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Economics(1) has many attributes of a religion: Its high priests argue about arcane minutia, offer prophecies which don't come to pass, and taking them seriously requires a leap of faith.

Economics(1) has many attributes of a religion: Its high priests argue about arcane minutia, offer prophecies which don't come to pass, and taking them seriously requires a leap of faith.

Any serious politician requires an economic shaman -- preferably one with an exalted academic position and a talent for soundbites. These high priests speak with great certainty and self-confidence, despite having much to be modest about.

As a former policymaker and consumer of economic analysis, I suggest the priesthood of tax, regulatory and fiscal policy would benefit from: Replication studies (hint -- what real scientists do); Indices/tracking metrics/awards to measure economic forecaster accuracy; The medical profession's principle of "first, do no harm"; and Oversight of conflicts of interest.

I'm not alone in my concerns about economics. For example, Nassim Nicholas Taleb commented:

You can disguise charlatanism under the weight of equations, and nobody can catch you since there is no such thing as a controlled experiment.
And Nate Silver, in The Signal and the Noise, reviewed the accuracy of economic forecasts utilizing data from the Survey of Professional Forecasters. After noting how bad the forecasts have been, he concluded:

There is almost no chance that the economists have simply been unlucky; they fundamentally overstate the reliability of their predictions.

In theory, economists are rewarded for seeking the truth. In reality, many are rewarded for outlandish soundbites for "talking head" shows and supporting whichever special interest group pays them.

Our mass media (from Fox News to MSNBC) makes no attempt to track the accuracy of past forecasts of pontificating pundits. Instead, it often gives the most air time to the shrillest, least accurate and most doctrinaire -- thereby promoting unreliable spinmeisters into the lucrative realm of the pundocracy (as documented by Philip Tetlock).

To address these concerns, I suggest economists:

1. Commit to replication studies and multiple modeling/data sources before making policy recommendations. The recent fracas over the work of Professors Carmen Reinhart and Kenneth Rogoff is one highly-publicized example of this issue. In 2010, they published research widely interpreted and cited as demonstrating that once government debt exceeds 90 percent of gross domestic product, economic growth would likely be sharply reduced. Their research certainly played a major role in the austerity debates. In 2013, however, researchers at the University of Massachusetts attempted to replicate their work, revealing serious issues with the original 2010 paper.

My point isn't to re-debate the austerity controversy, but rather to highlight that -- under no circumstances should major policy debates rely on unreplicated studies, using single data sets, done from the viewpoint of a single model (a point also made by Harvard professor and former Treasury Secretary Larry Summers). Practitioners and academic economists should both insist on higher standards.

2. Create indices/tracking metrics/awards to measure forecaster accuracy, with incentives for accuracy and disincentives for inaccuracy . Economists should be modest about the predictive power of their models, because they have much to be modest about. Publicly accessible tracking of such forecasts would encourage modesty. This sort of tracking isn't easy. But a profession claiming to understand the global economic system should be able to develop metrics to better assess its own accuracy.

3. "First, do no harm". The shamans of economics recommend bold policy initiatives, predicting (like modern Savonarolas) that if true believers do as they are bid -- economic heaven will descend upon us (followers of the church of the Holy Tax Cut are particularly prone to this mania). Like religious leaders from time immemorial, priests of the Holy Tax Cut (or whatever nostrum is popular that week) never discuss what could go wrong. Arguably, the 2008 financial crisis was partially the result of a religious-like faith in the power of deregulation and tax cuts, and a complete lack of concern about worst case scenarios. Economists should much more aggressively "red team" and pre-mortem proposed policies.

4. Acknowledge, and manage with oversight, conflicts of interest. Like Renaissance-era cardinals, the princes of economics preach one set of rules for the laity, but apply a different set to themselves. One of the deepest held beliefs of economists is the power of financial incentives to influence behavior. Yet, according to the shamans of economics, only one group of individuals is immune to the influence of money -- economists. Doctors, lawyers, bus drivers, and everyone else responds to financial incentives. But, miraculously -- economists are presumed to be immune to the almighty dollar's siren song. It's disingenuous for prominent economists to receive millions in fees for consulting and speeches, yet claim this doesn't influence economists' priorities, policy recommendations and research agendas. Even when these fees don't buy policy recommendations, they create the appearance of inappropriate influence.

Perhaps instead of aspiring to be a national priesthood of public policy, economists should focus on the more limited goal suggested by John Maynard Keynes.

If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.
(1) Economics is generally split between Macroeconomics (which concerns large-scale or general economic factors) and Microeconomics (which analyzes the behavior of individual consumers and firms). For ease of exposition, I've used the terms economics, economists, etc. -- but this commentary is primarily about the challenges facing Macroeconomics.

