There was a long article in The Economist magazine entitled, "What went wrong with economics", July 16th 2009.
http://www.economis t.com/printediti on/displayStory. cfm?Story_ ID=14031376
The article started with these 2 paragraphs,
"OF ALL the economic bubbles that have been pricked, few have burst more spectacularly than the reputation of economics itself. A few years ago, the dismal science was being acclaimed as a way of explaining ever more forms of human behaviour, from drug-dealing to sumo-wrestling. Wall Street ransacked the best universities for game theorists and options modellers....
In the wake of the biggest economic calamity in 80 years that reputation has taken a beating. In the public mind an arrogant profession has been humbled. Though economists are still at the centre of the policy debate—think of Ben Bernanke or Larry Summers in America or Mervyn King in Britain—their pronouncements are viewed with more scepticism than before. The profession itself is suffering from guilt and rancour. In a recent lecture, Paul Krugman, winner of the Nobel prize in economics in 2008, argued that much of the past 30 years of macroeconomics was 'spectacularly useless at best, and positively harmful at worst.'...”
Economics' simplest definition is that "it is the study of proper allocation of limited resources." This definition is applicable in the past, in the present, and in the future.
What could go wrong in the most recent financial turmoil were the economists who mis-practiced economics. Resources are limited, and they will always be as demand and wants for certain goods and services will never be satisfied, even if global GDP will be 5x or more of its current size.
Consider the US government, always in fiscal deficit and forever raising its public debt. To my mind, it is already a failure of the economists and politicians in the US government. Common sense economics say that with limited resources, if revenues are not enough, then stop bloating the expenditures. Don't over-spend, don't over-borrow, because you will only pass your fiscal irresponsibility to the next generation. Does one need to take up financial economics or Econ. 201 and Econ 301 to comprehend this?
The problem with many economists working with government and even in multilateral institutions like the WB, ADB, IMF, UN, etc., is that politicians and political expediency of poverty -- including self-imposed poverty due to laziness and personal irresponsibility -- have ruled their lives and thinking. Fiscal resources are in the red every year, but the politicians say "find ways to borrow, find ways to further hike taxes and fees", and the economists obey them, sometimes blindly, sometimes with full agreement.
In the most recent financial turmoil, most economists I think, were with the politicians in the white house and capitol hill in saying "too big to fail companies should not be allowed to fail; here are some tax money and here are more IOU papers." As if US government debt was still small or non-existent.
So, what's wrong or what went wrong with economics?
What's wrong with economists?
They sometimes behave like politicians throwing away subsidies, expensive welfare programs and various political favors.
What's wrong with this article?
The author forgot the definition of Economics when he took Econ. 11 several decades ago.
The textbook definition of economics is like what you've written: The social science that studies how to properly allocate scarce resources in order to satisfy the needs and wants of man.
However, a better definition would be along the Austrian thinking of Mises, Rothbard, and Hayek.
Economics is the study of how man acts to meet certain ends in face of scarcity. Economics is part of praxeology or the science of human action.
Thanks Elevic. Yes, if left on their own and there are a few, general rules that impose restrictions that apply to all (no stealing, no killing, no rape, etc.), people will be rational to allocate resources at their disposal to the wisest use possible. Few will be drinking and partying too often because government will take care of their kids' education, healthcare, nutrition, etc. anyway.
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