Chapter 1Introduction: Economists as Innovators

Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.

—John Maynard Keynes

Kids ask the best questions, like the one I am sure most economists who have children get at some point in their lives: Mom or Dad, what do you actually do? Not only have my own children asked that question, but even my mother couldn’t understand why I wanted to go on after finishing college to earn a doctorate in economics (she told me to go law school instead because it would enable me to get a real job, so I went to a school that let me earn both degrees, on the theory that at a relatively young age it would be best to diversify). One reason I have written this book is to tell you why my instincts about economics were right, not just for me but many others in the very practical world of business and policy making.

I suspect most everyone who is not an economist thinks economists are trained to be soothsayers, predictors of how the economy will perform over coming months, and perhaps a year or two, or longer: to tell us how much inflation or unemployment will rise or fall, and how fast total output (GDP or gross domestic product) will or will not grow. Perhaps even more important, many non-economists may believe that economists can tell them what’s going to happen to the stock market, and maybe their particular stocks, and to the prices of their houses. Some highly ...

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