How to Restore Faith in Economics

Should you trust economists? For many people nowadays, the answer is “no.” Economists failed to predict the Great Recession. Their prescriptions -- quantitative easing, for example -- didn’t seem to help speed the recovery much. During the past three decades, a lot of their big policy ideas -- financial deregulation, tax cuts, privatization and the free movement of capital across borders -- don’t seem to have worked out so well for the economy. And their seeming tone-deafness on inequality and the problems of workers displaced by trade and new technologies often makes them seem like clueless elitists.

In the years since the crisis, a popular narrative has sprung up about why economists have been getting so many big things wrong. It goes something like this: Economists are obsessed with theory. Entranced by the beauty of elegant constructs, they’re disconnected from the way the world really works.