Monday, July 27, 2009

Economics as Religion

Whenever I feel I have a spare hour I try to read up on economic blogs, namely macroeconomic blogs. And I usually have an intense look and furrowed brow.
Explanations of the financial crisis-- the before, during, and now after-- are usually contradictory while each having kernels of truth.

This is because macroeconomics really developed different schools in the 20th century akin to the branching of denominations in Christianity/religion.

You have to decide, are you:
simple Neoclassical, old-school Keynesian, New Keynesian, Post-Keynesian, Monetarist, Austrian, etc.? (Some of these are considered "heterodox" and there are other heterodox schools).

You can be a New Keynesian with a monetarist bent just like one can be a Reformed Southern Baptist (Reformed= Calvinist). But most schools/denominations fall back on the same catechisms, the same principles.

So, it's tough to decide. You shop around to see which one you like, examine the assumptions behind the doctrines, etc.
Which one is the clearest to understand? While this may be a factor in deciding, it perhaps shouldn't be. Perhaps the best schools of thought are the most complicated.

Which school of thought explains current events most accurately, or predicted them? Pretty much all do in retrospect due to hindsight bias.

Which school you associate with is usually a function of your upbringing and education (like seminary). If you went to a "salt water" economics school on the coasts then you probably don't believe in efficient market hypothesis and are some brand of Keynesian. (If you went to a religious seminary in one of those schools you also probably don't believe in the total inerrancy of Scripture and are probably Episcopalian or Lutheran).

Asking "what do the data say" rarely works here, because you have to ask "which data?" and so much of that data depends on the presenter.

My brow remains furrowed (though to the best of my understanding I'm a New Keynesian who is flirting with converting to full Monetarism).

What led you to choose your current religious affiliation? When you chose you probably understood some basics, had heard a couple arguments you liked, but were by no means an expert. And you may have been an adherent all your life and still not understand everything. Or was it that you just liked the people associated with those arguments and felt comfortable and welcome there?

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