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Macroeconomists are Dangerously Wrong!



Our Human Resources Management lecturer is from the Critical Realist School of Thought. Believe me, his unique style of delivery is unbeatable! He gives very interesting papers to the student community to read. One of them is entitled “Right enough to be dangerously wrong“. A paper in which David Guest proposes Critical Views of the In Search of Excellence Phenomemon.  I have blogged on it. Guest’s talent of putting forward critics is really inspiring, especially critics on a book which is one of the supposed to be read by Managers to understand the Excellence School of Thought.

Well, on Business Week magazine we find a very interesting article with the same touch of deconstructing ideas and critisizing the main arguments. Here are some quotes from: Hey, Economics Geniuses! What Happened?

If you are an economist and did not see this coming, you should seriously reconsider the value of your education and maybe do something with a tangible value to society, like picking vegetables!

If you are not good at doing your job, ‘Ale plante sousou!’

The rap on economists, only somewhat exaggerated, is that they are overconfident, unrealistic, and political. They claim a precision that neither their raw material nor their skill warrants. Too many assume that people behave like the mythical homo economicus (a term we got to hear in our HRM class today), who is hyperrational and omniscient.

The article then discusses Macroeconomics, which is my favourite subject of study in Economics, the queen of Social Sciences. Mention is made about the profession of Economists and about Economists who have introduced new School of Thoughts like John Maynard Keynes, Milton Freidman. Something interesting about Economics Genius, Milton Friedman:

In the 1960s, free-market economist Milton Friedman persuaded virtually the entire profession that the Great Depression was caused by the Federal Reserve. That seemed to imply that better policy by the Fed, guided by economists, would prevent a recurrence. Bernanke, then a governor of the Federal Reserve, said as much in a 2002 speech for Friedman’s 90th birthday that acknowledged the Fed’s role in the Depression. He told Friedman: “You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

The authors raises critism on Macroecomists and claim that macroeconomists failed to foresee the recession despite plenty of warning signs. I would be curious to know how Prof. Jeffrey Henkel from the National Bureau of Economic Recession would comment on this bold statement. And the very insightful last sentence of the article triggers food for thought in your mind:

Perhaps out of the ashes of failure will emerge a better macroeconomics profession.

Reading such articles provides inspiration for thinking critically, challenging the assumed knowledge and writing masterpiece articles and exam answers (:D)!

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