How economists rode maths to become our era’s astrologers
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> Hayek’s greatest contribution to economics was to show that society is far more complex than we realize, with little pieces of knowledge dispersed among millions of individuals. “The curious task of economics,” he famously wrote in “The Fatal Conceit,” which he published in 1988, “is to demonstrate to men how little they really know about what they imagine they can design.”
> Recent government interventions suggest that politicians and bureaucrats today think they can design just about anything. This ignorance has backfired, as it always does, bringing with it what economists call “unintended consequences.”
Ref: https://www.washingtonpost.com/news/volokh-conspiracy/wp/201...
but I can offer you a realisation that I have attained through the kind of haphazard real world that experience the sort of life that I remember reading about in Surely You're Joking Mr Feynmann?
Only to understand why the insight was late in arriving, you see I read Surely.. Joking about when I was ten, and growing up in the bosom of a well to do upper middle class family, with my father retired and mother devoted homemaker and a professor my half brother by our father's first marriage and uncle was a DoD director and scientist who also had no children and was devoted to my early years...
And so I grew up in a world in which I was sure that I could attribute to everyone I met, the possession of a underlying and rational logic, even when I was unsure of how they themselves understood what motivated their decisions.
I'm surveying a decade of watching my life and world in the most complete definition possible, being systematically destroyed. Possibly result of accidentally discovering a corruption of immense and blatant scale.
I learned from this experience, of prison and acquittal ("we should never have been in this court.." began the judge after a five year onslaught of abuse, clearly wrecked my mental health, and irreparably my physical health, I see from my now recovering vantage)...
.... there's nothing that motivates people in any reliable way I see purely random behaviour to be the norm...
And economists are won't to portray the world with the idea of rationality of interests.
Erm.... NOPE!
Try another model....
Oops that's the primary assumption... Okay, back to my aimless broken life, unable to communicate with anyone in normal life because I find no motivation for anything, no systems no values... All outsourced to the Nanny State and red masthead newspapers..
Edit: not in any reply to anyone I've not checked out yet for a update, but I was purposely ignoring the STFUARTFA of econometrics and the various things I have done with along my career, particularly auction and micro markets theory and logic, which I just noted to my loyal but only in title one remaining limited partner is among the memories that I have been thoroughly unable to recall of in any part of my work, which spanned more than half of my years on this planet. I certainly know that economics is far beyond the kind that The Economist newspaper is given to making accessible to proverbial common man hypothetical problems and quandary. I never thought that economics was ever limited and possibly that same belief in the limitless application of Economic Theory (intoned with great reference by all who utter the wisdom denounced from whom they are unable to question, not because they lack the ability, but because they are presented with unintelligible morass of signal free human volume)... May be that that limitless applicability which is the candle that will burn both ends forever in some kinds professionally employed as economists, is precisely what should have been the very warning sign, alerting us to a problem. I mean, has any other profession, reached across the desk, and leaning over the work of a unrelated practitioner, suggested that their input was capable of unbounded insights and discovery? Yet, like the populous hope for Panacea or else a Soma, we all have our moments of susceptibility...)
Piketty T. "Capital in the 21st century", p. 36.
At least sociology is honest that they're going pure opinion.
The discipline raises the questions of philosophy of mathematics and logic (and thus we should say language). How do mathematical models relate to the world? Is it the Tractatus, or Philosophical Investigations?
I wonder if economics students are ever assigned readings of Ludwig Wittgenstein. The latter part of Ray Monk's biography on him touches on many hilarious debates between him and his students, including Alan Turing, around these questions.
If your predictions consistently fail, you're not doing good science.
If you want to claim you're not doing science at all but standup comedy or literature, that's fine.
But that's not how economics is presented to the public. It's always "We must do [unpopular thing] to get [defined outcome] because [economics is truth]."
If there's no empirical basis for any of that, the entire narrative is plain political fraud.
I agree with where you're going, but I think the better phrasing would be "If your predictions consistently fail, your scientific theory isn't very good"
Good science usually involves a lot of failure before it provides good theory.
This doesn't excuse incredible overselling of economic models by economists though.
There is no scientific rigor so there is nothing to laud. Economics is on the same level as astrology in that "math" is used to gain the appearance and legitimacy of "science".
> The discipline raises the questions of philosophy of mathematics and logic (and thus we should say language). How do mathematical models relate to the world? Is it the Tractatus, or Philosophical Investigations?
