Economics rules : the rights and wrongs of the dismal science

The economics profession has become a favourite punching bag in the aftermath of the global financial crisis. Economists are widely reviled and their influence derided by the general public. Yet their services have never been in greater demand. To unravel the paradox, we need to understand both the strengths and weaknesses of economics. Dani Rodrik argues that the multiplicity of theoretical frameworks - what economists call 'models' that exist side by side is economics' great strength. Economists are trained to hold diverse, possibly contradictory models of the world in their minds. This is what allows them, when they do their job right, to comprehend the world, make useful suggestions for improving it, and to advance their stock of knowledge over time. In short, it is what makes economics a 'science' a different kind of science from physics or some other natural sciences, but a science nonetheless. But syncretism is not a comfortable state of mind, and economists often jettison it for misplaced confidence and arrogance, especially when they confront questions of public policy. Economists are prone to fads and fashions, and behave too often as if their discipline is about the search for the model that works always and everywhere, rather than a portfolio of models. Their training lets them down when it comes to navigating among diverse models and figuring out which one applies where. Ideology and political preferences frequently substitute for analysis in choosing among models. So the book offers both a defence and critique of economics. Economists' way of thinking about social phenomena has great advantages. But the flexible, contextual nature of economics is also its Achilles' heel in the hands of clumsy practitioners.;Cover -- Economics Rules: Why Economics Works, When It Fails, and How To Tell The Difference -- Copyright -- Dedication -- Preface and Acknowledgments -- Contents -- Introduction: The Use and Misuse of Economic Ideas -- Chapter 1: What Models Do -- A Variety of Models -- Models as Fables -- Models as Experiments -- Unrealistic Assumptions -- On Math and Models -- Simplicity versus Complexity -- Simplicity, Realism, and Reality -- Chapter 2: The Science of Economic Modeling -- Clarifying Hypotheses -- When Standard Intuition Fails Us -- Scientific Progress, One Model at a Time -- Models and Empirical Methods -- Models, Authority, and Hierarchy -- Wrong versus Not Even Wrong -- Chapter 3: Navigating among Models -- Diagnostics for Growth Strategy -- General Principles of Model Selection -- Verifying Critical Assumptions -- Verifying Mechanisms -- Verifying Direct Implications -- Verifying Incidental Implications -- External Validity, Redux -- Chapter 4: Models and Theories -- The Theory of Value and Its Distribution -- The Theory of Business Cycles and Unemployment -- Theories as Explanation of Specic Events -- Theories Are Really Just Models -- Chapter 5: When Economists Go Wrong -- Errors of Omission: The Financial Crisis -- Errors of Commission: The Washington Consensus -- The Psychology and Sociology of Economics -- Power and Responsibility -- Chapter 6: Economics and Its Critics -- Reconsidering the Usual Criticisms -- The Question of Values -- Lack of Pluralism -- Ambition and Modesty -- Epilogue: The Twenty Commandments -- Ten Commandments for Economists -- Ten Commandments for Noneconomists -- Notes -- Introduction: The Use and Misuse of Economic Ideas -- Chapter 1: What Models Do -- Chapter 2: The Science of Economic Modeling -- Chapter 3: Navigating among Models -- Chapter 4: Models and Theories -- Chapter 5: When Economists Go Wrong. Takes A Close Look At Economics To Examine When It Falls Short And When It Works, To Give A Surprisingly Upbeat Account Of The Discipline. Drawing On The History Of The Field And His Deep Experience As A Practitioner, Rodrik Argues That Economics Can Be A Powerful Tool That Improves The World--but Only When Economists Abandon Universal Theories And Focus On Getting The Context Right. Economics Rules Argues That The Discipline's Much-derided Mathematical Models Are Its True Strength. Models Are The Tools That Make Economics A Science. Too Often, However, Economists Mistake A Model For The Model That Applies Everywhere And At All Times. In The Wake Of The Financial Crisis And The Great Recession, Economics Seems Anything But A Science. In This Sharp, Masterfully Argued Book, Dani Rodrik, A Leading Critic From Within, Takes A Close Look At Economics To Examine When It Falls Short And When It Works, To Give A Surprisingly Upbeat Account Of The Discipline. Drawing On The History Of The Field And His Deep Experience As A Practitioner, Rodrik Argues That Economics Can Be A Powerful Tool That Improves The World--but Only When Economists Abandon Universal Theories And Focus On Getting The Context Right. Economics Rules Argues That The Discipline's Much-derided Mathematical Models Are Its True Strength. Models Are The Tools That Make Economics A Science. Too Often, However, Economists Mistake A Model For The Model That Applies Everywhere And At All Times. In Six Chapters That Trace His Discipline From Adam Smith To Present-day Work On Globalization, Rodrik Shows How Diverse Situations Call For Different Models. Each Model Tells A Partial Story About How The World Works. These Stories Offer Wide-ranging, And Sometimes Contradictory, Lessons--just As Children's Fables Offer Diverse Morals. Whether The Question Concerns The Rise Of Global Inequality, The Consequences Of Free Trade, Or The Value Of Deficit Spending, Rodrik Explains How Using The Right Models Can Deliver Valuable New Insights About Social Reality And Public Policy. Beyond The Science, Economics Requires The Craft To Apply Suitable Models To The Context. The 2008 Collapse Of Lehman Brothers Challenged Many Economists' Deepest Assumptions About Free Markets. Rodrik Reveals That Economists' Model Toolkit Is Much Richer Than These Free-market Models. With Pragmatic Model Selection, Economists Can Develop Successful Antipoverty Programs In Mexico, Growth Strategies In Africa, And Intelligent Remedies For Domestic Inequality. At Once A Forceful Critique And Defense Of The Discipline, Economics Rules Charts A Path Toward A More Humble But More Effective Science.