The 5 Stages of a Dismal Scientific Revolution
In most people’s minds, the recent financial crisis has been the last nail in the coffin of the Chicago School of Economics’ philosophies. That’s certainly what members of the saltwater school think, and I think that a lot of the public would agree with them. But what do they think in Chicago?
John Cassidy went to talk to some of them, and he wrote about what he found in the New Yorker (overview, Posner, Fama, Cochrane). The short version is that they don’t think that it proves anything of the sort. In fact, some of them even deny that there was a financial crisis at all.
Jonah Lehrer had a blog post yesterday about why this is what you would expect. You should also check out his recent Wired article about the neuroscience of learning from failure and Kevin Dunbar’s field studies of how scientists actually do their work.
Lehrer says that the reaction of the freshwater economists to recent events is a good example of how the discovery process really works. It also illustrates that you need to be interacting with people with diverse viewpoints to be able to benefit from failure. Because the members of the Chicago school only talked to each other they interpreted new information in terms of their theory, rather than modifying their theory to reflect new information.
Here’s Paul Krugman’s take from last September. As for Paul and the other saltwater economists, maybe they can help get the freshwater’s through the anger stage and into bargaining. But as Kübler-Ross could tell you, it’ll take some time.