Monday, 21 April 2008

Which way is up?

One of the most prominent failures of the economics profession is its inability to explain why some countries get rich and some do not. Would this be equivalent to physicists not being able to explain gravity? Some seem to think so - Bob Davis of the Wall Street Journal seemed to suggest as much here (though not without reply).

To me it seems more a case of the economics professions own arrogance coming back to haunt them. So often in the past economists have seemed to suggest this was an easy question, and have fallen flat on their faces as a result. Suddenly the discipline that likes to think it can have something to say on pretty much anything, using (suspicious) models of human-behavior and some clever statistical tricks to make 'scientific' claims about all manner of things, has been exposed as all too often having been far more ideological than scientific. When you think you can do anything, you better not be building your house upon sand.

It is all too tempting then to paint economists as the dumber cousins of 'real scientists' like Physicists, but it seems to me a little unfair to compare economic growth to gravity. That being said, we might be a lot closer to actually understanding growth had it not been for the fact that the economics profession spent so long with blinkers on. Now at least it seems mainstream economists seem to be finally getting the message (thanks to the work of some among them like Dani Rodrik) that growth is a lot more complex, contingent, and context specific than they first thought.

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