Consensual economics

Posted: 31 July 2014 in Uncategorized
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NYT-economists-and-recession-cartoon

Right now, mainstream economists are both congratulating themselves and bemoaning their fate.

Mainstream economists (such as Justin Wolfers and Paul Krugman) are congratulating themselves for having achieved a virtual consensus on the positive effects of fiscal stimulus. But they’re also complaining about the fact that the rest of the world (such as politicians, central bankers, and others) doesn’t seem to be listening to their expert advice.

Just two quick comments on this approach to consensual economics:

First, of course there’s a consensus among mainstream economics! That’s what their theories and models are supposed to do: produce and reproduce a consensus in terms of the basic analysis of macroeconomic events (although, of course, there can still be disagreements about particular aspects, such as the exact size of the fiscal multiplier and so on). And anyone who doesn’t use those models, and therefore reaches a different set of conclusions, is declared to be outside the mainstream, and therefore not worth reading or being listened to.

Second, how is it possible to declare—in the midst of the Second Great Depression—that mainstream economics has been an unqualified success? To arrive at such a conclusion would mean to overlook, at a minimum, the role that mainstream economics played in creating the conditions for the crash of 2007-08, in failing to include even the possibility of such a crash in their models, and in confining themselves to a package of monetary and fiscal policy measures—and not to even consider the possibility of larger, structural changes—as tens of millions of people lost their jobs, were stripped of their wealth, and were pushed further and further down the economic ladder.

Those engaged in consensual economics are, it seems, too busy congratulating themselves and bemoaning their fate to want to recognize the gorilla in the room.

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