Announcement

Collapse
No announcement yet.

Economics, a love story

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • Economics, a love story

    A nice blog post at Time.

    It's easy to rag on economics as not being a "real" science, and I try not to do things that are too easy. But in recent weeks I've really started to wonder. It is fascinating, and frightening, to me that smart economists can disagree about whether what the economy needs right now is more government spending or less. The debate isn't about how much stimulus, or how much austerity, or the way such stimulus/austerity should be applied, but rather about which one is called for in the first place. How is this possible? It's like a group of doctors not being able to agree whether a patient's blood should be thinned or coagulated. What am I supposed to make of that?

    Read more: http://curiouscapitalist.blogs.time....#ixzz0wFy2w48d
    ...the economy is as much a product of sociology and policy as it is pure-form economics. Yet we'd not expect a sociologist or a political scientist to be able to write a computer model to accurately capture system-wide decision-making. The conclusion I've come to: while economists may have an important perspective on whether it's time for stimulus or austerity, maybe we should stop looking to them as if they are people who are in the ultimate position to know.
    Ever since the crash started in 2008 I have been reading MarketWatch, CNBC and a bit of the wall street journal on a daily basis.

    The one overriding thing that comes out in all that reading is that nobody agrees on anything for any period of time.

    So why do so many people quote economic theory as if it where as proven as something like Newtonian physics? Many people believe in their view point. From my studies in psychology and what I know about economics is that the two areas are about equal as far as provability.

    Yet, like that blog stated, nobody really makes huge decisions and statements, especially with the confidence have in their decisions and statements, based with regard to sociology or psychology.

    But with economics that kind of thing seems to happen all the time.

    Why? Why do people have so much faith in it?

    I have the feeling that it is simply because those that have gained a certain amount of wealth use that power to pick the "economics" that best serve them. Or individual pick the economic theories that back their belief system.
    I’m not racists, I have republican friends. Radio show host.
    - "The essence of tyranny is the denial of complexity". -Jacob Burkhardt
    - "A foolish consistency is the hobgoblin of little minds" - Emerson
    - "People should not be afraid of it's government, government should be afraid of it's People." - Line from V for Vendetta
    - If software were as unreliable as economic theory, there wouldn't be a plane made of anything other than paper that could get off the ground. Jim Fawcette
    - "Let me now state what seems to me the decisive objection to any conservatism which deserves to be called such. It is that by its very nature it cannot offer an alternative to the direction in which we are moving." -Friedrich Hayek
    - "Don't waist your time on me your already the voice inside my head." Blink 182 to my wife

  • #2
    Re: Economics, a love story

    I've had this thread sitting in a Firefox tab for a month now and I finally got a chance to go check out the story. Response 15 in the comments (from drdro3) mirrors my own view of economics as a science, that it's like meteorology, not physics.
    Dude, seriously, WHAT handkerchief?

    snooggums' density principal: "The more dense a population, the more dense a population."

    Iliana: "You're a great friend but if we're ever chased by zombies I'm tripping you."

    Comment


    • #3
      Re: Economics, a love story

      http://whatpaulgregoryisthinkingabou...omics-101.html

      There is no need for a new Economics 101. What we have experienced over the past two years is nothing new. There is nothing unexpected that has happened. Events however should serve as “teachable moments. What is surprising is that Keynesian economists do not seem to have learned its lessons.
      Dude, seriously, WHAT handkerchief?

      snooggums' density principal: "The more dense a population, the more dense a population."

      Iliana: "You're a great friend but if we're ever chased by zombies I'm tripping you."

      Comment


      • #4
        Re: Economics, a love story

        Originally posted by El_Gringo_Grande View Post


        So why do so many people quote economic theory as if it where as proven as something like Newtonian physics?
        Why? Why do people have so much faith in it?

