It has proven almost completely useless from a predictive standpoint.
That's not true at all, economics can predict many things. Here are some things that economics can accurately predict:
mv = pq is very well tested.
Economics can accurately predict that if you print too much money, you will get inflation. This has been verified over and over in many countries and at many times.
The idea that increasing demand for a product (without modifying supply) will increase the price of that product is predictive and well supported.
Price controls cause shortages: this happens over and over.
When someone says, "economics is useless from a predictive standpoint" they are showing their ignorance.
I presume you mean that m is usually positively correlated with p over some unspecified time horizon?
A problem I often find with economic truisms is that they tend to carefully ignore the time component. Over a short enough time horizon this is clearly untrue. Over a long enough one it's pretty much tautological. Market theory has a similar property.
> if you print too much money, you will get inflation
Again, usually. Hasn't really been happening over the last few years in the US and Europe. Presumably we just wait for some arbitrary long period until inflation starts to rise again? Does the theory tell us how long?
So it's not that economics can't make predictions. It's just that they're often not useful predictions. It is quite good at postdictions, of course. The utility of which is at least a tad suspect.
«A problem I often find with economic truisms is that they tend to carefully ignore the time component.»
It's a bit of an aside, but I feel like I keep waiting for someone to finally invent a proper calculus of economics. Taking economics classes side-by-side electrical engineering classes in college the lack of time in most economics work seemed particularly jarring at that time. I kept wanting to convert economics to some semblance of electrical diagrams and investigate deeper the first and second derivatives of money with respect to time... (It's not the potential voltage (money) in an electrical diagram that is interesting, but differentials of voltage and current flow (and resistances to that), neither of which are well defined as concepts in any of the economics I saw in school.)
I don't know what level/classes you're taking, but I'm doing graduate classes in economics at the moment, and most concepts in macro are time-based (studying transient/long-term dynamics of systems, finding steady-states etc.).
In fact, it reminds me a lot of my undergrad electrical engineering classes.
All of the economics courses I took in college were undergrad. It says something about the field if the comparison is between graduate level economics classes and undergraduate level engineering classes.
Again, usually. Hasn't really been happening over the last few years in the US and Europe. Presumably we just wait for some arbitrary long period until inflation starts to rise again? Does the theory tell us how long?
The reason you even have to ask this question is because you don't understand MV = PQ.
MV = PQ is true by definition. There is nothing to test about it because it's tautologically true.
Then again, people go astray all the time when they try to fill the equation with causal implications which can be tested.
For example, when people said "Increasing M will increase P" and predicted hyperinflationary mayhem as a consequence of quantitative easing. Those predictions have failed entirely, mostly because rather than change P or Q, the change in M simply changed V instead. (There is a plausible argument that quantitative easing has contributed to asset price inflation, but that doesn't have anything to do with MV = PQ either, because the P in that equation isn't about asset prices.)
Because of these failures, the value of MV = PQ for economics as a science is basically zero.
"Economics can accurately predict that if you print too much money, you will get inflation."
Not really. Hyperinflation it's normally associated to a supply problem, for instance the archetypical examples: the Weimar Republic and Zimbabwe (see http://bilbo.economicoutlook.net/blog/?p=3773 for a detailed explanation.)
Anyway, I agree that good economics it's useful and can explain and predict frequently.
