Beware of Zombie Ideas in Economics

Expertise, in the academic world, is based on ideas. They are the basis of hypotheses and theories that try to provide explanations of how particular phenomena work . But hypothesis and theories in economics cannot be definitively established as in sciences such as physics. For one thing, economists cannot put forward a hypothesis, and then do controlled experiments to determine whether the hypothesis is right or not. They are forced, instead, to rely on models, or historical information or cross-country evidence to suggest, not ascertain, a possible outcome or result. In addition, ideological and political viewpoints of economists make their theories imprecise and biased. As a result, expertise in economics is marked by significant explanatory failures, and the models are useful under some set of conditions and not others.

Unfortunately, in economics bad models keep coming back even when evidence do not support the theory or prove them wrong. Though they are undead , as Paul Krugman called them, they still influence policies, despite being wrong.

The history of economics is full of “undead “or “zombie” ideas proclaimed by experts. Let´s look at one.

At the time of the Great Depression in the 1930s, the Classical Economists argued, despite sustained bouts of unemployment, that market economies would automatically approach full employment, as businesses would hire any worker who wanted a job, as long as his contribution to the output of the firm was greater than his wage payment. For them, there was always adequate demand for the output of these additional workers because supply created its own demand. The self-correcting mechanism of market economies, led them to recommend that governments should refrain from intervening in the e...

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...what you expect to happen in your study”, while a theory is a well established principle that explain some aspect of the world. Cherry, Kendra, Introduction to Research Methods”. http://psychology.about.com/od/researchmethods/ss/expdesintro_2.htm

http://www.nytimes.com/2014/03/31/opinion/krugman-jobs-and-skills-and-zombies.html. Paul Krugman, the Nobel Prize Economist, called them “zombie ideas”, that is ideas that should have been killed by evidence, but refuse to die.

Cassidy, John (April, 2013),” THE REINHART AND ROGOFF CONTROVERSY: A SUMMING UP”, http://www.newyorker.com/online/blogs/johncassidy/2013/04/the-rogoff-and-reinhart-controversy-a-summing-up.html

Herndon, Thomas, (April, 2013), “The Grad Student Who Took Down Reinhart and Rogoff Explains Why They´re Fundamentally Wrong”, http://www.businessinsider.com/herndon-responds-to-reinhart-rogoff-2013-4.