ABSTRACT Economists not only failed to anticipate the financial crisis; they may have contributed to it—with risk and derivatives models that, through spurious precision and untested theoretical assumptions, encouraged policy makers and market participants to see more stability and risk sharing than was actually present. Moreover, once the crisis occurred, it was met with incomprehension by most economists because of models that, on the one hand, downplay the possibility that economic actors may exhibit highly interactive behavior; and, on the other, (...) assume that any homogeneity will involve economic actors sharing the economist’s own putatively correct model of the economy, so that error can stem only from an exogenous shock. The financial crisis presents both an ethical and an intellectual challenge to economics, and an opportunity to reform its study by grounding it more solidly in reality. (shrink)

The goal of this article is to provide a slightly different spin on economists' use of the positive-normative distinction by providing some context for its use. The major difference is the following: philosophers and philosophically oriented economists, such as Hilary Putnam and John Davis, see the positive-normative distinction in economics as following from the logical positivist position, and they interpret comments made by economists as reflecting scientific methodological positions that have long since been repudiated by philosophers of science. This article (...) argues that economists' use of the positive-normative distinction developed from the Mill–Keynes methodological tradition, which did not hold logical positivist views. Instead, it had pragmatic purposes and was designed to encourage economists to be more modest in their claims for the implications of economic theory. We conclude by arguing that economist's current use of the positive-normative distinction is problematic, as Davis suggests, but th.. (shrink)

This paper considers the debate between economists and philosophers about the role of values in economic analysis by examining the recent debate between Hilary Putnam and Sir Partha Dasgupta. It argues that although there has been a failure to communicate there is much more agreement than it seems. If Dasgupta's work is seen as part of the methodological tradition expounded by John Stuart Mill and John Neville Keynes, economists and philosophers will have a better basis for understanding each other. Unlike (...) the logical-positivist tradition, which treats facts and values as two mutually exclusive concepts, the Mill- Keynes tradition recognizes that facts and values are intertwined. Unlike the Smithian tradition, which blends the study of facts and normative rules, it divides economics into a science that studies "what is" and an art which considers "what ought to be done". (shrink)

In the wake of the financial crisis of 2008, many economists have blamed economics for having failed to warn us. Paul Krugman, for example, in a well-known New York Times Magazine article, suggests that Classical economists were blinded by the beauty of mathematics, and that Keynesian economics is the path of the future. This paper argues that the evolution of economic thinking is much more nuanced than Krugman portrays it, and that instead of embracing what has become known as Keynesian (...) economics, macroeconomists should rather re-embrace the broader Classical economic tradition, of which Keynes was an important part. (shrink)

In the wake of the financial crisis of 2008, many economists have blamed economics for having failed to warn us. Paul Krugman, for example, in a well-known New York Times Magazine article, suggests that Classical economists were blinded by the beauty of mathematics, and that Keynesian economics is the path of the future. This paper argues that the evolution of economic thinking is much more nuanced than Krugman portrays it, and that instead of embracing what has become known as Keynesian (...) economics, macroeconomists should rather re-embrace the broader Classical economic tradition, of which Keynes was an important part. (shrink)

(2013). The systemic failure of economic methodologists. Journal of Economic Methodology: Vol. 20, Methodology, Systemic Risk, and the Economics Profession, pp. 56-68. doi: 10.1080/1350178X.2013.774848.

Macroeconomics is evolving in an almost dialectic fashion. The latest evolution is the development of a new synthesis that combines insights of new classical, new Keynesian and real business cycle traditions into a dynamic, stochastic general equilibrium model that serves as a foundation for thinking about macro policy. That new synthesis has opened up the door to a new antithesis, which is being driven by advances in computing power and analytic techniques. This new synthesis is coalescing around developments in complexity (...) theory, automated general to specific econometric modeling, agent-based models, and non-linear and statistical dynamical models. This book thus provides the reader with an introduction to what might be called a Post Walrasian research program that is developing as the antithesis of the Walrasian DSGE synthesis. (shrink)

Bryan Caplan’s Myth of the Rational Voter overstates its case against democracy by not dealing with what might be called the historical/instrumentalist argument for democracy. The case for democracy that he attacks is primarily an academic exercise, which makes his argument against that case also an academic exercise. The supposed policy choice that Caplan presents between the market and democracy is not the correct choice, and the notion that economists should be given more voting weight in the democratic decision process (...) is normatively inappropriate. (shrink)

This book, first published in 1989, contains a spirited debate between eminent economists, journalists, and publishers about the spread of economic ideas. Using many of the same ideas as do the rhetorical and sociological philosophical schools, the contributors to this book discuss the spread of economic ideas in readily understandable English. The examination of the flow of ideas among economists and from economists to the public is followed by a discussion of the public policy use and abuse of these concepts. (...) A final section provides insights into the funding of ideas and the incentives to make economics more relevant. The dialogue among the book's contributors provides both the lay reader and the interested professional with fascinating insights into what happens behind the scenes in academia, publishing, and journalism. (shrink)