Watching Paul Mason grapple with a new economic idea is always going to be an amusing prospect. Perhaps a little like resistance training, vast effort being expended to get nowhere. Here his concern is the new Paul Romer paper insisting that, if we're honest about it, most macroeconomic models are a bit pants.
Well, yes, they are. Mason's solution is:
Romer’s huge mea culpa on behalf of mainstream economics is a sign that, after a decade-long hunt for trolls and gremlins as the cause of crisis, academia now has to begin the search for the cause of instablity inside the system, not outside it. My hunch is that the answer lies in large, agent-based simulations, in which millions of virtual people take random decisions driven by irrational urges – such as sex and altruism – not just the pursuit of wealth.
What the left can bring to the design of these models are the insights that still draw lines of emnity through elite campuses: that class, gender and race exist as economic facts; that the 1% always acts with more information than the 99%; that crises are unavoidable but can be mitigated by accepting they might happen.
Which is rather to miss the point that Hayek made. Which is that we simply cannot do this. The centre cannot collect enough information in anything approaching real time to be able to model something as complex as an economy. Which leaves us with the economy, that market and price system, as the only thing capable of calculating the economy.
Sure, there are some thing we can vaguely plan. The central bank determines the short term price of money (as Romer insists) and influences the longer term price so a decision must be made as to what that price will be. But at any level of detail greater than that we just don't have a system.
And there's no point in invoking "computers" to replace the phlogiston of the current models. As Cosma Shalzi pointed out in "In Soviet Union Optimisation Problem Solves You." We are at minimum a century away from having the necessary sort of computing power even if we knew what we were trying to compute. But since we don't, and cannot, know what the utility function we're trying to optimise is 100 years hence doesn't get us any closer to the goal.
Oh, and whatever modelling process we do use we've still got to start with market prices meaning that we've still got to have that market and prices in the first place.
That is, the lesson that Mason has missed is that Romer's dismissal of the current models does not mean that some others are therefore going to be correct. The failure of the current best we have models means that no such models work.
As Hayek pointed out. Nothing can model an economy to the sort of level Mason desires, so that it can be controlled.