As we can see from the current dismal state of economic affairs, economies are incredibly complex systems, and policymakers who are forced to act in the face of this uncertainty and complexity want guidance. And over the last half century, neoclassical economists have not only been more than happy to offer it, but largely been able to marginalize any other disciplines or approaches, giving them a virtual monopoly on economic policy advice.There's that weasel-word, "problematic", again. Angus at Kids Prefer Cheese responds. "Any econ 101 class which argued for the points discussed above is a misleading class that does not well-serve the students." Go, read, and understand. Peter Boettke of Coordination Problem also responds.
But there are two big problems with this. First, despite economists’ calming assurances, we still know little about how economies actually work and the effect of policies. If we did, then economists should have sounded the alarm bells to head off the financial collapse and Great Recession. But even more problematic, even though most economists know better, they present to the public, the media and politicians a simplified, vulgar version of neoclassical economics — what can be called Econ 101 — that leads policymakers astray. Economists fear that if they really expose policymakers to all the contradictions, uncertainties and complications of “Advanced Econ,” the latter will go off track — embracing protectionism, heavy-handed “industrial policy” or even socialism. In fact, the myths of Econ 101 already lead policymakers dangerously off track, with tragic results for the economy and everyday Americans.
Econ 101 isn't what is killing us, it is the denial of the practical impliactions of the science of economics that is. One must always remember that simple economics -- basic principles derived from the logic of action in a world of scarcity -- is not simple-minded. Critics of economics have forever tried to paint Econ 101 into such a corner --- unrealistic and unhelpful for the real world.As William Allen puts it, "The world has suffered more tyranny and poverty because it has embraced bad economics." It's useful for the policy maker to understand that allocative efficiency, while a goal, is not the only goal of policy.