics hasn’t changed its basic model of a utility function and budget constraint. But to claim such thing doesn’t exist amounts to claiming individual agency doesn’t exist period. And that would be a rather unfortunate theory to motivate and premise a revolution on.