Randomized trials would lead nowhere
Financial Times, November 21st, 2013
There is a fatal flaw, inherent in economics, which Professor Oswald’s recommendations (letter in today’s FT commenting on Wendy Carlin’s article of yesterday) overlooks. His proposal for large-scale randomized trials would be an utter waste of time and money.
The inherent problem of economics is that economic behaviour is much too variable to validate with reliable certainty any large-scale economic models. The same data (even assuming comprehensive data are available and reliable) are regularly used by macro-economists to validate diametrically different models and policy recommendations. The present argument between advocates of QE and the ‘austerians’ concerning the best policy for restoring economic growth is a case in point.
In a recent article Professor Robert Shiller, one of the winners of this year’s Nobel Prize in Economics, has sought to claim the validity of engineering for economics. This too seems extremely fanciful. To see why one has only to compare the real dramatic advances over the last century in, say, manned flight (to take only one of myriad examples in genuine science) from the Wright Brothers to the Boeing Dreamliner, the Voyager spacecraft and the Hubble telescope, with the present dismal state of the global economy, five years after the 2008 crisis and after a century of supposed advances in the theory
and practice of economics.