01/06/2014 | Chris Dillow – Blog: Stumbling and Mumbling
Whom should economists advise? I ask because of something Tim Harford says. He points to the abundant evidence that economists can´t foresee recessions, and invokes Keynes´ claim that economists should aspire to be like dentists:
To this, Unlearning Economics replies:
But why? Even if we knew for sure ways to keep the economy working well or to avoid recessions, there´s no reason to suppose governments would follow such advice. If it fell outside the narrow Overton window, or if it clashed with the interests of the 1%, they might well ignore it. Shiller´s proposals for macro markets to insure against big risks, and proposals to seriously fix the banking system, for example, have both been ignored. And economists´ good ideas for improving well-being – on policies from fiscal policy through immigration to housebuilding – are also routinely ignored.
Dentists do not confine themselves to advising governments on dental health policy – even though they´d probably have more influence than economists – but instead help individuals.
Economists should do likewise. Here, we have a lot to offer. We know enough to give reasonable advice that can at least prevent savers from making terrible errors; this paper by John Cochrane is compulsory reading.
For example, in the context of protecting ourselves from recessions, the following might help:
Dentistry is not much interested in politics – though dentists might reasonably lament inadequacies of dental health policy. I´m not sure economists should be much different, especially as giving policy advice causes people to under-estimate how useful economists can be.