The problem has nothing to do with mathematical models. It has to do with testability and reproducibility.
I wasn't aware that astrology uses even the pretense of math, however I'm admittedly not well-versed in astrology.
[1] https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465... [2] https://en.m.wikipedia.org/wiki/Thomas_Sowell
http://www.newyorker.com/news/john-cassidy/the-reinhart-and-...
Also, I think it is appropriate: what we had here was someone "demonstrating" why a specific policy works: "it works because our math model proves it works". So instead of going for an empirical proof everybody was expected to be ok wih this because, look, we have math. Also, if it is not working for you it's because you are not doing it right.
In a proper scientific discipline you design experiments to verify if your formulas are correct: if you send a rocket to Venus and it crashes back on Earth you can't just say "you didn't it right, I have an Excel sheet that says it should have reached the target"...
Exactly. And if even with all the "research" all the predictions are wrong all the times and all the political measures based on economics studies give yield bad results all the times that makes the argument correct, right?
"Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man.[21]" Lionel Robbins (1932) developed implications of what has been termed "[p]erhaps the most commonly accepted current definition of the subject":[22]
Economics is about understanding how your everyday actions impacts the whole, it is a study that allowed whole societies to organize and plan at the beginning and now it dares, through data, to predict events. And believe me, if companies and people couldn't have a minimal idea of the inflation rate by the end of next year, investments wouldn't occur as much (because the interest rate would be higher) and everyone would be worse off. Obviously, trying to predict the future is almost nonsensical, and yet those methods apply to every field nowadays. Marketing without data is nothing, does a marketing analysis always result in a successful prediction? No, and yet if you don't actually engage in trying you don't have a clue of what works and is ultimately worse off. Again, there are predictions for every possible outcome. There are researchers that say is no environment crisis and use data to back that up. The policy that ends up being made is about the study, but about the elected by the people that chooses that prediction it think it suits the society that he represents better, doesn't mean that aren't very serious people doing work that benefits us all doing those predictions.
An assertion based on what (apart from American exceptionalism)?
I was encouraged to study economics as a more "practical counterbalance" to philosophy. The funny thing is, I've found philosophy, in how it helped me improve the rigor of my thought, to be much more useful and practical than anything I learned in economics.
Economics needs to rely more on computation and data than on abstract mathematical models if it ever hopes to have real predictive power.
It's as if, after early AI researchers who took some inspiration from biology to create neural networks, the medical establishment then took their results and decided to use them as a guide to performing brain surgery.
I like that analogy.
Economists think they can look beyond that and divine the deep truths. But they can't. They are looking for the philosophers stone.
If you collect data about a man in a straitjacket you can only predict the movements of a man in a straitjacket. You can say nothing about what would happen if you took the straitjacket off.
The purpose of economics is to embed the beliefs of those funding economists. Particularly the idea that there is no alternative - because data.
And the central tenet of the critique has been reaffirmed by decades of meticulous "natural experimental" studies and small-scaled field experiments which show that real-world economic causal effects do not often correspond to observational data on policy changes.
Believe it or not, both of you, there are plenty of competent economists working on that exact methodological problem and resolving other statistical issues that are rarely encountered in non-behavioral sciences. James Heckman's works on this topic have been so widely influential, and lauded, that his papers are now frequently taught as canonical texts in graduate-level statistics courses. And this is a guy that started out only wanting to estimate returns to early-childhood education and basically carved out the best way to do it over 10 years.
Here's a long review paper by Heckman on the literature on microeconomic policy evaluation: http://www.nber.org/papers/w11259.pdf
The language is clear, the use of statistical theory and technical concepts is brief but rigorous (the proofs are on p.54 onward), and literally all 80 pages are devoted to reviewing other recent papers on the best statistical methods to analyze policy data towards making accurate causal inferences.
Realize the sheer size of that body of work? Maybe, just maybe, there are good academics in every discipline who aren't hopeless idiots that fit into your grandiose stereotypes. And maybe a random one-liner "omg they should look at policy data" isn't exactly a well-informed criticism in the context of the sheer amount of contemporary empirical work that you've never heard of in a discipline that you aren't familiar with.
So I disagree: Macro economics needs less computation, data and abstract mathematical models.
The Hayek quote that CaseySoftware wrote into another toplevel comment sums it up perfectly: Only pretense of knowledge coming from this.
