Thursday, October 13, 2011

The Nobel Prize Awarded to Sargent and Sims is a Kick in the Groin of Hayek

Arnold Kling writes:

Rational expectations in the Sargent-Sims tradition treats everyone as having the same model with which to form expectations. As Frydman and Goldberg point out in Imperfect Knowledge Economics, this assumes away the local knowledge and tacit knowledge that Hayek correctly identified as being very important in the economy.

...Indeed, if Sargent and Sims represent a slap in the face to Keynes, they must be regarded as a knee to the groin of Hayek. Hayek coined the term "scientism" to describe the pretentious pose that economists strike when they equate mathematics with rigor. If scientism is a germ that infects economics, then Sargent and Sims were responsible for unleashing some of the most virulent strains.

1 comment:

  1. How well did Sargant's and Sims' models forecast the Great Recession? ...or did anyone even use them for this purpose, before the fact of course?