Emran Mian, who runs the Social Market Foundation (and has written a brilliant novel, [amazon_link id=”1846556260″ target=”_blank” ]The Banker’s Daughter[/amazon_link]), has a terrific essay – Prediction and the Flagpole –  in 3am Magazine about the problem of knowledge in economics – what do we actually know about how the economy works, about causality? As he points out, either the mechanisms are highly contested among economists, or ignored by them. We don’t know very much at all.

There should be no shame in this, because we don’t know much about anything. This is why epistemology is so hard. However, as the article also says, “We live in a peculiarly economics-friendly public sphere.” Yet many economists over-claim their knowledge, especially when it comes to making predictions. Personally, I think economic forecasting is largely a hopeless task except for the limited task of using time series methods to predict a short period ahead. (I was a forecaster for several years, a long time ago, so I know whereof I speak.) Chris Dillow has recently blogged about the nonsense often associated with forecasts – unicorn farming is his term for it. Nate Silver’s [amazon_link id=”0141975652″ target=”_blank” ]The Signal and the Noise[/amazon_link] has a terrific chapter effectively demolishing most macroeconomic forecasts.

After the onset of the financial crisis, there were lots of calls for economists to be humbler. I don’t see a lot of humility, alas. Most f my colleagues have little interest in the philosophical questions, although of course my great hero David Hume was keen on epistemology. One terrific book about what economists can know is John Sutton’s [amazon_link id=”0262692791″ target=”_blank” ]Marshall’s Tendencies: What Can Economists Know?[/amazon_link]. I must read Mary Morgan’s [amazon_link id=”0521176190″ target=”_blank” ]The World in the Model: How Economists Work and Think[/amazon_link], and Nancy Cartwright’s recent [amazon_link id=”0199841624″ target=”_blank” ]Evidence-Based Policy[/amazon_link] – she has also written a lot about the causality question.

[amazon_image id=”0262692791″ link=”true” target=”_blank” size=”medium” ]Marshall’s Tendencies: What Can Economists Know? (Eyskens Lecture) (Gaston Eyskens Lectures)[/amazon_image]  [amazon_image id=”0521176190″ link=”true” target=”_blank” size=”medium” ]The World in the Model: How Economists Work and Think[/amazon_image]  [amazon_image id=”0199841624″ link=”true” target=”_blank” size=”medium” ]Evidence-Based Policy: A Practical Guide to Doing It Better[/amazon_image]