In industry it does. Every major bank and hedge fund employs economists, and generally they have a pretty good grasp of what's going on. Of course those models are kept secret, much like trading algorithms.
That's why stuff like Econometrics is taught, and why (at least in the program I took) a decent amount of stats courses are required.
There's many branches of Economics which look at different things; you have macro which is mostly theoretical and constructs broad models which attempt to model behaviour in a somewhat abstract way, micro which attempts to model individual behaviour, game theory which is practical but not necessarily for predictive power on a broad level, and Econometrics which is very practical, but doesn't necessarily provide much insight beyond medium-term predictions.
How useful are those models, however? Without knowing much of the field, I do see the managed funds not outperforming index funds over the long term. Would the current run to the large unmanaged funds not demonstrate how limited their trade secret models are?
In the case of automatic trading models, occasionally running wildly off the rails, there is probably still value, in that it does something we otherwise could not. A hedge fund manager that fails to outperform the index over the long term is not providing any value, except perhaps in providing a social function.
I think economics has some valuable insights into human nature -- not necessarily applicable to every human but applicable to enough of us to be of use -- but they should stop cargo culting mathematics. Or more accurately, everyone else should call their bluff.
But the stark reality is that the existence of economics as an academic discipline is inevitable. Policymakers worldwide make decisions that impact billions of people and involve trillions of dollars, and it simply either isn't palatable to the public ear to proclaim they're going by intuition alone, or involve proposals so complex that our intuition just can't evaluate them - they need an academic foundation to stand on.
And that's where economists come in - they might quibble over more esoteric topics, or waver in giving specific recommendations, but there are areas where they can say what definitely won't work in the long run - for e.g. when foreign aid might work instead of foreign trade, currency manipulation, regulation of monopolies, use of state subsidies, impacts of tariffs etc. The academic consensus in areas like these are a lot stronger than the media make it seem.
You are also assuming that taxes actually pay for things, which isn't really how modern monetary systems work (Governments who have their own central banks actually spend money into existence and taxes destroy money). So Governments do have an important issue to play being the monopoly issuer of money.
It does not hinge on the efficient market hypothesis: at its most basic it's just built on the idea that in the general case people are more careful with their own money than they are with other peoples', which is an observation I don't think many people would disagree with. It can be also built on the assertion that people are more able to invest in things how they want if they can spend that money directly than if they have to do it through the incredibly indirect method of voting for a political party and then somehow transferring money to the government to invest, which doesn't seem particularly controversial.
>You are also assuming that taxes actually pay for things, which isn't really how modern monetary systems work (Governments who have their own central banks actually spend money into existence and taxes destroy money). So Governments do have an important issue to play being the monopoly issuer of money.
From an economic perspective there's not a huge difference between taxes and creating money in this sense: both involve a transfer of wealth from citizens to government. Wealth (or more abstractly, utility) is the fundamental unit of economics, not money.
Of course you're correct in that it demonstrably isn't. But does that make your point about the politics of finance right, or wrong?
The free-market concentrates wealth/power to those that have wealth/power. It always has, and always will. There is no "fair competition". If anywhere hacker news is blatant about sharing this truth.
Every business plan lools for its "moat". It's way to ensure it doesn't have to compete. Half the startup exit strategies aren't to make a long term business, but to get bought out by a huge company and let them own the product. Ie concentrate more power in one of the aleeady most powerful companies.
Amazon, Google, Facebook... on a daily basis we sit and watch these companies expand at will taking over markets and now industries and forcing out and effectively preventing any legit competition.
Fundamentally how can people believe that the "free-market" is actually a balancing fair effect while watching this data day in and day out.
The positive impact free-market is an idealism that doesn't exist. It's the exact same thing with communism, but a different group who is mixing up their ideologically perfect idea with reality.
Yes communism probably would be great if the world worked that way, but it doesn't. And yes libertarianism would be great if the world worked that way, but it doesn't. Communist refuse to believe their ideology is flawed regardless of how much evidence there is to the contrary, libertarians do the exact same but with a different religion.
It all depends on what you want to optimize for. If you optimize for equality, go with communism, and everyone will be equally poor. If you want wealth, go with a free market, and billions of people will be elevated out of poverty.
Freer markets lead to more economic growth and therefore more with for everyone, not just the rich. Free markets aren't about fair, they're about progress.
