Do economic ideas matter?

[BB]

http://www.economist.com/blogs/freeexcha...epartments

[tuffy]

It is the basis of a person or county's level of success.

[Gerald]

economy is the tool of progress when it is the master you can't control it breakdown is inevitable

[IA]

They certainly do as governments make key decisions based upon the recommendations of economists. Just ask the people of Chile or Argentina whether they matter, after their economies were subjected to the Hayek treatment. They matter a little less in more developed countries because these have greater resistance to change in any direction and generally by the time any government starts to take effective action we are already in the next stage of the economic cycle.
I think it is also important to consider the political environment in which academics are working. In the USA the big money is not going to go to schools of economics which support a social market economy, far less to anyone who suggest more radical arrangements. To complain about the US debt and monetary easing is to over-look the whole historical basis of US economic success, cheap money.
Economists are as guilty of rationalisation as other social scientists and the lack of good hard historical and current evidence is a serious problem. Historians are more and more aware that grand models are seriously misleading unless based on a multitude of close localised studies. Making prescriptions for one economy or sector which does not take account of this simply means half the patients die. I'm less concerned that modern under-graduates do not understand the history of the subject, although the rant from one of the Economist's contributors suggests some elementary history is required as he seems to imagine a pre-social world of exchange, a Enlightenment model of no actuality.
That a recent, and economically literate, British Chancellor like Gordon Brown should have imagined that he could avoid economic cycles smacks of hubris. While a banking sector which is so large it must be aware of macro-economics blindly stumbled into a crash by only looking at their own individual bank's micro-environment and not seeing the bigger picture that resulted from everyone doing the same thing, guided by idiot savant mathematicians.