Noah Smith asks an interesting question and offers the non-economist answer:
“Now, maybe this was just an expression of good old American anti-intellectualism, like Insane Clown Posse’s views on magnetism, or the Republican party’s denial of evolution. But Bob Hall, who was a discussant on the paper (and who I’ve heard referred to as “the greatest working macroeconomist”) had a different interpretation. “The average American,” Hall memorably declared, “thinks of economists as masters of an alien religion, with teachings no more relevant than Buddhism.” Non-economists, he said, see economists not as empirical scientists, but as deductivist Aristotelian philosophers, sitting around and thinking of how economies ought to work while totally ignoring the evidence of how they really do work.”
Being a non-economist, I have to side with the non-economists. To me, this problem is rather simple. Economists tend to dabble too much in ideology and not enough in reality. I’ve described this as a problem resulting from the lack of a Da Vinci methodology. In other words, there is too much confirmation bias occurring in economics where economists create solutions extending from a preferred ideology as opposed to a solid understanding of our surroundings. That’s putting the cart before the horse.
I hate to pick on the Market Monetarists, but just look at what they do. They essentially design an entire school of thought around a policy idea and have conformed their world view around it. Nevermind if it conflicts with the way modern banking works or if the actual implementation of such an NGDP Targeting policy would run into real-world problems. They fit that square peg in a round hole regardless of how small that round hole is.
Of course, market monetarists aren’t the only ones. Austrian economists will find almost any way in the world to prove that the world works better when government is not involved in the economy. Keynesians will find any way to prove that countercyclical policy is always the best solution to problems. The list goes on. It all wreaks of ideology.
MR is far from perfect. Hell, I don’t even get involved in policy ideas directly via MR so you could say that MR just totally ignores policy and actually fixing the problems. That’s a huge problem. I know that. But I think the world’s understanding of money, economics and finance is so poor that it would be irrational to start telling the world that we need a new arm when most of us don’t even realize that we have arms.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.