A pair of economists recently published a book entitled "This Time Is Different." They studied 800 years of speculative bubbles, economic collapses and financial stupidity. Their research is exhaustive, their arguments convincing- they have proved that history does, indeed, repeat itself. Over and over again.
Yet mainstream economists pride themselves in ignoring history, or even current events. They care only about creating ever-more complex and 'elegant' economic models, which are more akin to metaphysics than science, as they are not grounded in any form of experimental method. Their formulas are like a delicate crystal vase: beautiful to look at, but almost completely useless.
I hate to sound utilitarian, but an economic theory which does not explain the present economic situation, and help policy makers and businesses prepare for the future, is no more useful than a Sudoku puzzle. It's an intellectual exercise, perhaps, but nothing more. A mere game.
Much more useful than any model is an actual examination of the historical record. I'm sure if economists had been more familiar with past speculative bubbles they could more easily have recognized the housing bubble which just burst in the U.S.
History offers innumerable examples of countries which have faced economic collapse and social and political upheaval because of unmanageable debt. Yet many governments- encouraged by economists- have acted, in the last two years, like teenagers with their first credit card. Only now- trillions of dollars too late- have they sobered up. Yes, we avoided a long recession. But at what cost? We avoided two years of recession by accumulating debt that will take 20 years (optimistically) to pay back.
Our ancestors made many mistakes. We could learn from them. Or we could ignore history, and make the same mistakes all over again, while we create elegant and useless economic models which explain nothing. If economists don't get serious about studying the real economy, they should step aside, and let historians do their job.