Economists endowed their own cozy little Nobel "Memorial" Prize. Some good, broad thinkers have won it, and some rather narrow ones too. Watch carefully to see whether the optically, aurally, and orally challenged ones (blind, deaf, and dumb) succeed in taking over that part of the profession too.

For the record, this was written and posted by Bill, not Theda.

Ghilarducci doesn't give the full dirt on the Notre Dame situation, perhaps because she lived through it and doesn't want to confuse her accurate critique of economics with a false accusation that she's indulging in sour grapes. Here's a link to the Chronicle's recent story about this.

http://chronicle.com/article/Notre-Dame-to-Dissolve/48460/

Economists aren't the only people who have been seduced by computer models, and they won't be the last. The problem, as noneconomist Nobel Prize-winner Richard Feynman explained, is that [physicists] fall in love with their pristine, neat, tidy (and, one tends to forget, simplified) models, which are so much easier and pleasanter to work with than the real world. After a short time, discrepancies between the model and the world are seen, not as shortcomings of the model, but as shortcomings of reality.

Feynman, in my opinion, was absolutely right about this preference for neat computer models over the messy real world. He called it, quote, a disease.

The old definition still seems to hold: an economist is someone who can tell you why it happened.

If the models are bad, then change the models. It doesn't mean that government should prevent people from freely exchanging goods and services. Most "heterodox" economists are against the free market itself, not just the models.

Anyone who blindly believes predictions of mathematical models is guilty of trivializing reality. All models incorporate simplifying assumptions to make analysis tractable. Note that models for predicting election outcomes always include estimates of margins for error, something models lacking statistical estimates cannot provide. Models improve understanding, but as predictors are at best guides (look no further than the storm paths predicted by various hurricane models). The recent economic collapse was predictable, just not by the kind of modeling used by neoclassical economists, who would have benefitted from less hubris and more common sense.

I'm really glad that this was written & posted. "Dumbfounded" is right.

And btw, re: an above comment: "If the models are bad, then change the models. It doesn't mean that government should prevent people from freely exchanging goods and services. Most "heterodox" economists are against the free market itself, not just the models."

- Gross, innaccurate oversimplifications such as this are not in any way helpful.

If heterodox models make better predictions, then why doesn't she cite the accurate predictions made by those models?

The real problem is the overall acceptance by most everyone, including academia, of government involvement in the market (Fannie Mae and Freddie Mac, etc) and therefore the distortion of the pricing system by government. When the market is allowed to function, it does. The crash was caused by the government's implicit guarantee. This camel's nose under the tent is now allowing the government to own car companies, banks, etc. Prediting economic results should get much easier when the government owns or controls production and investment, because it will be the goverment that picks the winners. This is obvious to me and I am constantly amazed that such a basic concept, proved by the entire history of the world, except for the United States (until now), is ignored.

'Twere the biggest capitalists in the country (bankers, carmakers, and a couple of insurers) who begged (BEGGED!) and pleaded (PLEADED!) for government intervention in their allegedly free-market enterprise. The only reason there's a still a facsimile of a free market in those places is because the government listened to their paintive cries pulled the free market's willie out of the wringer. And not for the first time: The only reasons there were banks around in the fall of 2008 to beg and plead for government intervention is because three-quarters of a century previously, FDR extracted the banks' same body part from the squeezer by declaring bank holidays and taking other measures.

The free-market mathematical-model fans remind me, paradoxically, of the soldiers brainwashed by the Chinese communists in the original film version of "The Manchurian Candidate." Frank Sinatra's character starts to doubt the whole fake Medal-of-Honor-winning battle they supposedly fought because, after they were released back across the lines, they "remembered" the "battle" only as the lines and dots on the diagram their captors drew for them. Likewise, the free-market mathematical-model fans deal not with real, flesh-and-blood human beings, but with lines and dots on their wondrous computer diagrams. (And they same to care more about dots and lines than real, flesh-and-blood human beings who, for instance, can't get health insurance.)

Conservative macroeconomics has totally lost its way, and exists in a pretty deluded space. Here, among many samples, are quotes from Edward Prescott, winner of a recent Nobel Prize in Economics, and fierce critic of Keynesian work:

"The period of the '20s was one of healthy growth, until Hoover's anti-market, anti-globalization, anti-immigration, pro-cartelization policies were instituted, brought this expansion to an end, and created a great depression. Roosevelt's policies prolonged the Depression for over six additional years..."

and

"I don't know why Obama said all economists agree on [the need for a stimulus bill] They don't. If you go down to the third-tier schools, yes, but they're not the people advancing the science."

and my favorite..

"I love creating models and coming up with explicit structures I can play with..Economists create their own worlds. We're like little gods with our artificial economics, wanting to see what happens."

No doubt Notre Dame would fall all over itself to get this Nobel Prize winner. Then maybe they would think they weren't a "third-tier" school, and could instead happily deny history (the comments on the Depression), deny policy (plenty of economists, corporate and academic, supported the stimulus), and, of course, deny reality itself ("Economists create their own worlds." What arrogant and inaccurate blather.

There is a petition started by ND students and alumni to save and strengthen the heterodox department: http://www.ipetitions.com/petition/SaveEconomicsND/signatures.html

It is interesting that Teresa Ghilarducci, surely more open than most autistic economists writes that "Economists need to be broader, more self-critical, deeply knowledgeable about economic institutions". Note that she mention only "economic institutions" while in fact economists should know more about social institutions in general! Not just economic ones! So, a little more effort is needed to get out of the economic ghetto to better understand society... But that is a good beginning I guess...

Skeptic