Going forward, in principle, economists have the knowledge and tools to avert another financial crisis and to pull the economy quickly out of another potential Great Recession, or failing that to provide clear enough warnings and admonitions that the blame falls on those who don't heed economists. But the failure to avert the last financial crisis in 2008 and the long-drawn-out aftermath of that financial crisis and the Great Recession have hurt the reputation of economists.
However, some of the negative views of economists predate economists' failure in 2008 and after. In his August 25, 2017 Wall Street Journal article "In Defense of the Dismal Science," (All the quotations here are from that article.) Greg Ip explains negative views of economics and economists and defends economics and its practitioners. These two paragraphs best sum up his discussion:
Thus, when economists preach the virtues of globalization, market solutions or cost-benefit analysis, they sound to critics on the left like corporate shills lacking any moral anchor. To critics on the right, they sound like globalist elites who despise patriotism.
Yet it is precisely their love of numbers that makes economists invaluable. By stripping the emotions from pressing problems, economists can often illuminate the most practical ways to tackle them—but only if ordinary people and their representatives are prepared to listen.
On the first charge against economics, some economists no doubt are corporate shills lacking any moral anchor, but that is mostly limited to a subset of those on the payroll of corporations or wealthy patrons. (Incentives affect economists, too.)
Something I hope will tug the overall worldview of economists away from too much of a corporate worldview is the increasing amount of work on measuring nonmarket goods with subjective well-being data I am involved in (1, 2).
As to the second charge, I view caring about the welfare of all human beings as consistent with patriotism. The United States is still the indispensable nation, and needs to strengthen itself by welcoming more people as citizens rather than discouraging people from joining in the historic mission of the United States.
I love Greg's line "it is precisely their love of numbers that makes economists invaluable." In addition to the obvious meaning, it is their love of numbers—and in some cases their interpersonal cluelessness—that makes many economists more likely to tell the truth than others who are more sensitive to the political ramifications of any statement.
Today, the greatest strength of economics as a discipline is its devotion to statistics:
In 1963, roughly half the papers published in the top three American economics journals were theoretical, according to a tally by Daniel Hamermesh, now at Royal Holloway, University of London. By 2011, that figure had shrunk to 28%; the remainder were empirical papers based on public data, on data gathered by the authors or on experiments. Economic debates these days are won not by the best theory but by the best data: Statistics are more important than calculus. Economists are far more obsessed with measurement than with math. When public discourse is plagued by innumeracy, this capacity to count is no small thing.
Economics has the most unity where economists have done good statistical work:
A study by Gordon Dahl and Roger Gordon of the University of California, San Diego, found that disagreement among economists was greatest where the empirical research was most sparse ...
The second great strength of economics is the understanding of endogeneity that comes from learning economic theory:
Economists are also instinctively skeptical of simple explanations. They are trained to look for equilibrium, which is another way of saying, “When you change one thing, how do other things respond? Where do things settle once all interactions have occurred?”
These two strengths of economics make it important for economists to pursue a wide range of research topics that go far beyond the traditional domain of economics. On that points, see:
- Economics Needs to Tackle All of the Big Questions in the Social Sciences
- Defining Economics
- Does the Journal System Distort Scientific Research?
Circling back to the financial crisis of 2008, Ricardo Reis describes well both the limitations and value of economics:
But such misjudgments don’t justify the charges leveled at economists. Take, for example, their inability to predict financial meltdowns. Crises almost by definition are unpredictable. In a recent essay, Ricardo Reis, an economist at the London School of Economics, argues that failing to foretell a financial crash is no more an indictment of economics than failing to predict when a patient will die is an indictment of medicine. Economists didn’t predict the financial crisis, Prof. Reis notes, but they did help to arrest it by applying theory and experience: “The economy did not die, and a Great Depression was avoided, in no small part due to the advances of economics over many decades.”
Economics can say that high capital requirements will lessen the chance of a financial crisis but if that advice to have high capital requirements is not heeded it can't easily predict when the financial crisis will happen. Economic can't always predict when a recession will strike, but it can say that negative interest rates will shorten the length and reduce the severity of a recession. And economics can give insight into a thousand other issues. But it can't keep us from being surprised by events.