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There are many models considered common knowledge in economics that possess strong explanatory and predictive power.

Though in recent times people tend to pick and choose which models they base their thinking on, depending upon their chosen political agenda.

Brief example: There has been a lot of political hand waving about possible inflation or even hyperinflation. If you look at a version of the Phillips Curve, unemployment and inflation have an inverse relationship. High unemployment = low inflation or worse. And inflation has remained low, while deflation has actually been more of a threat, and is actually a problem in many countries.




> Phillips Curve

Wikipedia seems to think that the 1970s in the US show that it doesn't work.


Yes, the Philips Curve is pretty much the poster child example of the Lucas Critique. That is, observed invariants often cease to be invariant when policy changes. When we well and truly went off the gold standard the Philips Curve ceased to have predictive power for the US economy.

More details: http://www.themoneyillusion.com/?p=9677




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