For this reason, calls for a “new economics” based upon simple principles, such as this bilge, get things arse about face.
Good economics is not about grand theories. Instead, it consists in looking at small problems one at a time - and in paying huge attention to problems of how to draw inferences about competing hypotheses from noisy data. This is what the papers I link to on this blog usually do.
If we’re lucky, some “ultimate laws” might drop out of this detailed, incremental empirical study. More likely, though, we’ll just end up with an onion.
Take, for example, Akerlof and Shiller’s Animal Spirits. The ultimate law proposed here - I simplify - is that people are irrational.
This appears to be controverted by some evidence - for example, that consumers might, on average, be quite rational and that workers today do seem to accept nominal pay cuts. But it’s consistent with other evidence; you can’t understand fluctuations in aggregate capital spending without paying heed to sentiment.
It's an onion.
Some on the left might find this “little think” approach conservative. They are wrong. Silly “ultimate law” economics is at least as common on the right as on the left: for every Richard Murphy there’s some vulgar libertarian who thinks Econ 101 a sufficient guide to life, the universe and everything.
And “little think” has served to undermine simplistic neoclassical economics. For example, it highlights how incentives can often backfire, how high incomes aren’t a reward for talent, or how inequalities of power - and not ( just?) marginal products - can generate income inequalities.
This is not, of course, to claim that economics should serve a particular political function. The point of economics is, like Feynman’s physics, is merely to understand a little more of the world. If ultimate laws, or even policy proposals, drop out of this it would be a mere by-product.
* not always - we can’t generalize so glibly.