Nobel Prizes are announced in the next week. This may be the year not to award the Sveriges Riksbank Prize in Economic Science in Memory of Alfred Nobel. Okay, there may be some deserving recipients. Maybe. However, the discipline and the profession are failing.
Macroeconomic models are founded on fallacious assumptions about “rational” behavior and thus their conclusions are unfounded. An individual is greedy but not rational in a predictable way. Few individuals act in a “self-interested” way which is adequately defined as gilded greed undergirded by thought, reflection and calculation.
The “quants” on Wall Street may be quaint. They are the economists who purported to be able to assess and manage and even eliminate risk using complex and inscrutable formulas. There is always risk; the only question is who assumes the risk and suffers the downside. Asserting and rewarding the proposition that “2 + 2 = 5” does not mean that “2 + 2 = 5.” The quants and their kin were engaged in fraud perpetrated with numbers and formulas rather than with letters and syntax. The Nobel Committee rewarded their efforts; the government rewarded their failures.
Someone interested in pursuing a Piled higher & Deeper (Ph.D.) in economics must buy into the established orthodoxy of a school and a school of thought. Someone matriculating at a university is endorsing a worldview that is not based on an accurate view of the world. The free-for-all culture in economics departments does not promote or provoke unrestrained free thought. Economics departments are profit maximizing; they will produce whatever is rewarded.
Or they should give it to someone who knows something about economics and has conveyed a few sound ideas.
Bumper sticker of the week:
If all economists were laid end to end, they would reach the wrong conclusions.
