The Year Ahead: Conventional Wisdoms that Get It Wrong

Paul Solman: Next up in our week-long series on The Economic Year Ahead: conventional wisdoms economists think are wrong. After asking economists to weigh in on the next crisis and what would surprise them most about the economy next year, we asked them to tell us the economic conventional wisdom with which they most disagree.

Up first: Dan Ariely. George Eliot a behavioral economist! Who knew? You have to be careful, reading the posts today. They can lure you into hours of reading, as for example Eliot’s 1856 essay, “The Natural History of German Life.” Fascinating. I almost didn’t get to Arvind Subramanian’s sort of retort to Ariely as a consequence.

The argument between these two concerns the power of economics. Its blinkered world-view precipitated the crisis, Ariely argues. No, says Subramanian (though he didn’t read Ariely’s entry): Economics doesn’t presume to know it all or predict the future. Its only pretension is fixing what’s broken, after it breaks. I’m guessing most readers will side with Ariely on this one.

Dean Baker, meanwhile, illustrates just what economic thinking is unambiguously good for: forcing you to think rigorously and abandon the conventional wisdom when it doesn’t measure up. There are plenty of adjacent issues raised by his brief remarks: To what extent do we really WANT to control medical expenditures, given all the truly useless thing we devote resources to? What if only the richest and most educated stop have kids, and those who can least afford to educate their children have most of the world’s young? Maybe we’ll pose those questions some other time.

Read the full feature here.