In Economics Do We Know What We're Doing? Nobel Prize winner grows disenchanted
Economics’ status as a “science” is questioned as commenters highlight its weak predictive power, heavy ideological baggage, and frequent use as a political or corporate tool rather than a neutral guide to policy. Referencing Nobel laureate Angus Deaton’s growing disenchantment, they debate the limits of core models like supply and demand, the gap between micro- and macro-level theory and reality, and how incentives, power, and media distort both what economists study and which conclusions are amplified. Some still see value in basic economic reasoning, but many argue the field needs far more humility, ethical reflection, and openness about uncertainty.
Interpretations of Deaton’s Reassessment
- Thread parses his remark about the Great Migration and immigration:
- Consensus: he is not endorsing racist hiring; he’s noting that tighter European immigration likely forced northern factories to hire Black workers, indirectly enabling the Great Migration.
- Used as an example of how immigration can have distributional downsides for specific domestic groups, which he previously underweighted.
Keynesian vs Austrian Economics
- Debate over whether “Keynesian knob‑twiddling” (monetary/fiscal management) is humane stabilization or just postpones a larger crisis.
- Disagreement on whether any society has truly implemented Austrian ideas (no central bank, minimal regulation).
- Critics liken “true Austrianism has never been tried” to defenses of communism; defenders say virtually all history shows heavy state intervention.
- Some argue pre‑Keynesian recessions were more frequent and brutal; others say downturns are needed to purge bad investments, but acknowledge workers bear most of the pain.
Economics, Power, and Political Use
- Strong theme: economics is heavily used as ideological cover by media, politicians, and think tanks, often to justify pre‑chosen policies (tax cuts, deregulation, austerity).
- Economists are compared to court priests who legitimize power; incentives and funding (e.g., from wealthy donors) bias which economists are elevated.
- Calls that economists should foreground ethics, power, and inequality rather than treating “efficiency” as the main objective.
Limits of Models, Data, and Predictability
- Many comments stress that macro models rest on unrealistic equilibrium and rationality assumptions; general‑equilibrium math is fragile, with conditions rarely met.
- Econometrics without explicit interventions is criticized (Milton Friedman’s “thermostat” example; Lucas critique); instrumental variables and policy experiments are seen as partial fixes.
- Disputes over whether GDP, inflation, and even supply/demand curves are meaningfully measurable; some see them as rough but useful, others as so malleable they’re “nonsense.”
- Energy, long lags, and complex human behavior are cited as underrepresented or hard to model.
Supply, Demand, Crises, and Price Controls
- Basic supply–demand curves are defended as a valuable conceptual tool, especially to argue against price caps that create shortages.
- Others counter with cases where rationing and controls are necessary (war, pandemics, critical goods), and argue that real‑world outcomes often diverge from textbook predictions.
Globalization, Inequality, and Justice
- Several quotes from the article are highlighted: economists’ neglect of power, equity, and slow‑acting mechanisms; over‑optimism about technology and globalization.
- One side now doubts that harming certain workers for global poverty reduction was justified; another argues competition from a rebuilt world economy was inevitable and globalization made most people richer, with protectionism seen as worse long‑run.
Status of Economics and Its Prizes
- Recurring skepticism that economics is a “science” in the same sense as physics or engineering; replication and forecasting failures are noted.
- The economics “Nobel” is repeatedly called out as a bank‑created prize, framed as a PR coup for finance rather than a true Nobel.