        I have the feeling that it is simply because those that have gained a certain amount of wealth use that power to pick the "economics" that best serve them. Or individual pick the economic theories that back their belief system.
        “It is universally appreciated, I think, that theorists are able to tweak their assumptions in order to reach any conclusion they wish. The believability of the conclusion depends not only on the fact that it was reached but on how hard the theorist had to tweak the model to get there.” David Kreps


        “I have the feeling that it is simply because those that have gained a certain amount of wealth use that power to pick the "economics" that best serve them”

        I agree with you on this….you are spot on…


        No bastard ever won a war by dying for his country. He won it by making the other poor dumb bastard die for his country.
        George S. Patton

        Comment


        • #5
          Re: Economics, a love story

          Economic Theory has always had the issue that it models nothing but honesty. As such, application of said theory tends to horribly blow up in their faces. There is no simple solution, sadly, but one I've always wanted to see is an elimination of day traders. The market is not a ****ing casino but it sure is used like one.

          The most honest description of Economics that I ever received was from my High School Civics teacher, where he basically compared it to a predator-prey ecological system where you also need to predict for Rambo air-dropping randomly into the field.

          Comment


          • #6
            Re: Economics, a love story

            Originally posted by Flarfignuggen View Post
            to a predator-prey ecological system where you also need to predict for Rambo air-dropping randomly into the field.
            LOL...So thats what happened to my IRA...


            No bastard ever won a war by dying for his country. He won it by making the other poor dumb bastard die for his country.
            George S. Patton

            Comment


            • #7
              Re: Economics, a love story

              Newtonian physics or classical mechanics has been disproved. I'm not sure that economists actually quote economic theories like you're thinking EGG. Perhaps lay people do. Even physicists don't talk about their own theories as if they are certain. Indeed for the past 60 or 70 years, cutting edge physics hasn't held that there are subatomic particles. The standard model, which physicists use but acknowledge can't be correct is a quantum field theory. It holds that things that we thought or appear as particles on our instruments are actually particular kinds of ripples in a field. But the standard model is taken to be incorrect because it doesn't unify certain forces which seem to call for an underlying explanation. The two major competing grand unified theories, string theory and quantum gravity, don't take there to be particles either. Of course we lay people, and perhaps physicists working in areas other than cutting edge theoretical physics might say things like there are particles. We're just probably wrong. Nobody really knows.

              I don't think that there's anything inherently different. It's not like one is less of a science than the other. One may be less developed than the other. One maybe harder to do than the other. One may be harder to apply than the other. There's nothing wrong with modeling how we think things should go. Physicists do that too. Physics isn't just purely about describing what we see happening. It also has predictive value, and to make predictions in a theoretical framework is to provide a model and see what the model says will happen.

              Comment


              • #8
                Re: Economics, a love story

                Here's my 2 cents as someone in their last semester before receiving a BBA in Economics:

                1) Economists try to provide models which predict behavior. However, there is tiny problem that economics has no way of testing these models. Few and far between are actual instances where an economist can set up a testable hypothesis. In essence, it is a soft science trying to be a hard science. In the end, we are forced to look at loads of data which we have no control of whatsoever.

                2) Hypotheses are meant to be disproved. I wouldn't even call a lot of economic theories hypotheses, but more like educated guesses. There are some instances where you can see models moving and feel like you know exactly what is going on there, but you have to remember economists cheat by including this in all of their models: Ceteris Paribus (All other things held equal/constant). In essence, we are saying the model does a good job of looking at these variables, but there may be and probably are other factors that we can't or don't take into account.

                3) Most of the talking heads you see on TV are not economists. The Ron Pauls and Ben Steins do not have degrees in economics, but these are the kind of people that get air time on all the major news outlets.

                Comment


                • #9
                  Re: Economics, a love story

                  What is surprising is that Keynesian economists do not seem to have learned its lessons.
                  The problem is fundamentally rooted in Keynesian economics itself. When you use paper money (via a central bank mechanism) to artificially manipulate the market, you're creating the classic boom-bust cycle. The nation's that use this type of economics (like the U.S., and much of the western world) will see their currencies devalue until they become worthless and their economies collapse. If the government keeps some gold/silver backing to its currency, and it keeps its deficits under strict control, the booms will be less destructive and the currency devalues much more slowly. The allure of fully fiat money is too much of a temptation for countries that seek to dominate the world militarily, and provide a generous welfare state domestically.

