In Time Magazine of January 30, Robert Johnson, executive director of the Institute for New Economic Thinking, called economics “a discipline in disrepute”. The financial crisis, he argues, was partially the result of “false visions of financial-market behaviour” pushed by economic models “constructed with building blocks that assume [unrealistic] stable and anchored expectations”. In short, the recession has broken the ship “from its stable mooring and unexpectedly slammed it into the rocks”.
Johnson proposes two remedies. Firstly, economists should be more humble about what they actually know. This is a fair point and probably true of most science. Secondly, Johnson criticizes the over-reliance on high-powered mathematical models. He argues, instead, for the reintroduction of context. “More research on economic history and evidence-based studies are needed to understand the economy and overcome the mechanistic bare-bones models”. Also, political economy: “We must acknowledge the intimate, inseparable relationship between politics and economics”.
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