Quiz: Field Autopsy — Economics

Q: The Reinhart-Rogoff error was significant because: (a) It proved that all economics is unreliable (b) A coding error in an Excel spreadsheet created a false "90% debt threshold" that became the intellectual foundation for austerity policies affecting millions (c) It showed that economics journals don't check arithmetic (d) It demonstrated that graduate students are better economists than professors

(b) The specific 90% threshold gave policymakers a precise, actionable number that justified austerity policies. When the error was found (by a graduate student attempting replication), the threshold largely disappeared — but the policies it had justified had already been implemented.

Q: Behavioral economics succeeded as a correction because: (a) It completely replaced the rational actor model (b) It had high evidence clarity, high alternative availability (modular improvement), and medium switching cost (could be added without replacing existing infrastructure) (c) The Nobel committee endorsed it (d) The financial industry supported it

(b) Behavioral economics succeeded specifically because it could be incorporated modularly — added to existing frameworks rather than requiring their replacement. This dramatically lowered the switching cost and enabled absorption by the mainstream.

Q: "Model monoculture" in economics refers to: (a) Using only one model per paper (b) The convergence of the field on a narrow range of models (particularly DSGE) that share common blind spots, amplifying those blind spots across the global financial system (c) The agricultural economics department's focus on a single crop (d) The practice of all economists using the same software

(b) When central banks worldwide rely on the same family of models, a shared blind spot (like the inability to model endogenous financial instability) becomes systemic. This is exactly what happened before 2008.

Q: The chapter describes the FIRE sector's relationship to economics as: (a) Deliberate corruption of academic research (b) Structural incentive alignment — the financial industry is the primary non-academic employer, creating selection pressure that reinforces research favorable to financial interests (c) A conspiracy between Wall Street and academia (d) Irrelevant to the quality of economic research

(b) The alignment is structural, not conspiratorial. Career incentives (consulting, employment, institutional access) select for and reinforce a worldview favorable to financial industry interests, without requiring deliberate corruption.

Q: The chapter identifies Hyman Minsky as a heterodox economist whose financial instability hypothesis predicted the 2008 crisis. After 2008: (a) Minsky's framework was fully incorporated into mainstream macroeconomics (b) The "Minsky moment" became a widely used phrase, but Minsky's theoretical framework was not incorporated into mainstream models (c) Minsky was awarded a posthumous Nobel Prize (d) The economics profession apologized for ignoring him

(b) The specific outsider was partly rehabilitated (his name became widely known) but the system that excluded him was not reformed. Journal gatekeeping, hiring credentialism, and paradigm-dependent funding remained intact.

Q: The credibility revolution in economics: (a) Solved all of economics' methodological problems (b) Transformed empirical microeconomics through quasi-experimental methods but has not propagated to macroeconomics — the two halves of the discipline are correcting at different speeds (c) Was cosmetic reform that made no real difference (d) Was rejected by mainstream economists

(b) The credibility revolution is a genuine correction in empirical methods, but it has been most effective in microeconomics. Macroeconomics faces higher switching costs and lower alternative availability, and has been less affected by the revolution.

Q: The chapter's subtitle — "The Science That Keeps Predicting the Past" — refers to: (a) Economics' focus on economic history (b) The fact that economic models are typically validated by fitting historical data but fail to predict future events — a form of precision without accuracy (c) Economists' nostalgia for earlier economic theories (d) The tendency of economics to recycle old theories

(b) Economic models are often "calibrated" to fit past data (predicting the past), but fail when applied to future events (especially crises, which the models rule out by assumption). The models are precise in-sample and inaccurate out-of-sample.

Quiz: Field Autopsy — Economics

Test your understanding of Chapter 24. Try to answer without looking back at the text.

Q1. "Physics envy" in economics refers to:

(a) Economists wishing they had studied physics instead (b) Economics importing the mathematical apparatus of physics without physics's empirical grounding, producing precision without accuracy (c) The physics department receiving more funding than the economics department (d) Economists using physics metaphors in their public communication

Answer

**(b)** Economics adopted physics's mathematical tools (equilibrium, optimization, differential equations) for systems that lack physics's stable laws, measurable constants, and repeatable experiments. The result was mathematical formalism that gave the appearance of rigor without the empirical foundation.

Q2. The Reinhart-Rogoff error was significant because:

(a) It proved that all economics is unreliable (b) A coding error in an Excel spreadsheet created a false "90% debt threshold" that became the intellectual foundation for austerity policies affecting millions (c) It showed that economics journals don't check arithmetic (d) It demonstrated that graduate students are better economists than professors

Answer

**(b)** The specific 90% threshold gave policymakers a precise, actionable number that justified austerity policies. When the error was found (by a graduate student attempting replication), the threshold largely disappeared — but the policies it had justified had already been implemented.

