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Comment by Retric | Hacker News Reader

Great Depression: industrial production in the United States declined 47 percent and real gross domestic product (GDP) fell 30 percent.

In comparison 2010-2014 was a minor blip, with less than 3% GDP drop, that barely qualifies as a correction. I fear central banks have actually gotten to good at minimizing these issues as we could easily do the same thing in another 10 years, where the great depression created far more systemic change in both organizations and peoples attitude to investing and credit.

PS: People want the post correction economy to match up with the pre-recession economy. However, in the case of irrational behavior the rational economy should have a lower GDP and that's not actually a problem.

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A minor blip where millions lost their jobs, houses, and businesses...

The hard part about economic analysis is you can never know all the variables in a dynamic system. It's a common error to summarize based on variables convenient to the theme you choose to present only to later realize your analysis should have included some fairly obvious factors.

Yes millions lost their jobs, houses, and business. And yes it was a minor blip. If you think otherwise, you don't grasp how bad the Great Depression was. Think about 35% unemployment for years.

The majority of mainstream economists didn't see it coming. That's a totally valid criticism. But they did a much better job of handling it than in 1929, and the damage, while major, was still nothing like the Great Depression.

I think you owe it to yourself to look up how the US defines a job. Most jobs created since 2008 are trmp jobs not actuallu structurally solid jobs so sure there is less unemployment but the employment there is is way more fragile.

The actual criticism is the US not counting people not actively looking for a job as unemployed, thus dismissing those who have given up/gone back to school/retired early/found their calling as a stay-at-home dad.

Still: if you believe today's troubles are in any way comparable to the 20s, you owe it to yourself to read up on that period. Check for "starvation" in the index.

U-3 includes discouraged workers and is back to 1997 levels. U-6 includes discouraged workers and even workers unwillingly working part time when they want full. Even that more expansive definition is back at levels from the 90s.

People who criticize what is and is not counted and don't specify which unemployment number are uninformed.

Federal nutritional programs weren't available until 1932. Social Security Act passed in 1935. It's these programs that eliminated the starvation headlines in the US.

I agree it's not comparable -- many billions more people are negatively affected by the Great Recession simply because world population has grown so much since 1929.

We are talking jobs not the consequence of not having jobs. Point is there are a lot more who have jobs which arent actually jobs on any way comparable to back then.

I see your 42 million unemployed people in 1929 and raise you 100 million people not currently looking for work in 2017.

US population has more than tripled since 1929.

are "unemployed people" and "not currently looking for work" comparable measures, or where there man more people "not looking for work" in 1929? (most women, for example?)

https://en.wikipedia.org/wiki/Unemployment_in_the_United_Sta... suggests that many of those 100million are relatively old or not interested in jobs even if jobs were on offer.

A lot of those 100 million are elderly, children, or permanently disabled. There's a reason we count unemployed in a different manner than just "not currently looking for work."

Don't just regurgitate Trump's tweets: http://www.politifact.com/truth-o-meter/statements/2013/jul/...

Poltifact's description of an environment where all students and retirees don't need to work is not only unlikely but unrealistic.

That's true for correction against irrational exuberance in a static environment. This may explain Japan. But the world is usually dynamic. Technological progress, non-monetary fiscal/regulatory reform, new business innovations (of the non-subprime-mortgage flavor), world events, and population growth are rational factors that can simultaneously push up GDP during or following a correction of previous irrationality.

Which, arguably, shows that economists were not as useless as a group over 2008-2018 as they were over 1929-1935.

Why not? Minimising these impacts it's about finances, not economics. I.E Economics is about predicting these things (which they absolutely didn't), finances is about putting mechanisms in place so that if they happen they will be minimised.

The vast majority of economics is not macroeconomic forecasting. That's somewhat akin to saying that computer science is about making email work.

Sure. But the ones that were about macroeconomic forecasting totally fucked up. That's somewhat akin to saying that the IT department responsible for managing email is about making email work. Not such an unreasonable complaint any more. Particularly galling that we had "crazy" economists claiming that we were in a massive housing bubble which we should expect to burst back in 2006, while at the same time the economists at the Fed were saying, "Look at interest rates! Now is a great time to buy a house!" and coincidentally their mates from college were selling mortgage backed securities. So really its more akin to the IT department responsible for managing the email deliberately sending Nigerian fishing scams to their fellow employees along with the public message of "No, outlook is fine, just click on anything in your inbox!"

Economics is not about predicting, it's about understanding things.

It's basically impossible to do the former at scale for time periods over 6 months, we're slowly getting better at the latter.

One big reason economic forecasting is so hard is that agents in the system you are forecasting are taking your present period forecast into account when acting in future periods.

