Making Economics More Useful: How Technological Eclecticism Could Help

Abstract

Keynes thought it would be “splendid” if economists became more like dentists. Disciplinary economics has instead become more like physics in focusing on concise, universal propositions verified through decisive tests. This focus, I argue, limits the practical utility of the discipline because universal propositions form only a part of new policy recipes. I further suggest that, as in engineering and medicine, developing economic recipes requires eclectic combinations of suggestive tests and judgment. Additionally, I offer a detailed example of how a simulation model can help evaluate new policy combinations that affect the screening of loan applications.

Keywords: economic methodology, simulations, banking, regulations

JEL Classification: B40, G21, G38