                  Keynesian economics favors welfare states and military empires, while Austrian economics favors freedom and long-term economic tranquility.

                  Most of the talking heads you see on TV are not economists. The Ron Pauls and Ben Steins do not have degrees in economics, but these are the kind of people that get air time on all the major news outlets.
                  Ron Paul and Ben Stein get lots of airtime? Compared to whom?
                  Like the server? Become a regular! TGNS Required Reading
                  Answers to every server question? Yes! TGNS FAQ

                  Comment


                  • #10
                    Re: Economics, a love story

                    Paul and Stein are popularizers. Just like Isaac Asimov. Asimov wasn't a scientist, but he did a great job in his non-fiction writing of making science approachable by the masses.

                    Electronics has the same issues as mechanics: Different models are best applied for different purposes. There's the very crude and simple DC model, then AC, then Kirkoff's Laws, and finally Maxwell's Equations. Each is best used in a different frequency realm. Sure, you could use Maxwell's Equations to solve common electrical panel problems, but who would want to? Precision is not always needed.

                    Economics is more like climate science, with lots of chaotic phenomena. You could model it with great precision and then get lost in the detail. Or you can try to aggregate what's happening and have the butterfly effect screw with your results. And the skepticism over climate science is mirrored in skepticism over economics. Which makes sense, because basing policies on either has huge effects on our way of life. For example, both potentially lead to big tradeoffs between liberty and survivability. Some value liberty more, while others value survivability, and picking the goal is the domain of politics, not science.
                    Dude, seriously, WHAT handkerchief?

                    snooggums' density principal: "The more dense a population, the more dense a population."

                    Iliana: "You're a great friend but if we're ever chased by zombies I'm tripping you."

                    Comment


                    • #11
                      Re: Economics, a love story

                      Originally posted by aeroripper View Post
                      The problem is fundamentally rooted in Keynesian economics itself. When you use paper money (via a central bank mechanism) to artificially manipulate the market, you're creating the classic boom-bust cycle. The nation's that use this type of economics (like the U.S., and much of the western world) will see their currencies devalue until they become worthless and their economies collapse. If the government keeps some gold/silver backing to its currency, and it keeps its deficits under strict control, the booms will be less destructive and the currency devalues much more slowly. The allure of fully fiat money is too much of a temptation for countries that seek to dominate the world militarily, and provide a generous welfare state domestically.

                      Keynesian economics favors welfare states and military empires, while Austrian economics favors freedom and long-term economic tranquility.
                      Every month we get this junk in the sandbox stated as fact. We don't need economic policy driven by ideologues like Ron Paul who have emotionally invested in one particular set of theories and treat them as gospel. We need people educated in all manner of economic theory who can think more carefully and critically and understand there is no magic bullet.

                      All western currencies will devalue and all western economies will eventually collapse because of it? Give me a break. There were boom and bust cycles before central banking and before Keynes was born. Inflation too. That I can state as fact.

                      Comment


                      • #12
                        Re: Economics, a love story

                        Yeah, let's waste a precious resource by stockpiling unused in warehouses, driving up the price artificially for its industrial value, leading to it being more expensive via the consumer footing the overall bill.

                        As much as people like to pleasure themselves to the notion, the Gold Standard was a stupid, primitive idea that will never come back, bar a complete loss of the last 1500 years of knowledge. It was never as stable as people liked to think; yeah, it might have been mildly better for lower inflation due to the potential limits it imposes in the very long term, BUT, the short term variation was extremely volatile and excessively hard to control. And that's all I'm going to get into it.

