Economic Theory Predicts that We Would Not Have Very Good Economists

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Tuesday, 30 November 2010 06:51

Suppose that school teachers could keep teaching and get regular promotions year after year no matter how badly they performed in the classroom. Suppose also that there was no incentive to teach well. Economic theory predicts that we would get a large number of unmotivated mediocre teachers.

Okay, suppose that the people who design economic policy never need to worry about getting fired no matter how badly their policies turn out. They continue to hold their jobs and get regular promotions. Under such circumstances we should expect that we would get mediocre economists.

This simple fact should have been included in an interesting WSJ discussion of efforts to promote new directions in economics. If there is no incentive to get things rights, then economists should expect that economic policy will be largely done by people who are not competent.