Steven Strauss is an adjunct lecturer in public policy at Harvard's Kennedy School of Government. Immediately prior to Harvard, he was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation. Steven was one of the NYC leads for Applied Sciences NYC (Mayor Bloomberg's plan to build several new engineering and innovation centers in NYC), NYC BigApps and many other initiatives to foster job growth, innovation and entrepreneurship. In 2010, Steven was selected as a member of the Silicon Alley 100 in NYC. He has a Ph.D. in Management from Yale University, and over 20 years' private sector work experience. Geographically, Steven has worked in the U.S., Asia, Europe and the Middle East. You can follow him on Twitter at: @Steven_Strauss

Follow Steven Strauss on Twitter:

This is cross posted from my blog, and originally published on December 8th, 2013 as Is Economics a Religion?

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Comment Preferences

  •  Obviously it is (0+ / 0-)

    for some.  The ONLY religion for a few.

    I'm part of the "bedwetting bunch of website Democrat base people (DKos)." - Rush Limbaugh, 10/16/2012 Torture is Wrong! We live near W so you don't have to. Send love.

    by tom 47 on Wed Dec 18, 2013 at 07:28:41 AM PST

  •  Closer to a Carnival Scam (1+ / 0-)
    Recommended by:

    It's nothing but a collection of excuses for allowing the strong and the rich to have more and take more.

    --Although I must admit, that has also been the teaching of mainstream religion through the ages.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Wed Dec 18, 2013 at 07:39:15 AM PST

  •  In my 20 years (3+ / 0-)

    of studying and thinking about economics, I think what we hear  from "economists" is roughly 92% bullshit and 8% decent stuff.

    Religion? I dunno - it reminds me of the pseudosciences - phrenology, alchemy and such.  Give it another couple hundred years - maybe it will become a real science.

    Suggestion for Facebook: 50 free "starter friends" automatically as soon as you sign up.

    by dov12348 on Wed Dec 18, 2013 at 07:41:04 AM PST

    •  92% BS and 8% decent stuff (2+ / 0-)
      Recommended by:
      dov12348, Nattiq

      pretty close to the numbers for organized religions.

      As my father used to say,"We have the best government money can buy."

      by BPARTR on Wed Dec 18, 2013 at 08:09:20 AM PST

      [ Parent ]

    •  I doubt econ. will ever be more than a social (0+ / 0-)

      science. The dependence of economic study on human behavior which is too easily influenced by, among other things, religion, popular belief, political/economic indoctrination/education is too broad a scope of study on a relatively small number of individuals.

      Economic studies will never even have the equivalent of Le Chatelier's principle, let alone a way of testing hypothesis on a macro scale. The best that can be hoped for is models examined against past data, each set out to predict future outcomes, until perhaps something like a predictive model can be developed. Kind of like figuring out how to predict the weather.

      "Are these morons getting dumber or just louder?" - Mayor Quimby

      by Banach MacAmbrais on Wed Dec 18, 2013 at 03:14:44 PM PST

      [ Parent ]

  •  Not if you expect a religion to be focused on (1+ / 0-)
    Recommended by:

    a deity.

    "In the name of the nation and of the dollar and of the rule of law shall you and your children be sacrificed."

    Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

    by hannah on Wed Dec 18, 2013 at 07:42:45 AM PST

    •  "The Market" is a de facto deity (3+ / 0-)
      Recommended by:
      psyched, Nattiq, denise b

      The unmoved mover, the shaper of the world, the source of all values and the sole arbiter of right and wrong, who rewards obedience and punishes disobedience, etc.

      Domestic politics is the continuation of civil war by other means.

      by Visceral on Wed Dec 18, 2013 at 11:40:57 AM PST

      [ Parent ]

      •  The market is made up of middlemen who take (0+ / 0-)

        a cut of all transactions. I don't know if it's because accounting set a binary pattern, but there is no room for middlemen (third party) in economic analysis.
        The middlemen are the thing left out. The thing left out is hardly noticed, a convenient situation.

        Think about it. The financiers are pure middlemen adding no value to goods or services. They just mediate, like highwaymen of old interrupting the flow of traffic.

        Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

        by hannah on Wed Dec 18, 2013 at 12:21:37 PM PST

        [ Parent ]

  •  Economics Is Based Upon A Belief System (1+ / 0-)
    Recommended by:

    As is politics, as is religion. There is almost nothing about ones economics beliefs that can be proven in the real world.

    robert drake on free trade

    I hate it when people have opinions about things (3+ / 0-)

    they know little about, and with all due respect, your grasp of both the theory and the practice of "free trade" is sorely lacking. Let's begin with the theory you allude to. It's called "comparative advantage" and it was formulated by the British economist David Ricardo. Your summary is adequate. Unfortunately, Ricardo's model was, like most tenets of neoclassical economics, a simplistic, idealized abstraction that only works even in its blackboard form if you make a series of assumptions that are not evident in a real economy. Ricardo's model assumed equilibrium, (which is an economic fantasy), full employment, parity in economic outputs between countries, perfect competition, perfect mobility of factors of production within a country, and most ridiculous of all--no mobility of factors of production between countries, which is what agreements like NAFTA are designed to promote!

    While economics has scientific, or at least pseudo-scientific pretenses, comparative advantage hasn't done very well when tested in the real world. ?The most famous example is that of Wassily Leontiof, the Nobel-winning economist who proved in the fifties that Ricardo's theory, which makes a series of predictions, doesn't survive empirical scrutiny. The U.S. exports more labor-intensive goods then capital intensive goods, which as Leontief demonstrated, is the exact opposite of what Ricardo predicted. Unable to account for this empirical failing, neoclassical economists just invented an appendage to the theory called the Leontief Paradox. There have been attempts to explain it since then, but they are usually unsuccessful without impugning Ricardo's original theories, the most convincing explaination is that Ricardo's models, assuming only one, or two inputs, are too simple to be of any value, which sort of puts the skewer to comparative advantage as a theoretical underpinning of agreements like NAFTA, which are in any case, anathema to Ricardo's own assumptions.

    Free trade agreements are not free trade agreements at all, they have little to say about the actual trade of goods. NAFTA runs to 1,700 pages, only about 350 pages of the document have anything at all to do with the actual trading of goods. Tariffs between Canada, Mexico and the U.S. were only 2% when NAFTA was enacted, so the ostensible rationale for NAFTA and other agreements, to take down "trade barriers" was a crock even then. The remaining 1,350 pages of the NAFTA document is about capital protection, and various restrictions on the regulation of labor, environment, worker safety, etc. If you like I'd be glad to get into specific claims made before Congress about what NAFTAs proponents said would happen if NAFTA was enacted, and what actually happened. If free trade is such a win-win for everyone, you'll have to explain the domestic dissatisfaction with free trade, as well as the ascendancy of left-wing governments in Latin America in response to "free trade."

    But enough with theory, how about your main points? Your first point is simply nonsensical, bordering on dishonest. It doesn't matter if the U.S. manufactures more goods in absolute terms then it ever has before! You'd expect that because GDP is bigger! It's like saying we have more people working today then ever before. Well no shit, we've got more working age people then ever before! Manufacturing jobs as a percentage of GDP are declining! Not just declining, but collapsing. 84% of American workers are now employed in service industries, which pay significantly less then manufacturing jobs, and do not offer the benefit packages.
    To say we have not lost our manufacturing base is inane. Look at the state of American manufacturers--Boeing, 35% of their newest aircraft is manufactured in Japan where Japanese industrial workers earn 30% more then American industrial workers, another 25% of the plane is manufactured in Europe. The U.S. auto industry is nearly bankrupt, it employs 1/3 the number of workers it did 30-years ago, automation and increased productivity you say? A little bit, but not much. Japan has more industrial robots then any other country on earth, they have the most efficient industrial sector on earth, and their automotive workforce is booming. How come?

    In 110 of the 113 manufacturing sectors the government keeps track of, there have been declines in domestic production relative to GDP--steel, pharmaceuticals, semiconductors, automotive components, textiles, finished autos, heavy machinery, aerospace, you name it, and it's bleeding jobs, but oddly enough, high value sectors in places like South Korea, Singapore, Japan, Scandanavia, Netherlands, places where the costs of doing business are greatest, have not seen collapses in their manufacturing sectors which would be the case if automation, increased efficiency, wage demands, etc, were the culprits for job loss in manufacturing.

    Your accusations that a trade war would ensue if we took steps to protect local markets is ridiculous. Since the United States imports far more then it exports, a trade war would do more harm to foreign producers then it would to domestic ones. Damage to domestic consumers wouldn't be any greater then if the Chinese actually floated their currency on the open market, which would automatically raise the price of Wal-Marts junk. The United States is consumer of first and last resort for foreign manufacturers, we on the other hand have a service based economy that could withstand a trade war rather nicely. Why do you think Japanese car manufacturers started building plants in the U.S.? They knew that eventually there would be calls to limit imports, and by having a domestic capacity to build Toyotas, Nissans and Subarus, they could get around them.
    by Robert Drake on Sun Apr 22, 2007 at 08:16:26 PM PDT

    I won't be coming home tonight, my generation will put it right - Genesis 9:3

    by superscalar on Wed Dec 18, 2013 at 07:46:48 AM PST

  •  Austerians ignoring past 5 years of evidence that (0+ / 0-)

    they are wrong on fundamental issues,

    shows that they are now, and perhaps have always been, taking a mainly faith-based approach to their assumptions, analysis and recommendations.

