The Economic Manhattan Project
May 01 2009, 02:23 EDT [updated May 01 2009, 02:49 EDT]
In a well meaning lecture forwarded to me and given by a Stanford guy it is suggested at great length that we should work to treat economics as a science. And then - get this - solve it! Because in 250 years of study no one has decided to sit down and work this stuff out. But after an hour the speaker argues - what the hell - with a few million bucks and some smart minds we can solve this thing.

Economics is called "the dismal science" for a reason - that reason is that econ has everything to do with people and people are miserable. For my money the Austrians come closest to the truth; they even label econ as "praxeology" - literally the study of people.

The biggest names in economics talked about people first. Adam Smith didn't just write The Wealth of Nations, he also wrote The Theory of Moral Sentiments - he was thinking about people stuff all the time. Friedrich Hayek didn't just write The Road to Serfdom he also wrote theories of human cognition before it had it's own field. Economics stuff was people stuff to them.

Nobel laureates in economics always get their prizes for proving that the sciency thing is a people thing. Hayek got his, Krugman got his for demonstrating that the old theory of natural advantage by land was at least matched by local knowledge of how to use land (the French make good wine not just because of the hills, but because that they have good hills encourages the group of people to get smart about using them). Other recent prize winners also won for being novelly descriptive; the coolest thing public choice theory can do is to kinda explain how people have behaved instead of plotting how they will behave. It's people stuff all the way down.

I like economics and I am thrilled by game theory. Anyone that tells you the economy is a problem than can be solved if we just put the brightest minds in a room is a utopian. Politicians are like the consultants of the tech world - who would hire them if they didn't promise a silver bullet? And both politicians and consultants don't actually have to deliver, they just have to convince you that if they weren't there things would be oh-so-much worse. And when politicians go looking for an economist? they aren't going to hire the guy without a silver bullet theory.

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