Hayek discussing in his Nobel Prize lecture the causes and cures of unemployment, admits his ignorance:
It has, of course, to be readily admitted that the kind of theory which I regard as the true explanation of unemployment is a theory of somewhat limited content because it allows us to make only very general predictions of the kind of events which we must expect in a given situation. But the effects on policy of the more ambitious constructions have not been very fortunate and I confess that I prefer true but imperfect knowledge, even if it leaves much indetermined and unpredictable, to a pretence of exact knowledge that is likely to be false. The credit which the apparent conformity with recognized scientific standards can gain for seemingly simple but false theories may, as the present instance shows, have grave consequences.
A few years ago, a journalist I respected asked me if NAFTA had been good for the United States, on net. I told him the question could not be answered empirically. Yes, the Economic Policy Institute had managed to estimate not just the total number of jobs NAFTA had destroyed (766,030–love that precision!), but could even calculate the number by state. But I confessed to being unable to even take a stab at the question. I told him that while you could certainly make an attempt to count factories that had moved to Mexico or Canada, it would be difficult or nearly impossible to assess the jobs that had been created because lower-priced goods were now available to Americans and that in turn freed up resources to create new goods and expanded availability of existing goods.
And that was just employment. How could anyone possibly measure the full impact across all Americans when so many other factors were changing at the same time and so much of the effect of expanded trade was impossible to observe directly and measure? I told him I was happy to tell him the logic of why I thought expanding trade was good for most Americans but I had to admit that I was unable to quantify that impact in any meaningful way.
His reaction was actually one of disgust and bewilderment. Or maybe just disbelief. You’re a professional economist–you have to be able to make these kinds of calculations, he said. I apologized and he said that my response of empirical agnosticism was simply unacceptable.
I should have quoted Hayek and said that I “prefer true but imperfect knowledge, even if it leaves much indetermined and unpredictable, to a pretence of exact knowledge that is likely to be false.”
