Mark Thoma sends us to Justin Fox, who tries hard to be sympathetic to the latest hard science/engineering guy bustling in to show those dumb economists how to do it. But as Fox clearly realizes, the reason we don’t have a new economic paradigm isn’t that economists are dumb, or even that all of them are rigid in their beliefs (obviously some are, or I wouldn’t have as many arguments as I do.) The reason, instead, is that it’s hard.

Specifically: we have a body of economic theory built around the assumptions of perfectly rational behavior and perfectly functioning markets. Any economist with a grain of sense — which is to say, maybe half the profession? — knows that this is very much an abstraction, to be modified whenever the evidence suggests that it’s going wrong. But nobody has come up with general rules for making such modifications.

So, on the behavioral side, clearly people aren’t perfectly rational — but there are lots of ways to be slightly stupid, and it’s very hard to come up with a general theory about which of these ways they will choose in any given situation. Behavioral economics is a fine thing, but it’s more a collection of interesting and sometimes useful observations than a general, well, paradigm that can offer guidance across a wide range of cases.

Meanwhile, markets also fail much of the time — but while we know a fair bit about what happens to particular markets in practice, we don’t seem close to a general paradigm here either.

So how do you do useful economics? In general, what we really do is combine maximization-and-equilibrium as a first cut with a variety of ad hoc modifications reflecting what seem to be empirical regularities about how both individual behavior and markets depart from this idealized case. And people using this kind of rough-and-ready approach have done really well since 2008, on everything from inflation to interest rates to the effects of austerity.

But here’s the thing: economists have done their work this way for generations. So it’s really not a new paradigm. If anything, the true new paradigm was the attempt to justify everything with maximization and equilibrium — but that’s the paradigm that failed.

Now maybe, someday, someone will find a way to do something truly new — integrate neuroscience into economics for real, not as a marginal research topic, or turn agent-based models into a useful tool. I’m for it! But merely noting the foolishness of some economists and calling for a new paradigm in the abstract won’t get us there.