The Humbled Science: Economists Reckon With Reality

Not so long ago, politicians had “favorite” economists. Margaret Thatcher’s was Milton Friedman. John F. Kennedy’s was probably John Kenneth Galbraith. President Bill Clinton had a Nobel Prizewinning economist, Joseph Stiglitz, in residence at the White House for his entire first term and was said to light up at the mention of John Maynard Keynes.

- Stephanie Flanders

You don’t hear of many favorite economists today. Political leaders still have economists around, but it’s difficult to remember the last time one publicly and proudly followed their advice. Donald Trump, as ever, is the extreme case. He seems to take some pride in doing the exact opposite of what mainstream economists would prescribe—on the wisdom of trade wars, say. But if the economics profession were being honest with itself, it would have to admit that the problem goes deeper than the gleefully heterodox President Trump.

If politicians in the advanced economies aren’t spending much time listening to economic gurus anymore, that’s partly because economists haven’t had very useful solutions to the big problems politicians are being asked to fix. Most failed to predict the global financial crisis, and the core macroeconomic models taught for decades have been coming up short ever since. Economists don’t even have answers to the challenges facing central bankers, which for many today includes getting the inflation rate back to 2 percent.

I saw the failures of traditional economic prescriptions firsthand in 2016 while chairing a commission on inclusive growth sponsored by the 30 largest cities in the U.K. The first public hearing was in the city of Sheffield, in the north of England, just six days after the referendum on the U.K.’s membership in the European Union. Sheffield had been an unemployment black spot throughout the 1980s and 1990s, following the collapse of its steel and coal industries. Local leaders had dedicated themselves to following the modern recipe for economic revival, redeveloping the city center and expanding the universities to give it one of the greatest concentrations of students in the U.K.