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What's Wrong With Economics?

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Hubris might well head the list

Samuelson 1973: “The spectre of the repetition of the depression of the 1930s has been reduced to a negligible probability”.

Lucas 2003: “Macroeconomics in this original sense has succeeded: its central problem of depression has been solved, for all practical purposes”.

Both statements came shortly before the crises of the economic policy regimes they championed.

Samuelson thought: we would have no more depressions because governments had the tools to prevent them. These tools were called Keynesian economics.

Lucas 30 years later: we would have no more depressions because governments no longer used the Keynesian tools to prevent them.

Samuelson was hubristic about what governments could do; Lucas about what markets could do.

Who was right? Keynesian policy seemed to work for 25 years before succumbing to the crisis of stagflation. New classical economic policy - monetarism for short -seemed to work for about 15 years then fell victim to the Great Recession of 2008.

Hubris is the belief you are right, whatever the evidence. Economists are particularly prone to hubris because of the extremism of their method and the difficulty of applying to their theories Popper’s falsification principle.

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