How useful are economists?

First most of them missed the degree of the recession, and now they can't agree on what to do. Having missed lessons of the Great Depression, some would argue that they've let the economy spiral out of control due to bad forecasts, an unwillingness to admit mistakes and an arrogance which suggests they're quite confident that most people consider economics to be beyond their own comprehension or control.

Yes, I'm talking about economists, and they're the subject for a BusinessWeek magazine cover story entitled "What good are economists anyway?"

Of course many bloggers and a few economists -- such as Christopher Thornberg, a partner to MetroIntelligence -- were warning of a great housing bust and a recession to follow as early as 2004, but such voices were largely drowned out by a cheerleading press and a dishonest NAR economist named David Lereah, whose objectivity was rarely questioned.

So where did these economists go wrong and what lessons should we learn from their profound mistakes? From the story:

Economists mostly failed to predict the worst economic crisis since the 1930s. Now they can't agree how to solve it. People are starting to wonder: What good are economists anyway?...

To be fair, economists can't be expected to predict the future with any kind of exactitude. The world is simply too complicated for that. But collectively, they should be able to warn of dangers ahead. And when disaster strikes, they ought to know what to do. Indeed, people pay attention to economists at times like this precisely because of their bold claim that they know how to prevent the economy from sliding into a repeat of the Great Depression. But seven decades after the Depression, economists still haven't reached consensus on its lessons. The debate has only intensified in recent weeks...

The rap on economists, only somewhat exaggerated, is that they are overconfident, unrealistic, and political. They claim a precision that neither their raw material nor their skill warrants. Too many assume that people behave like the mythical homo economicus, who is hyperrational and omniscient. And they take sides in quarrels that freeze the progress of research. Those few who defy the conventional wisdom are ignored...

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