Yes, every business wants a moat. The main source of this moat? Government interventions with regulations, bailouts, prohibitions, etc
Libertarians never can describe what a free market really is. Is anti-theft law a government regulation? Seems to me that pure anarchy is the only real free market.
With a small amount of effort using google, you can find plenty of web pages describing basic libertarian philosophy - it really isn’t some kind of mystery.
>...Is anti-theft law a government regulation? Seems to me that pure anarchy is the only real free market.
(Since you asked, I would guess that most libertarians would say that the basic goal of a free market is to allow for voluntary exchanges between two parties which leave both better off. In order for this to happen, there has to be rule of law, property rights, enforcement of contracts, etc. And if you are wondering, libertarians likely also think that drugs and electrical devices, etc should be safe - they may just have different ideas on how to achieve that safety. Just because someone is opposed to prohibition on various drugs or opposed to laws against prostitution etc etc doesn’t mean they are proposing an anarchistic war of all against all.)
Look at tobacco. Without government research we would probably still be at the same stage as climate research where the tobacco companies would claim the science is still unsettled. How can you get a court settlement against billion dollar company who can pay an unlimited number of lawyers and scientists?
I just think a lot of libertarians are intellectually lazy, blame everything on government and offer no practical solutions. There is a lot to improve in this world but dreaming of the ever elusive free market and evil government will do nothing.
What I typically get as a response is that that person or company will go out of business, as people will stop buying said unsafe products. In my opinion this belief comes from wrongly applying parochial common sense to such a large and complex system that is the modern economy.
Victorian England learned this lesson the hard way through its string of adulteration scandals (e.g plaster in bread). You could perhaps make a parallel with the adulteration scandals in China.
I am sure many consumers see the UL certification on electrical devices and think that the product design must have been certified a large government agency. Some public goods must be provided by government, but those who think everything requires a government agency seem to forget the regulatory capture, rent seeking, political cronyism etc that can plaque government programs.
>...Somebody has done harm to another person. Who determines that?
Did anyone ever say that courts should be removed?
>...I just think a lot of libertarians are intellectually lazy, blame everything on government and offer no practical solutions.
Oh please. One might say it is intellectually lazy to create straw men arguments and then declare victory. If you need an example of trying to offer practical solutions, go to reason.org and you can probably find hundreds of pages of commentary, practical solutions, reviews, etc. The top story on teh site looks like it is on the details of the current state of the air traffic reform legislation being proposed in congress. You can read the digital version of their magazine for free and in fact every issue they have ever published for close to 40 years. Feel free to disagree with what they (or anybody else) writes - but don't make up a story that they (and others) just "blame government and offer no practical solutions".
>...There is a lot to improve in this world but dreaming of the ever elusive free market and evil government will do nothing.
Many libertarians I know would consider themselves to essentially be classic liberals. I suspect they all would find your characterization above to be inaccurate and offensive. For example, here is a quote from a professor at NYU:
"...I consider myself both a libertarian and a classical liberal. … So there are important differences among liberals and libertarians but I view these are differences along a spectrum. Some are principled (“Never, ever, initiate the use of force”) and some are empirical (“Many public goods can be provided privately”) and some are hard to classify (“The NSA should not collect masses of meta data”). Some people will want to take these differences and harden them into different political philosophies with different names and so forth. But I suggest that libertarians and classical liberals have too much in common for any divorce."
https://thinkmarkets.wordpress.com/2014/02/05/libertarianism...
http://world.std.com/~mhuben/faq.html
It's one of the best quick critiques of libertarianism I've seen.
None of these ideas are new, they've been hashed out for years, and libertarianism has never really caught on because most people have an intuitive sense that mere property rights and enforcement of contracts are vastly insufficient to make a society anyone wants to live in--a sense that is reinforced whenever they think more deeply about what the arrangement of that world would mean for their lives.
(For example, take away tools for society-building such as public goods, e.g. roads, buses, libraries, health care, and replace it all with private equivalents, because now your main tool for running society is transactions. You're asking people to imagine a world in which they have to pay for everything, constantly, item by item. Like Joe Chip and his nickel-a-use door in that Phil Dick novel. People get what that would mean for their lives and they don't want that. Libertarianism gets more use as a joke in satire than in real world policy.)
I don't know in the US but in France we have two families of economists in academia: orthodox and heterodox.
