Monday, January 16, 2012

Economists Are Not Doctors

. Monday, January 16, 2012

So says Ryan Avent, reporting from the annual meeting of the American Economics Association:

THE annual meeting of the American Economic Association (AEA) functions a bit like a large, rumbustious diagnosis session. The world economy is rolled in on a gurney, prodded and poked, and declared to be suffering from a host of conditions. Yet the awareness that economists are not doctors has been rather slow to creep into the profession. Doctors may order a treatment (even the wrong one) and feel reasonably confident it will be administered. Economists cannot. The crisis in the euro zone is an acute case. Ideas for fixing the problem are plentiful. But the best economic policies may never see the light of day because of the brittle and baffling world of European politics.
I would say it's even worse than that. For doctors, there is a clear separation between patient and disease. With economies every "treatment" harms a patient even as it helps another. A policy that benefits debtors over creditors is... benefiting debtors over creditors. There may be instances in which policies are Pareto-improving, but they are rarer than economists (or political scientists, for that matter) care to admit. Even if we find a policy that will move us to the Pareto frontier, there is still the matter of where along the curve we're going to end up.

This is not an optimization problem.


Economists Are Not Doctors
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