Friday, June 29, 2012

Why Zombie Ideas In Economics Never Die

The majority of macroeconomic theories and models have been badly damaged by recent economic events that are describe in this article.  Karl Popper's philosophy of science is based upon the idea that science consists of hypotheses that must be capable of falsification.  The endurance of zombie ideas in macroeconomics suggests that it is not a real science.  It clearly is not an experimental science, but historical data are available that should cause some economic ideas to die.  One of the problems is that most macroeconomic theories are also connected with political ideology.  Those that are connected to dominant political ideology are very resistant to falsification.  Moreover, economists that have built their reputations by developing theories and models that have not fared well in recent years, will not easily give them up just because they are not supported by historical evidence.

This article is about macroeconomics, but I believe that microeconomics has similar problems.  Therefore, I do not accept the view that macroeconomics must be based upon a foundation of microeconomics.  In my view some macroeconomic ideas just make more sense than other ideas.  There are lessons from history, and some theories about how economies work provide a better fit to historical data.

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