The orthodox family is the one of the economists who thinks that their field is a hard science with laws comparable to that of physics. It is the mainstream family. It may be further simplification of the reality but I think almost all of them of them could be considered rightists politically. Sadly, they are currently taking over the entire field by making it very hard to get an academic position in economics if you are not on their team.
Heterodox economists are the ones who believe their field is more like a social science. They have a variety of point of views depending on their approach (sociological, anthropological, historical, philosophical, etc.). They are often categorized as more leftists relatively to orthodox (again, I may be oversimplifying here). Many of them are "refugees" in other academic field such as sociology (e.g., Frédéric Lordon or Bernard Friot).
Anyway, my point is that economics could very well be an academic discipline without being a religion.
EDIT: the Austrian School of Economics that fiatjaf mentions in another comment is an example of what is called heterodox economics.
Complex proposals that the public can't evaluate are more typically a way of pulling the wool over the public's eyes.
If the public were against "economic intuition" on principle then Trump would likely have lost Michigan on the basis of his opposition to the TPP, which most economists supported.
So it's all a bit late for this hand-wringing now. They used you, you got paid, enjoy your privileges and try not to think what you've done.
Globalism has allowed multinational corporations to expand their economic and political influence - since they have the economies of scale to expand globally. It's true that more people have been lifted out of poverty, but the fact remains that globalism favors wealthy owners of multinationals over everyone else.
Look at how much influence western oil/tech companies have in countries around the world. Lobbies are stronger in our political realm, it really isn't fair to say that these policies benefited the poor more than the wealthy.
That's not to say that globalism is bad. But we need to be careful because as the wealthy's influence and power grows, it becomes harder to solve the problems that will come with the age of automation.
You're right to point out the risks of vast wealth disparities and the corrupting influence of money in politics, but I think that problem needs to be combatted separately, and not by making everyone less well off.
To break this down further, the masses gain economic value and employment. The wealthy gain political/economic influence to solidify their wealth and position.
I'm not talking about low-balling millionaires. I mean the billionaires and royalty of the world. The people who own industries, not just companies.
To illustrate, imagine they both start with $1000 each. The total wealth pool is hence $2000, and they both have 50% each, perfect equality. Now, let's look 50 years in the future, assuming the previously mentioned interest rates per annum compounding annually. According to http://www.moneychimp.com/calculator/compound_interest_calcu..., Jo will have $2,691.59 and Jane will have $7,106.68. The total wealth pool is $9,798.27. Jo hence now has 27.47%, and Jane has 72.53%. They're both less equal, but they're also both wealthier, and the overall wealth pool has increased.
Now, let's look ahead another 50 years. If no wealth transfer occurs, Jane will have $69,633.20 and Jo will have $19,128.28, with the total wealth pool being $88,761.48. If we equalise wealth, however, such that both have $4,899.13, then in 50 years they'll each have $34,816.57, for a total wealth pool of $69,633.14. This is 78.45% of the total wealth pool that there would be if no wealth transfer took place.
In this sense there is hence a direct tradeoff between growth and financial equality.
The country which has done most to raise its citizens out of poverty (China) did the exact opposite of articles 5, 6, 7, 8 and 9 of the Washington Consensus.
The Latin American countries which applied it as directed in the 1980s, by contrast, subsequently did very poorly on raising people out of poverty.
It's interesting to compare China, GDP per capita of around $8000, with neighbours like Taiwan, Singapore, Hong Kong and Korea, all of which are now developed countries (GDPs per capita of $20000-$50000), and all of which opened up more and sooner than the Chinese mainland.
Western economists, by and large, advocate doing the exact opposite of what they all did.
90s Russia is a good example of where those recommendations were taken to heart. It didn't go well:
http://fair.org/extra/harvards-best-and-brightest-aided-russ...
Globalization is above and beyond all else a result of the Internet, and digital communications, dropping latency to practically 0. No economist predicted, understood or indeed currently understands what that would bring, and what it is doing to our world.
At this point in time, the inability of the economics academy to understand, debate or indeed correct, the multiple feedback loops that are operating to concentrate money into the financial sector, is probably the biggest single threat to capitalism that has ever existed.
At the end of the day, it doesn't matter if power is concentrated through the monetary unit, or through the gun - or indeed the latter as a result of the former - the end is wide scale impoverishment.
I didn't downvote you, but the reason people are is probably that this is obviously wrong. Globalization began well before the Internet was commercialized.
cf. printing presses did the same thing and ushered in 100 years+ of economic and social disruption.
