The economics profession has lost its way.
Economists generally believe that “growing the economy” depends largely on the proper mix of the "ingredients" of fiscal policy, monetary policy, and tax policy, etc. And a few other ingredients, all policy-based.
And so economists’ prevailing wisdom is that economic doldrums result from not having enough of this or that policy ingredient. Or that a given policy ingredient was added to the economic stew too soon, too late, or out of sequence.
If the economics profession were an emperor then although he had clothes previously he has no clothes now.
Although fiscal policy, monetary policy, and tax policy, etc. can set the stage for economic growth -- and while ill-advised fiscal, monetary, and tax policies can seriously hinder economic growth -- those policies are not the primary ingredient for economic growth.
The primary ingredient for economic growth is advancement in science, engineering, and technology.
In years gone by this primary ingredient was part of the economic discussion. But consideration of its contributions has dropped away, little by little, over time.
Why? Probably because discussion about this primary ingredient doesn’t fit well with the economic curriculum of our times. (If the only tool one has is a hammer then every problem looks like a nail.)
Economists constantly predict GDP growth: “it should be in a tight range of x% to y% for full year 2011.”
Really? Except in the same way that economists have predicted "seven of the last five recessions" how can economists predict GDP with accuracy given the large contribution to GDP growth resulting from unknowable future advances in science, engineering, and technology?
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Addendum: Yale Economics Professor Robert Shiller, writing in an Economic View column published in The New York Times on May 1, 2011, states that "[t]oday, our prosperity depends on finance, and on its associated disciplines of accounting and macroeconomics." This blogger's view is very different.
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