How Effective Is Economic Theory?
Discussions like this always seem a little strange. Sure, they&#x27;re important, but taken out of context they&#x27;re counterproductive and even harmful.<p>This is the problem: what is the alternative? The pet theory of a madman or sociopath?<p>The difficult truth is that everyone has an economic theory, whether they admit it or not. The question is, whose theories do we want to pay attention to? People who spend their lives arguing and thinking about it, and trying to find some evidence in support? But who might be a bit isolated from reality? People who work close to the phenomena being explained, but who don&#x27;t really rigorously explicate or defend any of their ideas, who haven&#x27;t had to put them on the table, so to speak? Or have massive, critical financial conflicts of interest?<p>There&#x27;s also the difficult problem of identifying when any theories have really been tested well. It&#x27;s not like we can just run randomized controlled designs on whole civilizations--at least, not most of the time for major policies.<p>I guess I really don&#x27;t see the alternative to encouraging the standard academic approach to economics, opening it up to public criticism and discussion, and maybe trying them out when it&#x27;s ethical and feasible.<p>Sure, lots about classical economic theory is really ridiculous, and the source of a lot of problems, but then you change those things and then move on. It&#x27;s not any different from physics theory or chemistry theory in that regard.