Michael Blowhard summarizes two books attacking mainstream economics.

For most of the "Changing Face" crowd, the field needs some correction, but nothing fundamental. One mathematical-modeling whiz says straight-out that there's nothing wrong with mathematical modeling that better mathematical modeling can't fix. For the heterodox economists whose thoughts are put on display in another book, "A Guide to What's Wrong With Economics," edited by Edward Fullbrook, what's wrong with economics is far more basic, and the fixes that are needed are far more wide-ranging.

Read his entire post.

A lot of the criticism of economics centers on the assumptions of self-interest and rationality. Those don't bother me so much. I think that the amount of interesting and empirically supported predictions that you get out of those assumptions far outweighs the occasional clinker.

If you think in terms of the analogy of drilling for oil, I think there's still a lot more to be found drilling in the fields of self-interest and rationality than in the field of behavioral economics.

I think that where economists become the proverbial drunk looking for a lost watch under a lamp post is when they insist on formal mathematical modeling. We need to find a way to maintain professional standards without forcing people to turn their ideas into equations.

You are right the test of a science is the results from using its theories, not the assumptions of the theories. This was the point made by Friedman in, "The Methodology of Positive Economics." The world behaves as if people were maximizing utility. We don't pretend to know what actually goes through their minds. Prices change as if they were following the laws of supply & demand. The supply & demand curves don't actually exist.

Computer simulation could achieve the same results faster than formal mathematical solutions. In most cases, you don't have to worry about numerical stability the way you would if solving partial differential equations.

I suspect that economics tends to model what humans do (in a given situation), rather than what makes them happy. My main problem is that it seems that economists tends to assume the two are the same and advocate public policy based on this assumption.

For example, I think people tend to value stability, even at the cost of growth. I don't think I know anyone who wouldn't take a moderate cut in salary in exchange for freedom from fear of losing one's job. This desire is echoed in the policies we look for in our politicians (but won't necessarily follow up on it).

The base question becomes "what is self-interest"? If we eat too many chocolates and feel rotten the next day, should economic policy be aimed at enabling ourselves to eat *more* chocolate or at guiding us towards moderation even as our short-term desire is frustrated?

Not easy questions, in my ever so humble opinion :-).