Tag Archives: raj chetty

The Taylor Rule: Ignore Fraud Epidemics and Worship Markets

By William K. Black

I recently posted a detailed article in response to Raj Chetty’s lament that scientists make fun of economics’ pretense to science.

The thrust of my article was that the problem was not that economics was inherently incapable of becoming more scientific.  The problem was that so many economists wear ideological blinders that recurrently cause them to perform a parody of the scientific method.

Chetty claimed that economists who are “testing precise hypotheses” in quantitative studies that exploit natural experiments are (finally, in 2013) “transforming economics into a field firmly grounded in fact.”  Chetty’s metaphor is that economics is like epidemiology.  (One assumes that his column is posted in the CDC’s common areas for the general amusement of epidemiologists.)

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Economics could be a Science if More Economists were Scientists

By William K. Black
(Cross posted at Benzinga.com)

Raj Chetty has written an op ed in the New York Times designed to counter the abuse the Sveriges Riksbank (Sweden’s central bank) rightly received for its latest embarrassment.  Economics does not have a true Nobel Prize, so a central bank decided to create a near-beer variant.  The central bankers have frequently made a hash of it, often awarding economists who got it disastrously wrong and inflicted policies that caused immense suffering.  This year, not for the first time, the central bankers decided to hedge their bets – awarding their prize to economists who contradict each other (Eugene Fama and Robert Shiller).  The hedge strategy might be thought to ensure that the central bank’s prize winners were right at least half the time (which would be an improvement over the central bankers’ batting average in their awards), but that is a logical error.  It is perfectly possible for both of the prize winners to be wrong.  I’ll explain why I think that is the case in a future article.

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