LL11 Value (cont)

In this lecture, we discuss the experimental game that the class played, which has landlords and laborers and production choices. As the experiment showed, predictions of economic theory fail to hold. The lecture will discuss WHY they fail to hold, and how we can construct better theories.

Economists use only one criteria to judge theories -- if the theories have optimization and equilbrium then they are good theories -- and the more math they use, the better.

Science is based on checking whether predictions of theories match observations. If there is a mis-match, then theories are modified to create a better match.

Krugman: How Did Economists Get It So Wrong?

Lucas says the Obama administration’s stimulus plans are “schlock economics,” and his Chicago colleague John Cochrane says they’re based on discredited “fairy tales.” In response, Brad DeLong of the University of California, Berkeley, writes of the “intellectual collapse” of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten.

What happened to the economics profession? And where does it go

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.