Diligent readers will know that I frequently bang on the idea that we ought to be humble regarding the state of our knowledge and our ability to act on it. But that does not mean, as Hayek correctly pointed out, that economists cannot say anything, about the world. We are well positioned to make what he called, pattern predictions. Here are two that have panned out (this as counterpoint to the claim that economists are responsible for not predicting any business cycle downturn in the past):
First from Tyler Cowen on the Eurozone crisis:
Chris Calomiris wrote in 1999 that the euro is doomed (pdf). Milton Friedman had some pretty good predictions about the euro. Here are my 2004 predictions about the euro, and here is my bit from 2003 (“The three percent rule is effectively dead…The real question is what will happen when one of the smaller nations thumbs its nose at France and Germany…and then claims exemption from the relevant penalties.”) I have been worried about euro-like arrangements since the late 1980s. Here are Paul Krugman’s 1998 remarks,
Roubini predicted the course of the current Italian financial crisis in 2006. And so on.
It is sometimes asserted that the economics profession should lose some status because so few economists predicted the U.S. financial crisis. I’m not sure economists should be judged by their ability to predict asset price movements, but grant the point. The euro crisis is now here, and it seems our profession should win some of its status back.
And perhaps even more pertinant, here are the Bleeding Heart Libertarians on the rise of the Corporate State:
America is suffering from rampant, run-away corporatism and crony capitalism. We are increasingly a plutocracy in which government serves the interests of elite financiers and CEOs at the expense of everyone else.
You know this and you complain loudly about it. But the problem is your fault. You caused this state of affairs. Stop it.
We told you this would happen, but you wouldn’t listen. You complain, rightly, that regulatory agencies are controlled by the very corporations they are supposed to constrain. Well, yeah, we told you that would happen. When you create power—and you people love to create power—the unscrupulous seek to capture that power for their personal benefit. Time and time again, they succeed. We told you that would happen, and we gave you an accurate account of how it would happen.
You complain, perhaps rightly, that corporations are just too big. Well, yeah, we told you that would happen. When you create complicated tax codes, complicated regulatory regimes, and complicated licensing rules, these regulations naturally select for larger and larger corporations. We told you that would happen. Of course, these increasingly large corporations then capture these rules, codes, and regulations to disadvantage their competitors and exploit the rest of us. We told you that would happen.
It’s not rocket science. It’s public choice economics.
Read the rest. Enjoy your morning coffee. Here is the most depressing thing you can do with the next hour of your day.