When can economists claim to "understand" an event or phenomenon? It's a common refrain that economists still don't have a solid grasp of the causes of business cycles (in particular, the Great Depression), despite decades of serious study. What would it take to say that this (or another event/phenomenon -- economic growth, the collapse of the Soviet Union, the causes of inequality) is "understood"? Are any key questions in economics "solved"?

Some additional questions for discussion- Can economists say that they "understand" something when they can craft policy to manipulate it as desired? Does the ability to predict phenomena constitute "understanding"? Is something "understood" when there is a broad consensus in the profession?
I'm not sure there is a correct answer to this question (or if there is, we don't understand it yet!), but here's a first shot at an answer:

Even if you look at the natural sciences, there is a process whereby ideas are refined over time. In the 17th century people 'understood' mechanics thanks primarily to Newton. But that didn't mean Einstein couldn't improve on the theory with relativity. One approach would then be to say that we never really understood mechanics in the first place, we were just confused until Einstein came along. But that binary view of understanding sets a very high threshold that economics may never meet; indeed, by that standard it might very well be that humanity never truly understands anything. I think most good scientists would be very cagey about ever describing a problem as solved—theories cannot be proven correct, only 'not disproven' and subsequently improved.

An alternative view would therefore be that understanding is measured on a continuous scale so that partial understanding is recognised and new discoveries refine that existing understanding. One might then define something as (at least partially) understood when


  
  Economists share a broad professional consensus on the matter.
  The consensus view is consistent with available empirical data.
  The consensus view represents a meaningful contribution over and above the knowledge that might be expected of a lay-person.
  


An issue for which economics performs better on all three dimensions might be said to be better understood.


Something like the effect of a rent ceiling, the role of adverse selection in a market, the potential benefits of free trade, or the static welfare effects of monopoly appear to be fairly well understood (at least by social science standards) because economists are in broad agreement, these things are not well-understood in society at large, and economists' views on these issues are generally bourne out empirically. 
Things like the effects of a fiscal stimulus, the dis-employment effects of a minimum wage, or the dynamic relationship between competition and innovation seem to be less well-understood because economists frequently disagree on these issues—both with each other and with the data.




The rationale for the three components of the definition is as follows:


Consensus is not a direct measure of understanding. But I include it as a proxy to get at the fact that there are some areas of economics in which seemingly convincing theories that match some aspects of the data quite well are in direct conflict with alternative theories that also do well in some respect. It seems like having two conflicting views on an issue that you are not able to reconcile ought to be penalised in any measure of understanding.
Obviously, economics is an empirical undertaking—it aims to describe and explain empirical phenomena. A description of or explanation for a phenomenon that is not consistent with data is clearly not part of a good understanding of that phenomenon.
This criterion is aimed at getting at the idea that economists have been especially successful in improving upon a common sense understanding of the world in some areas. In these areas, economists might be viewed as having a particularly good understanding relative to society at large. Consider two examples: (i) a monopolist will charge more when demand is less elastic; (ii) two countries can benefit from trade even when one of them has an absolute advantage in every good. Both are issues that economists agree on, but (i) is common sense whereas (ii) is utterly counter-intuitive. The definition is designed to capture the idea that understanding (ii) is more meaningful because society depends upon economists to figure such things out. Society could probably figure out (i) without economists' help.