> One big reason economic forecasting is so hard is that agents in the system you are forecasting are taking your present period forecast into account when acting in future periods.

Meh, that's not terribly convincing, as far as excuses go. For GDP predictions, for example, there are many competing institutions publishing forecasts for any number of countries, sectors, etc. It'd be impossible to take them all into account, especially when they don't agree.

I'm also not sure if "taking it into account" wouldn't actually lead to the opposite: self-fulfilment of those prophesies. After all, the prevalent reaction to an expectation of high growth would be to invest, thus creating that growth.

Right. What I said is generally true for Central Bank forecasts, because they have an effect on interest rates (which they set). But the expectation of change in interest rates changes lending and borrowing behavior now, etc.

That said, it's generally doable to do serious forecasts for a few months in advance, but the error bars explode after that.

If you cannot predict, you do not really understand.

A coin flip with 50/50 odds is understandable even without predictions.

This is a technicality / edge case of 'pure randomness', rather than a rebuttal.

Furthermore, I can predict the distribution of results for a coin quite accurately over long time timeframes. Indeed being the 'understanding' of a successful gambler means being able to make predictions about what will happen with a random process over time.

Roulette for example is analogous to the coin toss; most casinos seem extremely able to predict what will happen over time quite well.

Or are you hinting at a counterargument that most of the world is a truly random process analogous to a coin throw?

In which case, your experience with reality must be terrifying. Will the sun come up today? Who knows? Will gravity work in a minute? And so on.

You can model a coin flip you can't predict it. Next year the US GDP with be the same +/- 50%. That's been true for the last 200+ years, further there is positive bias so it's more likely to be + than -, but the down tail is thicker so it's more likely to be down 9% than up 9%.

Similarly casinos will sometimes lose lot's of money on Roulette when someone makes a big bet. But, the their long term average is positive money maker. Further, they don't pick specific returns just a range with some probability aka more than X not 10,203,556$.

What you want is a prediction for next year, not a model for next year.

Plenty of people I know were predicting the crash of 2008 at least a year out - sometimes more.

Fortunately, none of them were qualified economists.

Macro is actually pretty straightforward to do.

But economics is politics by other means. It is not a science - it's a branch of rhetoric and persuasion (i.e. propaganda) and is used to disguise and rationalise purely political decisions that would otherwise be impossible to justify.

Indeed. Take Brexit. Government economists stated as fact that there would be 400,000 job losses following a vote to leave (note: the vote, not actually leaving itself). Absolute bloodbath. Reality: the economy grew.

Everyone knows economists say what they're paid to say, which is why they're so often ignored. Oddly, the people who tend to understand that best are often the ones derided as the "uneducated" voters and the people who continue to cling to their faith in economic modelling despite all the evidence it's worthless are often the "educated".

If you want to find an economist to support some statement that's easy, but does not mean that it's actually what most economists actually believe.

It's like saying 4/5 Dentists recommend X by asking them if it's better to brush with crest or not brush at all. Or pay some group of 5 dentists that work for you and ask a more neutral question.

Yeah, well, hold on to your hat.

Japan style stagnation seems like the most likely outcome to me, what's your prediction?

Not the parent, but if I had to guess, the current administration is creating the context for a massive wealth transfer using deregulation following a financial collapse of similar magnitude to Russia in the 90s. The end aim is to create a economically and politically entrenched kleptocrat class and a corresponding "managed democracy." Funnily enough, Abe Shinzo and his political allies have suggested doing this explicitly through constitutional reform, Japan being so steeped in corruption at this point that such talk is par for the course [0].

I'm not sure what will be the trigger, they seem to be pushing at several angles - war, knock-on effects from environmental collapse, another financial implosion. Because of the systemic corruption of the Democratic Party, the collapse could emerge organically. Obama really only papered over the root causes of the financial crises (not to mention paying off the culprits).

But it's a unlikely you're going to see Japanese style stagnation. Their economic circumstances are a result of the U.S. propping up their economy through an export regime for the sake of regional national security, as well as an economic approach that (generally) pursues a more stable state than dramatic rises and falls. The U.S has neither of those preconditions. Contemporary Russia is probably more instructive generally, with perhaps Central American style inequality being exemplary for the coastal regions.

[0] https://www.google.com/amp/s/amp.ft.com/content/06d6bf9e-fab...

Did Japan elect a lunatic that wanted to roll back all the institutions put in place in the last sixty years?

I think you're right. The government can keep things in sort of a gentle downward glide slope by printing money as long as they don't overdo it.

It's always a gentle glide until a mountain shows up and then you crater into it.

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