Let's be clear here: the dissenting position that you dismiss (in an ad hom manner) as motivated by "envy and hatred" is critical of the unbelievably distored distribution of wealth and political power that has resulted.
We are concerned about the future generations, "friend".
>unbelievably distored distribution of wealth and political power
Distorted by who's standard? There's no way to scientifically assert that a certain distribution of wealth and power is correct; it's just a distribution. To assert that a particular distribution is "wrong" (or synonyms in this case like "distorted") is a value judgement. It's a natural impulse for people to feel bad when other people have more than them, and this feeling is called envy, so it's not unreasonable to attribute a person's dislike of a distribution in which others have more than them as motivated by envy. Especially from the perspective of someone who believes increasing the size of the pie is more important than equalising the distribution, which many economists believe.
> Distored by who's standard?
By the standard of those of us who have a contrary "belief" than your economists.
As for envy, I hold that envy is operational amongst near peers. Peasants don't "envy" the king.
For example, Hong Kong and Singapore were extremely economically liberal. They still are, to some extent (some of the lowest tax rates in the world; Singapore even has no capital gains tax, and its top tax rate is 20%). According to Google, Singapore has a per capita GDP of $52,960.71 (the US is $57,466.79), a rich country by international standards. Hong Kong has a GDP per capita of $43,681.14.
Taiwan and Korea were/are less economically liberal than Hong Kong and Singapore, but still have relatively low tax rates by international standards. Korea has a GDP per capita of $27,538.81, and Taiwan of $31,900.00.
China was slow to open up economically, waiting until the 1970s, and even since then its policies are less liberal than the aforementioned countries (see e.g. https://en.wikipedia.org/wiki/Ease_of_doing_business_index). China now has a GDP per capita of $8,123.18.
North Korea is even less liberal than China, almost completely rejecting international trade. It has a GDP per capita of $583.00.
While this is not a large sample size, it's better than nothing, and does seem to indicate a correlation between economic liberalisation and economic growth.
The longer term impact for global development is explored by Dani Rodrik
"""This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers"""
https://www.sss.ias.edu/files/papers/econpaper107.pdf
Does it bother you at all that you took a simple set of numbers, largely devoid of context, and then waved your hands with some math and made a huge conclusion? No relevance to the subject of the original post we are discussing here?
I think its a direct example of Premature Mathiness but I suspect you'll disagree :)
>"""This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers"""
>https://www.sss.ias.edu/files/papers/econpaper107.pdf
>Does it bother you at all that you took a simple set of numbers, largely devoid of context, and then waved your hands with some math and made a huge conclusion? No relevance to the subject of the original post we are discussing here?
How was what I posted not relevant? The person I was replaying to asserted that there was no basis to make comparisons between the effects of different degrees of liberalism, I presented an example refuting that. If anything the link you posted seemed less relevant: how does a reduction in industralisation opportunities relate to the ability to make comparisons between different economic systems?
"Relevance" wasn't the metric. The metric was you very directly seeing numbers at hand and then using the math tool you had and coming to a broad, simplistic and wrong answer about whether "liberalization" is the way forward in 2017.
Many many mainstream economists are increasingly disagreeing with your simplistic and ideological model.
>"Relevance" wasn't the metric. The metric was you very directly seeing numbers at hand and then using the math tool you had and coming to a broad, simplistic and wrong answer about whether "liberalization" is the way forward in 2017.
Then if liberalisation is not the way forward, how will countries in Africa and South America be better served by denying opportunities to them and the people in them?
I'd seriously question this. There's a ton of stuff which they have both done which would be met with horror by "economically liberal" types if it were tried in the west.
For example, in Singapore 90% of the housing market is directly controlled by the government and if you look at the medical market, they have some really stringent price controls.
Then there's the currency manipulation: both states, while small, have enormous holdings of treasuries which they buy in order to make their exports more competitive.
I think those "ease of doing business measures" are fluff at best and at worst, basically just outright propaganda on behalf of foreign investors.
"North Korea is even less liberal than China, almost completely rejecting international trade. It has a GDP per capita of $583.00."
Nobody really has a clue what North Korea's numbers are and my level of trust in the CIA's estimates hovers around zero.
