July 30th, 2009

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The State of Economics

Those who are inexpert but interested in economics may want to take a read through this article in the Economist a few weeks ago. It's a good overview of the evolution of the field over the past few decades, exploring how macroeconomics in particular got to a point where almost everyone was agreeing on a consensus that utterly failed over this past year.

In particular, it's a fascinating exploration of how a field of thought can get dominated by convenience, and how brushing aside the inconvenient details can produce a structure that is tottering without anybody even realizing it. (That is, everyone knew that the standard model was insufficient, but disagreed about *how* it was insufficient, so the consensus and policymaking formed around that insufficient model.) And it gives some hints of the massive arguments occuring within the field right now, and some of the approaches that are being explored.

Really, it's neat stuff. The conclusion of the article is that these are hard times for economics, and respect for the field has plummeted, but is providing an invaluable opportunity to shake up the field and make it better...