(hat tip: Dan Mitchell of Cato.org) Why the miserable track record?
In my opinion here are the reasons:
One, model based prediction.
Most economists deem math models as representative of reality. They think that their models incorporate all the working variables required to represent market's action.
This is false, as Ludwig von Mises argued, ``The problems of prices and costs have been treated also with mathematical methods. There have even been economists who held that the only appropriate method of dealing with economic problems is the mathematical method and who derided the logical economists as "literary" economists."
Two, hostage to past performance and dogmatism.
Given their penchant to view reality as a construct of economic models, they become susceptible to fall for the "past-performances-determine-the-future" trap.
For instance, many have used the circumstances of the Great Depression as parallel paradigm to project the future given today's predicaments. They seem to forget that the Great Depression had been a product of the massive engagements of protectionism worldwide, and various anti-market and anti-foreign bias based policy interventions that have not emerged in the same degree today.
So mainstream protectionists, who impliedly have been 'clamoring' or 'desiring' to see a replication of the Great Depression paradigm, advocate similar mutually destructive policies just to have their convictions validated.
In other words, for such a clique, dogmatism precedes reality.
Unfortunately, the evolving technology based platform from which the world has been transitioning into (information age) has apparently served as major deterrent to the proliferation of such closed door-beggar thy neighbor policies.
In addition, much of the world through emerging markets, which have benefited from recent globalization trends, has been reluctant to jump into the protectionist cockamamie bandwagon.
This great quote attributed to Bertrand Russell encapsulates the surfeit of fallacies and myths seen in the profession,
``What a man believes upon grossly insufficient evidence is an index into his desires - desires of which he himself is often unconscious. If a man is offered a fact which goes against his instincts, he will scrutinize it closely, and unless the evidence is overwhelming, he will refuse to believe it. If, on the other hand, he is offered something which affords a reason for acting in accordance to his instincts, he will accept it even on the slightest evidence. The origin of myths is explained in this way.”
Three, political and vested interests.
The core of mainstream economics have been built around the ideas of John Maynard Keynes from which political institutions have warmly appropriated as their operating creed.
That's because Keynesianism is a proponent for big government, and inflation, in the words of James Buchanan,``The allocative bias toward a larger public sector and the monetary bias toward inflation are both aspects of, and to an extent are contained within, a more comprehensive political bias of Keynesian economics, namely, an “interventionist bias,” which stems directly from the shift in paradigm."
Unfortunately ideas and reality don't square, adds James Buchanan, ``The political process within which the Keynesian norms are to be applied bears little or no resemblance to that which was implicit in Keynes’ basic analysis. The economy is not controlled by the sages of Harvey Road, but by politicians engaged in a continuing competition for office. The political decision structure is entirely different from that which was envisaged by Keynes himself, and it is out of this starkly different political setting that the Keynesian norms have been applied with destructive results." (highlights mine)
In addition, the economic profession appears to have been "bought" or largely influenced by government.
For instance according to the Huffington Post, the US Federal Reserve ``doles out millions of dollars in contracts to economists for consulting assignments, papers, presentations, workshops, and that plum gig known as a "visiting scholarship."
In other words, many in the economic profession function as propaganda mouthpieces for the government.
Hence, the views of mainstream economists have been skewed by conflict of interests and hardly reflects on reality. This is what one might call the Agency Problem.
Here is a trenchant satire about mainstream economists...
``A mathematician, an accountant and an economist apply for the same job. The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."
``Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four - give or take ten percent, but on average, four."
``Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says "What do you want it to equal?"
Four, oversimplification of analysis.
Economic models and dependence on statistical aggregates allow economists to assume that people's action or reactions work in the same manner even in facing the same circumstances.
Unfortunately this isn't true, that's because everyone have different scale of values or priorities.
Besides, reality means more options (or complexity) than what most economists presume (who assume laboratory conditions).
Yet economists are merely human beings and are thus subject to cognitive frailties. This means they can be swayed by mental shortcuts 'heuristics' or impulse based decision making or analysis derived from the agency problem incentives.
The only difference is that they can they can embellish their statements or studies with technical economic gibberish. As Nassim Taleb of the Black Swan fame says, ``Let us remember that economists are evaluated on how intelligent they sound, not on a scientific measure of their knowledge of reality."
Many economists believe that their proficiency in math models and or economic theories privileges them with a clear edge over the rest of humanity that they resort to pedantic moralization of the world's problems accompanied by their sanctimonious prescriptions to such problems.
This is a practice of conceit aside from the cognitive folly known as overconfidence.
As Friedrich von Hayek warned in his Nobel Laureate speech, ``To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the overconfident because their experiments may after all produce some new insights. But in the social field, the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous-ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims."
In short, be aware of the hazards from the pretentious knowledge peddled by the mainstream.
Bottom line: Not because most in the economic profession cannot be trustworthy doesn't mean that everyone is.
One way is to examine the incentives that prompts for an economist or expert to argue his point. The other is to keep an open mind to diversified ideas.
And that's why it is recommended that everyone develop their own 'independent' judgment by learning the ropes, since economics encompasses all fields related to human social interactions.
An apt quote from Professor Joan Robinson of Cambridge University, ``The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."