                        Comment


                        • #13
                          Re: Economics, a love story

                          It doesn't have to be gold. It can be anything that's completely transparent in quantity, so that users can safely predict value over time. The fewer uncertainties a business has to deal with, the better its predictions and hence the greater its productivity. Currency should be rock solid so you don't have to guess what it's value will be tomorrow or next year.

                          The big problem with the Federal fiat currency is that it's totally NOT transparent. There's no way to know what its value will be over time. And the current deficit spending is making it even less reliable.
                          Dude, seriously, WHAT handkerchief?

                          snooggums' density principal: "The more dense a population, the more dense a population."

                          Iliana: "You're a great friend but if we're ever chased by zombies I'm tripping you."

                          Comment


                          • #14
                            Re: Economics, a love story

                            Every month we get this junk in the sandbox stated as fact. We don't need economic policy driven by ideologues like Ron Paul who have emotionally invested in one particular set of theories and treat them as gospel. We need people educated in all manner of economic theory who can think more carefully and critically and understand there is no magic bullet.

                            All western currencies will devalue and all western economies will eventually collapse because of it? Give me a break. There were boom and bust cycles before central banking and before Keynes was born. Inflation too. That I can state as fact.
                            I'll be honest, I hold a preference for a gold backed currency and have disdain for Keynes model. That is no secret as I have defended it at length in a previous post a few months ago. I cannot speak for Ron Paul's formal education in economics, but from reading his books he is educated on both Keynesian economics and Austrian (even admitting some of the failures of the latter).

                            It is true there were boom and bust cycles, and inflation before Keynes was around, but those were a result of fractional reserve banking, the same centuries old scheme Keynes "improved" upon. The common factor among them all is that eventually it all comes crashing down due to fundamental problems with that type of economics. The notion of a western world collapse is realistic as our currencies and economies become increasingly intermingled.

                            Yeah, let's waste a precious resource by stockpiling unused in warehouses, driving up the price artificially for its industrial value, leading to it being more expensive via the consumer footing the overall bill.
                            I'd rather have gold remain expensive and precious than being unable to purchase food, medical services, and a modest home at drastically inflated prices due to generations of currency manipulation and inflationary government spending.

                            As much as people like to pleasure themselves to the notion, the Gold Standard was a stupid, primitive idea that will never come back, bar a complete loss of the last 1500 years of knowledge. It was never as stable as people liked to think; yeah, it might have been mildly better for lower inflation due to the potential limits it imposes in the very long term, BUT, the short term variation was extremely volatile and excessively hard to control. And that's all I'm going to get into it.
                            I disagree, if a currency is fully backed by gold, it will be stable barring any government intervention or attempts to manipulate it (clipping coins, deluding with other metals etc...). More details about its volatility would be interesting so I can offer a good rebuttal.
                            Like the server? Become a regular! TGNS Required Reading
                            Answers to every server question? Yes! TGNS FAQ

                            Comment


                            • #15
                              Re: Economics, a love story

                              You don't need a fiat currency to have business cycles. Everything in nature oscillates. Why not markets? In my own industry, there's a natural cycle involving the rate at which new manufacturing technology is absorbed and the next generation of technology is needed to differentiate one's product. AFAIK, it has nothing to do with currency.

                              But centralized currencies mean that the entire market cycles with that currency. So the entire market goes bust at the same time, and the jobless rate with it. Whereas in my industry, if you lose your job due to its own cycle, you can usually find a job in another industry that's on its rising slope.

                              Surely everyone at TG knows that when a group of soldiers crosses a bridge, you don't march across in lock-step, lest you hit the natural frequency of the bridge and bring it crashing down. Instead, everyone walks at his own gait, so no single frequency excites the structure.
                              Dude, seriously, WHAT handkerchief?

                              snooggums' density principal: "The more dense a population, the more dense a population."

                              Iliana: "You're a great friend but if we're ever chased by zombies I'm tripping you."

                              Comment

                              Connect

                              Collapse

                              TeamSpeak 3 Server

                              Collapse

                              Advertisement

                              Collapse

                              Twitter Feed

                              Collapse

                              Working...
                              X