Oh boy, Bobo Brooks says economics is hard and a lot of economists get it wrong, so we should abandon economics and go back to explaining economics with stories out of history. Gosh, right out of the Austrian handbook. The Austrians hold that any sort of mathematical / statistical social sciences approach to economics is doomed to failure, and thus only the Austrian method of logical reasoning from postulates pulled out of their bungholes as “truths” is correct for thinking about economics.
Of course, as my Philosophy 208 (Logic) professor pointed out some thirty-odd years ago, if you start reasoning from false postulates, you end up with meaningless conclusions. If I start reasoning with, “All politicians are orange; John Boehner is a politician, thus John Boehner is orange”, I might think it’s correct. But then I come up with “All politicians are orange, Barack Obama is a politician, therefore Obama is orange.” Which, err, he isn't ;). A false premise (“All politicians are orange”) led to a false conclusion. Yet that is where the Austrians take us — into the realm of false premises that they “prove” are true much as I “proved” that all politicians are orange by looking at the examples of John Boehner and Charlie Crist.
The reality is that economic models validated by statistics do have use — as models, that imperfectly capture aspects of an economic system and have validity only insofar as they agree with the data they supposedly model. Insofar as these models can predict what happens in certain situations — such as what happens when we hit the zero bounds and enter liquidity trap territory — and insofar as these models agree with what we’ve actually observed in prior incidents where economies have hit the zero bounds and entered liquidity trap territory — they are useful. Throwing the baby out with the bathwater just because some of the models proposed by the Chicago school have no correspondence to any reality lacking pink unicorns and cotton candy trees is ridiculous, but it doesn’t surprise me that Bobo Brooks does it. After all, hacks hate facts, especially facts that happen to agree with models that predict them. Facts are inconvenient, and make it hard for them to lie to the American people about the results of policy decisions made by government and their effect upon the economy. And what fun is that?
-- Badtux the Logical Penguin