Should economists pay more attention to what is around them?

New York Times article that economists don’t pay enough attention to what is around them to supplement the other data they have.

No forecasters have a consistently good track record, but the best supplement their statistics and computer models of growth with informal evidence. To get an accurate picture of the economy, the wise economist uses something like an artist’s pointillist technique — individually, all those tiny dots make little sense, but together they provide a decent portrait of the whole.

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One thought on “Should economists pay more attention to what is around them?

  1. They certainly shouldn’t ignore what is around them. Although it concerns physics rather than economics, the recent book The Hunt for Vulcan by Thomas Levenson shows just how far wrong we can go when we try to shove the square peg of what we observe into the round hole of our theory. To save Newton’s theory of gravity, physicists posited the existence of a planet between the Sun and Mercury and used extremely unreliable data to confirm their hypothesis. They preferred to create an entire planet rather than abandon a relatively (pardon the pun) useful theory. There is no reason to believe that some economists, especially partisans of a particular ideology, will act any differently than 19th Century physicists. If an economist sees that the world around her does not fit her neoclassical or (insert model here) theory, she should both question her observations and — at some point — the underlying theory itself. Most economists probably wouldn’t disagree with this point, but those layman who fancy themselves economists or proponents of a particular economic theory (we’re looking at you Ron Paul) might take heed.

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