Econo-post

There's been a lot of talk since Recession 2.0 started about the death of the dismal science (economics). The central tenet to the argument is that economists failed to predict or forestall such an event from happening.

I think that this can be debated, for there are a few economists who predicted the massive housing bubble. Because the majority are wrong does not make the science moot. If Copernicus could prove his fellow contemporaries wrong without discrediting cosmology, then so too can Roubini tack against prevailing economic winds without killing them. The hard truth is that the dismal science is also an inexact science. It is based upon extreme assumptions (rational expectations, perfect information, etc.) that do not exist on the ground, because the world is not a perfect place.

There are, however, few alternatives. The models which economists have created are largely academic, but are useful in themselves. They are simply as imperfect as the world around us.

Economists will never be able to perfectly predict human behavior or factor in every variable. For that you'd need a crystal ball, some tea leaves, and a little bit of magic. What you should get, though, is a new set of expectations for economics. Dismal, indeed.