15th October 2011
Valid prediction is the only test of true knowledge. “Modern” macroeconomics fails ALL predictive tests
Retrospective explanations are a very important part of scientific knowledge. But the real value, indeed, the true test of this knowledge is when we are able to predict the future. Thus:
- Assuming we are correct that malaria is caused by a parasite, that MUST mean that if we kill the parasite today then malaria will disappear tomorrow.
- Assuming that Newtons's laws of gravitation are correct, that MUST tell us the precise position of planets 100 years into the future.
- Assuming that neo-Keynesians are correct, it MUST mean that if their recommendations are applied then the economy will behave in the predicted way.
Well, the performance of the predictions of modern "macroeconomists" (I sometimes regret the time I wasted in complex mathematical macroeconomics which has turned out to be SO BADLY IRRELEVANT) clearly says that they DON'T have any knowledge of the real economy. Their performance is as bad, or worse, than the performance of so-called climate "scientists":
When I look at the figures below I wonder when will someone tell these people that they aren't wearing any clothes. Merely getting a "Nobel" prize doesn't make them wise! Time for economists to go back to Adam Smith and start again.