An article from the New York Times on the complexities of economic decision making and why economists disagree. A good example of this is the debate between economists on the success of the $787 billion stimulus. There are two schools of thought and both seem to justify their stance with raw data.
To explain the case for humility in economics, Robert Solow, Nobel Prize winner and M.I.T. professor emeritus said, look no further than the stimulus bill: “It has run its course over the past year and a half, but it is not an isolated event. One thousand other things were happening that had an effect on employment and real G.D.P.,” a measure of a nation’s total output adjusted for changes in prices. “You want to trace the effect of one of a very large number of significant causal effects, and that’s a very hard thing to do.”
That the world doesn’t offer up clean economic experiments is a common refrain in the discipline, said Gary Becker, a Nobelist at the University of Chicago. There have been endless studies on every tax change in the modern history of the republic, Mr. Becker said, from Kennedy to George W. Bush, and arguments about the wisdom and aftereffects of each. It’s not just that there is so little clear signal amid so much noise. It’s that many economists have a unique idea of what signal to listen to and what priority it deserves.
Click here for the full article. There is reference also to Dan Ariely of Predictably Irrational fame at the end of the article. “The entire question of how emotion will change people’s behavior is pretty much outside the standard model of economics,”. If you are going to study economics at Univ it maybe best to do it with some Psychology papers.