21 July 2010

What's wrong with economics?

A great speech by a Central Banker, Dr DeLisle Worrell, Governor of the Central Bank of Barbados that talks of the problems with economics today, about complexity economics, about looking at data and understanding its details rather than going in for models that hide such detail at the aggregate..and lots more.

Our theories can’t deal with reality, so we ignore the real world and spend our time “testing” our theories. If economics is to have any advice to offer which is useful for the management of real economies, we must speak to the reality in all its rich complexity, using all the data we have, all the methodologies we can devise, and all the sources of insight we can borrow. We must dig as deeply as we can, and become sleuths in pursuit of deeper understanding of our economies, even if our search leads us into paths that are dark and uncertain.


So when central bankers talk of going back to the drawing board and making theory more realistic, what does that mean for policy?

1 comment:

  1. Interesting excerpt indeed!

    Rarely do policy makers of such high stature admit the unrealistic nature of economic models. Most of them hide the ignorance with mathematical jargons, the best of the lot.

    Alex
    www.alexmthomas.com

    ReplyDelete