The New — and old — Keynesian insistence on the reason for the failure of the unprecedentedly large stimulus to kick-start the economic growth engine is reminiscent of the Hebrew prophets’ sermons blaming Jews for their own persecution on the charge of insufficient zealotry, although it is plain to see that it was in fact this excess zealotry that was the proximate cause of the Hebrews’ sufferings. Now these same economists are counseling Europe to go down the same failed path in order to preserve the Euro, never mind the dubiousness of its value to European prosperity and the pain it has already caused.
The fact is that if macroeconomics is to be taken seriously as a science rather than philosophy, to say nothing of its prescriptions being accepted by responsible decision-makers, it must abandon doctrinaire adherence to theories — all theories — that are not proved, or at least well supported, by rigorous empirical evidence. Without such proof, economics will remain indistinguishable from ideology. Keynes, Hayek, Friedman, Marx even, if he is to be included in their number — all were fallible and often wrong, in whole or in part. Politicizing economic-theoretic thought to advance social agendas — whether it be more or less governmental control and regulation over economic factors, trade, inflation, and so on — only undermines the economics as a field of study, much like Stalin’s functionaries attempted to politicize genetics, cybernetics and agronomy.
To insist primacy of theory over observation, to seek out selective facts in support of favored thought while ignoring or attacking contrary evidence, to bully those who point out its inadequacy with argumentum ad verecundiam — particularly when that authority had been a priori deified — are all acts of the pseudo-scientist. Swaddling such naked theory in mathematics does nothing to improve its relationship to measurable outcomes, or make it more a real science.
Moral argument should have no more suasion in the science of economics than it does in geology, or physics, or astronomy. As yet, however, allowing morality and wishful thinking to creep into macroeconomic thought has turned if into philosophy with pretty graphs and nice equations, with scientific rigor still a consummation devoutly to be wish’d.
UPDATE: More on the subject by the repeatable anonymous columnist at the Economist.
UPDATE 2: No matter how utopian we wish our politics to be, we ignore realities of the laws of economics — which no one has been able to repeal — entirely at our peril.