--publisher's Description. The Use And Misuse Of Economic Ideas -- What Models Do -- The Science Of Economic Modeling -- Navigating Among Models -- Models And Theories -- When Economists Go Wrong -- Economics And Its Critics -- The Twenty Commandments. Dani Rodrik. Includes Bibliographical References (pages 217-231) And Index. “A hugely valuable contribution. . . . In setting out a defence of the best in economics, Rodrik has also provided a goal for the discipline as a whole.” —Martin Sandbu, Financial Times In the wake of the financial crisis and the Great Recession, economics seems anything but a science. In this sharp, masterfully argued book, Dani Rodrik, a leading critic from within, takes a close look at economics to examine when it falls short and when it works, to give a surprisingly upbeat account of the discipline. Drawing on the history of the field and his deep experience as a practitioner, Rodrik argues that economics can be a powerful tool that improves the world—but only when economists abandon universal theories and focus on getting the context right. Economics Rules argues that the discipline's much-derided mathematical models are its true strength. Models are the tools that make economics a science. Too often, however, economists mistake a model for the model that applies everywhere and at all times. In six chapters that trace his discipline from Adam Smith to present-day work on globalization, Rodrik shows how diverse situations call for different models. Each model tells a partial story about how the world works. These stories offer wide-ranging, and sometimes contradictory, lessons—just as children’s fables offer diverse morals. Whether the question concerns the rise of global inequality, the consequences of free trade, or the value of deficit spending, Rodrik explains how using the right models can deliver valuable new insights about social reality and public policy. Beyond the science, economics requires the craft to apply suitable models to the context. The 2008 collapse of Lehman Brothers challenged many economists' deepest assumptions about free markets. Rodrik reveals that economists' model toolkit is much richer than these free-market models. With pragmatic model selection, economists can develop successful antipoverty programs in Mexico, growth strategies in Africa, and intelligent remedies for domestic inequality. At once a forceful critique and defense of the discipline, Economics Rules charts a path toward a more humble but more effective science. Rethinking economics, from the inside out. In the wake of the financial crisis and the Great Recession, economics seems anything but a science. In this sharp, masterfully argued book, Dani Rodrik, a leading critic from within, takes a close look at economics to examine when it falls short and when it works, to give a surprisingly upbeat account of the discipline. Drawing on the history of the field and his deep experience as a practitioner, Rodrik argues that economics can be a powerful tool that improves the world―but only when economists abandon universal theories and focus on getting the context right. Economics Rules argues that the discipline's much-derided mathematical models are its true strength. Models are the tools that make economics a science. Too often, however, economists mistake a model for the model that applies everywhere and at all times. In six chapters that trace his discipline from Adam Smith to present-day work on globalization, Rodrik shows how diverse situations call for different models. Each model tells a partial story about how the world works. These stories offer wide-ranging, and sometimes contradictory, lessons―just as children’s fables offer diverse morals. Whether the question concerns the rise of global inequality, the consequences of free trade, or the value of deficit spending, Rodrik explains how using the right models can deliver valuable new insights about social reality and public policy. Beyond the science, economics requires the craft to apply suitable models to the context. The 2008 collapse of Lehman Brothers challenged many economists' deepest assumptions about free markets. Rodrik reveals that economists' model toolkit is much richer than these free-market models. With pragmatic model selection, economists can develop successful antipoverty programs in Mexico, growth strategies in Africa, and intelligent remedies for domestic inequality. At once a forceful critique and defense of the discipline, Economics Rules charts a path toward a more humble but more effective science. Economists are widely reviled and their profession has become a favourite punching bag in the aftermath of the financial crisis. Yet their services have never been in greater demand. To unravel the paradox, we need to understand both the strengths and weaknesses of economics. This book offers both a defence and critique of the field. Contents Preface and Acknowledgments The Use and Misuse of Economic Ideas What Models Do The Science of Economic Modeling Navigating among Models Models and Theories When Economists Go Wrong Economics and Its Critics The Twenty Commandments Notes Index