How Effective Is Economic Theory?

Effective at what?

A rather savvy economic-statistician once told me that economic theory is a very effective way to determine who has been able to get their theory published.

This is a great article although the stuff about Austrian economics and how economics will move left should be tossed. Mr. Kling should save those opinions for Cato.

Aside from that, I always wonder why we have never had a "Great Economic Project." In WWII we united scientists of all stripes to come together to build the atom bomb and more recently Obama launched the BRAIN initiative. Understanding how our economy works is, I'd say, as important as either one of those. Some project where the government can assemble the best minds in sociology, psychology, business, math, history and then use economists to help glue all of this together. Perhaps our way forward is not in coming across some new beautiful model but in building the ugliest, most glued-together piece of crap that happens to be (relatively) accurate and then simplifying it later.

A flaw with current economics is that they expect the economy to grow exponentially while resources including energy are linear. That for me is a flaw can someone explain how that works?https://dothemath.ucsd.edu/2012/04/economist-meets-physicist...

Then there is central banks which I think is a form of central planning. Most central planned system lack information that why they do not work. I argue production of goods and services are free market but money creation is centralized by banks and central banks. https://en.m.wikipedia.org/wiki/Economic_calculation_problem

Then there is the whole thing of peels bank act where the bank loans your bank account assets to others no matter how risky but still guarantees it to you. Is banks doing a form of double book keeping? https://en.m.wikipedia.org/wiki/Bank_Charter_Act_1844

"There is a very real possibility that over the next 20 years academic economics will congeal into a discipline, like sociology today, which is definitively shaped by an ideologically driven point of view."

That does not bode well for the future of the economy...

Discussions like this always seem a little strange. Sure, they're important, but taken out of context they're counterproductive and even harmful.

This is the problem: what is the alternative? The pet theory of a madman or sociopath?

The difficult truth is that everyone has an economic theory, whether they admit it or not. The question is, whose theories do we want to pay attention to? People who spend their lives arguing and thinking about it, and trying to find some evidence in support? But who might be a bit isolated from reality? People who work close to the phenomena being explained, but who don't really rigorously explicate or defend any of their ideas, who haven't had to put them on the table, so to speak? Or have massive, critical financial conflicts of interest?

There's also the difficult problem of identifying when any theories have really been tested well. It's not like we can just run randomized controlled designs on whole civilizations--at least, not most of the time for major policies.

I guess I really don't see the alternative to encouraging the standard academic approach to economics, opening it up to public criticism and discussion, and maybe trying them out when it's ethical and feasible.

Sure, lots about classical economic theory is really ridiculous, and the source of a lot of problems, but then you change those things and then move on. It's not any different from physics theory or chemistry theory in that regard.