Q3. Why did the 2008 crisis fail to produce deep theoretical reform in economics?

(a) Because the crisis wasn't severe enough (b) Because no replacement theoretical framework was ready (low alternative availability), and the switching cost and defender power were very high (c) Because economists proved the crisis was caused by regulation, not theory (d) Because economics doesn't need theoretical reform

Answer

**(b)** The Correction Speed Model predicts that without a ready alternative framework, even a severe crisis will produce only cosmetic reform. Economics had very high switching cost (DSGE models embedded in central banks, journals, and training), very high defender power (connected to external institutions), and low alternative availability.

Q4. Behavioral economics succeeded as a correction because:

(a) It completely replaced the rational actor model (b) It had high evidence clarity, high alternative availability (modular improvement), and medium switching cost (could be added without replacing existing infrastructure) (c) The Nobel committee endorsed it (d) The financial industry supported it

Answer

**(b)** Behavioral economics succeeded specifically because it could be incorporated modularly — added to existing frameworks rather than requiring their replacement. This dramatically lowered the switching cost and enabled absorption by the mainstream.

Q5. "Model monoculture" in economics refers to:

(a) Using only one model per paper (b) The convergence of the field on a narrow range of models (particularly DSGE) that share common blind spots, amplifying those blind spots across the global financial system (c) The agricultural economics department's focus on a single crop (d) The practice of all economists using the same software

Answer

**(b)** When central banks worldwide rely on the same family of models, a shared blind spot (like the inability to model endogenous financial instability) becomes systemic. This is exactly what happened before 2008.

Q6. The chapter describes the FIRE sector's relationship to economics as:

(a) Deliberate corruption of academic research (b) Structural incentive alignment — the financial industry is the primary non-academic employer, creating selection pressure that reinforces research favorable to financial interests (c) A conspiracy between Wall Street and academia (d) Irrelevant to the quality of economic research

Answer

**(b)** The alignment is structural, not conspiratorial. Career incentives (consulting, employment, institutional access) select for and reinforce a worldview favorable to financial industry interests, without requiring deliberate corruption.

Q7. The chapter identifies Hyman Minsky as a heterodox economist whose financial instability hypothesis predicted the 2008 crisis. After 2008:

(a) Minsky's framework was fully incorporated into mainstream macroeconomics (b) The "Minsky moment" became a widely used phrase, but Minsky's theoretical framework was not incorporated into mainstream models (c) Minsky was awarded a posthumous Nobel Prize (d) The economics profession apologized for ignoring him

Answer

**(b)** The specific outsider was partly rehabilitated (his name became widely known) but the system that excluded him was not reformed. Journal gatekeeping, hiring credentialism, and paradigm-dependent funding remained intact.

Q8. The most important difference between medicine and economics, according to the comparative analysis, is:

(a) Medicine has more funding (b) Medicine has institutional mechanisms (RCTs) for evaluating whether its treatments work; economics has no equivalent mechanism for evaluating whether its policy recommendations work (c) Medicine is older than economics (d) Medicine treats individuals while economics treats populations

Answer

**(b)** The accountability gap is the key structural difference. Economic forecasts are not systematically evaluated against outcomes. Policy recommendations are rarely subjected to randomized testing. The gap between what economics recommends and what actually happens is vastly larger than the equivalent gap in medicine.

Q9. The credibility revolution in economics:

(a) Solved all of economics' methodological problems (b) Transformed empirical microeconomics through quasi-experimental methods but has not propagated to macroeconomics — the two halves of the discipline are correcting at different speeds (c) Was cosmetic reform that made no real difference (d) Was rejected by mainstream economists

Answer

**(b)** The credibility revolution is a genuine correction in empirical methods, but it has been most effective in microeconomics. Macroeconomics faces higher switching costs and lower alternative availability, and has been less affected by the revolution.

Q10. The chapter's subtitle — "The Science That Keeps Predicting the Past" — refers to:

(a) Economics' focus on economic history (b) The fact that economic models are typically validated by fitting historical data but fail to predict future events — a form of precision without accuracy (c) Economists' nostalgia for earlier economic theories (d) The tendency of economics to recycle old theories

Answer

**(b)** Economic models are often "calibrated" to fit past data (predicting the past), but fail when applied to future events (especially crises, which the models rule out by assumption). The models are precise in-sample and inaccurate out-of-sample.

Scoring Guide

9-10 correct: Excellent. You understand economics' specific failure modes and correction dynamics.
7-8 correct: Good. Review sections on the incomplete correction (24.4) and persistent failure modes (24.5).
5-6 correct: Fair. Revisit the EMH analysis (24.1) and the Correction Speed Model application (24.4).
Below 5: Re-read the chapter focusing on the structural analysis rather than the specific examples.