    Anti-austerian economists appear to have been more more attentive to evidence, empiricism, admitting errors and learning from them.

  •  as practiced by pundits, not science (2+ / 0-)
    Recommended by:
    StevenStrauss, psyched

    we never hear of conservative or liberal physicists, where the adjective refers to the way they practice their trade. It is the media's job to call out the charlatans.   Good luck with that.

  •  nope (2+ / 0-)
    Recommended by:
    StevenStrauss, psyched

    Are some people, many even, worshiping the almighty dollar?


    Down here people believed Paul Ryan was an economist. Majoring in economics doesn't an economist make. Neither does printing a magazine. Most of what you see and hear regarding economics is actually just paid gas bags supporting their masters, market manipulators.

    Economists aren't speculators. It's obvious to me who is real and who is paid for.

    -You want to change the system, run for office.

    by Deep Texan on Wed Dec 18, 2013 at 08:39:24 AM PST

  •  is religion economic in the last instance (1+ / 0-)
    Recommended by:

    Warning - some snark may be above‽ (-9.50; -7.03)‽ eState4Column5©2013 "I’m not the strapping young Muslim socialist that I used to be" - Barack Obama 04/27/2013

    by annieli on Wed Dec 18, 2013 at 11:04:44 AM PST

  •  Forecasting (1+ / 0-)
    Recommended by:

    There is a more basic problem underlying the approach of economists than their inaccurate forecasts.

    The  problem could be stated as focusing on numbers instead of real people. Economists have reified their formulas and their spreadsheets, whereas they should begin with real citizens and ask whether they are being treated fairly and humanely and in accordance with the US Declaration of Independence

    We hold these truths to be self-evident, that all
    men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
    Looking at real people, they would see that we have severe and growing income inequality; we have poverty,
    homelessness, inadequate education opportunities, untreated illness, leading to depression, despair, crime, unfulfilled lives and early death.

    The entire profession of economics needs to be upended and a new start made: looking at pressing needs of the world and determining how money can be directed toward them rather than passively accepting the fairy-tale, pseudo-religious, selfish pronouncements of status-quo economists.

    I'm glad the diarist quotes Nassim Nicholas Taleb, who also said "Treasury bonds are safe; they are issued by the
    United States government, and governments can hardly go bankrupt since they can freely print their own currency to pay back their obligation."  ("Fooled by randomness: The hidden role of chance in life and in the markets.") My bold.

    Our government could fund (within reason) solutions to all these urgent problems if it wanted to. The control of money by the banksters in cahoots with consenting economists assures that the 1% will have the lion's share of doled-out money and the others can go fish. "The poor you always have with you. There is no cure for poverty."

    Okay, the bankster-economist-corporate complex cannot cure poverty, but it can create poverty. If it can create poverty, why can't it cure it? (I don't think it's necessary to elaborate on how the 1% creates poverty.)

    Recognizing, as Taleb apparently does, that our federal government can issue money without bankrupting itself, and recognizing that money is an abstract concept unlike gold or silver (and we are no longer on the gold standard), the
    most realistic trend I see in economics is Modern Money Theory (MMT). MMT attempts to describe the dynamics of
    money as they really happen rather than as most economists pretend they happen. Please see also my diary

    Also, another note on forecasting: Most forecasting seems to be on the stock markets, at base a selfish pursuit aimed
    at enhancing one's personal wealth.

    If I may introduce a parable: forecasting is like a man observing his brother's health:
    Forecaster man: My brother has just been diagnosed with cancer. I am making a forecast of his life expectancy.
    Each week I tweak my forecast. At this point I believe he has six months to live. We shall see what my charts predict
    next week. He cannot afford treatment, so that is one variable to enter into my predictive formulas.

    Non-forecaster man: My brother has just been diagnosed with cancer and cannot afford treatment. I am going to help
    him as much as possible, giving him money and searching for the best treatment options.

    For the first time in human history, we possess both the means for destroying all life on Earth or realizing a paradise on the planet--Michio Kaku.

    by psyched on Wed Dec 18, 2013 at 02:11:59 PM PST

  •  Yes. (1+ / 0-)
    Recommended by:

    And what is it going to take before we stop granting them priesthood status?

    I'd love to see our universities create Departments of Alternative Economics, and start training people to develop unorthodox ideas. Instead, every school seems to keep cranking out new graduates reciting the same old catechism, regardless of how flawed it is.

    Great diary.

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