Mark Wadsworth asks us an interesting question:
If we think that we know all this stuff, the temptation – on the part of prodnoses – is to use it to interfere.
Alternatively we could think of economics as a discipline that tells us why we need to tell those prodnoses to bugger off.? That is its best purpose. Telling people why they should NOT do stuff.
Is economics best use as a negative or positive thing?
Discuss and inform me.
The answer comes from Ben Bernanke:
Economics is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much. However, careful economic analysis does have one important benefit, which is that it can help kill ideas that are completely logically inconsistent or wildly at variance with the data. This insight covers at least 90 percent of proposed economic policies.
Yes, sometimes we can propose sensible things as a result of having consulted the economic runes. But the real value is that 90% of the time we can tell damn fools that their damn fool plans are damned foolish.
Nationalisation, rent controls, price controls of all kinds, trade barriers, infant industry protection….there’s a long list of things that people propose again and again, even if vanquished they’ll pop up a generation later. The value of economics is that not only can we point out that they’re damned foolish but even why they’re damned foolish.