Even Milton Friedman has said mainstream economics does not deal with real economic problems.
What's wrong with "neoclassical" or "mainstream" economics as it is taught, practiced, and widely believed today? Here are the words of six winners of the Bank of Sweden Prize (Nobel Prize) for Economics saying, in essence, that the subject is simply irrelevant to the real world.
[E]conomics has become increasingly an arcane branch of mathematics rather than dealing with real economic problems. Milton Friedman
[Economics as taught] in America's graduate schools . . . bears testimony to a triumph of ideology over science. Joseph Stiglitz
Existing economics is a theoretical [mathematical] system which floats in the air and which bears little relation to what happens in the real world. Ronald Coase
We live in an uncertain and ever-changing world that is continually evolving in new and novel ways. Standard theories are of little help in this context. Attempting to understand economic, political and social change requires a fundamental recasting of the way we think. Douglass North
Page after page of professional economics journals are filled with mathematical formulas. . . . Year after year economic theorists continue to produce scores of mathematical models and to explore in great detail their formal properties; and the econometricians fit algebraic functions of all possible shapes to essentially the same sets of data. Wassily Leontief
Today if you ask a mainstream economist a question about almost any aspect of economic life, the response will be: suppose we model that situation and see what happens. . . . Modern mainstream economics consists of little else but examples of this process. Robert Solow
Mainstream economics is under (well-deserved) attack. There are even heterodox economics journals like my favorite, real-world economics review, an exclusively-online journal that was until this year named the post-autistic economics review. (It is the source of the above quotations.) Although it is militantly heterodox, it has attracted submissions from many leading economists including Kenneth Arrow, James Galbraith, Robert Heilbroner, Jeffrey Sachs, and Joseph Stiglitz.
But the mainstreamers still control the high academic ground and are fighting fiercely. In 2004, Notre Dame renamed its economics department the Department of Economics and Policy Studies and brought in new professors to create a neoclassical Department of Economics and Econometrics. The recently-ghettoized professors have posted a petition that describes the situation and seeks support for the idea that their group should not be eliminated and that required economics courses not be exclusively neoclassicist orthodoxy. The petition is worth reading because it describes how economics is taught in other major schools, which is, of course, why Notre Dame created the new department.
Also worth reading is the home page of real-world economics review, which features short essays on, inter alia, A Brief History of the Post-Autistic Economics Movement, The Strange History of Economics (about how mainstream economics came to divorce itself from reality), and Policy Implications of Post-Autistic Economics, and links to several books.
Meanwhile millions of us have graduated believing neoclassical economic theory instead of our own lying eyes. How long will this go on? As a junior officer Colin Powell asked a mentor how long the US would stick with a certain weapons system that had some obvious vulnerabilities; the answer was, "Until it fails in war." It seems neoclassical economics will continue to be our conventional wisdom until it suffers a spectacular failure. Are we there yet?
Skeptic