Having been there and to Bangladesh I'd have to argue that the latter, while more open to the outside world, is much poorer. Whatever propaganda you are fed, it's fairly obvious from the eye that, for instance, the quality of housing in Bangladesh countryside/2nd tier towns is worse than those in North Korea's 2nd tier towns and countryside.
I'd wager the vast majority of economic liberals would welcome government controls on the housing market and medical market if it meant a top tax rate of 20% (with the average person paying much less), no capital gains tax, and extremely liberal immigration policies. The lesser of two evils, so to speak.
>I think those "ease of doing business measures" are fluff at best and at worst, basically just outright propaganda on behalf of foreign investors.
If you want a more concrete example: in Australia it takes approximately one day and zero dollars to open a business. In China it often takes over 30 days and thousands of dollars in deposit, depending on the kind of business.
>Whatever propaganda you are fed, it's fairly obvious from the eye that, for instance, the quality of housing in Bangladesh countryside/2nd tier towns is worse than those in North Korea's 2nd tier towns and countryside.
I encourage you to watch accounts given by people who managed to escape from North Korea: they give me the impression that starvation is a bigger problem there than even in Bangladesh.
In fact, you'd need to slap an extremely inefficient economic system on top of this mind-blowing amount of resources to not enrich the global population at least a little bit. Or you'd have to purposefully design it to work that way.
The Soviet Union had equal access to natural resources as America and Western Europe, yet at the time of its collapse it was much poorer, and many former Soviet Union countries still are. Clearly in the short term at least natural resources aren't all that matters.
And as you said, we're talking short term here. Very short term. On slightly longer terms, it really doesn't look so good. Indeed, it takes an absurd level of denial / techno-optimism / magical thinking (whichever you prefer) to look at paleoclimatology and current climate indicators and think it can go on for much longer without global catastrophy.
At the end, if the best we can say of globalization is "For around 40+ years it was great fun for a lot of people. Well, for the most privileged countries anyway. And then it collapsed, and took a great chunk of the biosphere and the human population with it"... I don't see much to celebrate.
It's a reasonable argument to make when people are advocating moving closer to Soviet Union policies (e.g. restricting trade, stronger government intervention in industry).
>And as you said, we're talking short term here. Very short term. On slightly longer terms, it really doesn't look so good. Indeed, it takes an absurd level of denial / techno-optimism / magical thinking (whichever you prefer) to look at paleoclimatology and current climate indicators and think it can go on for much longer without global catastrophy.
>At the end, if the best we can say of globalization is "For around 40+ years it was great fun for a lot of people. Well, for the most privileged countries anyway. And then it collapsed, and took a great chunk of the biosphere and the human population with it"... I don't see much to celebrate.
Ultimately all life on Earth will die when the sun burns out or otherwise significantly changes its output. The only hope humanity has to outlive this is taking to the stars, and that won't happen without consuming a lot of resources.
If you want to look at it in terms of natural resources, personally I think irrational fear of nuclear power is the biggest problem facing the world. Modern reactors pose almost no risk to the biosphere compared to coal, oil and the like, nor do they contribute to global warming. More people die every year from coal-burning related illness than have ever been killed by nuclear power accidents.
There's 500M to 1 billion years left for complex multi-cellular life on earth, due to increased solar output. That's around 100000x to 200000x longer than human recorded history. So clearly, not an imminent problem any rational human needs to worry about.
Trashing the planet in a few decades for such a far away "problem" is absurd. All it does is significantly shorten the time we have here. We could decide that 500M to 1B years is enough, stay here and enjoy all the time left.
If we really want to escape our fate on earth, well we could simply take our time to slowly develop ways go to space. Assuming that it is possible for humans to reach anything beyond the solar system, which may not be the case. There are practical physical and thermodynamic considerations that may prevent us from ever colonizing much in space, even if we were to try hard. In which case, preserving earth would not just be the best thing to do, it would be the only thing we can do.
> If you want to look at it in terms of natural resources, personally I think irrational fear of nuclear power is the biggest problem facing the world. Modern reactors pose almost no risk to the biosphere compared to coal, oil and the like, nor do they contribute to global warming. More people die every year from coal-burning related illness than have ever been killed by nuclear power accidents.
No disagreement here. Though it only addresses some of the issues we face, nuclear fission is probably the only semi-viable alternative to fossil fuels.
>If we really want to escape our fate on earth, well we could simply take our time to slowly develop ways go to space. Assuming that it is possible for humans to reach anything beyond the solar system, which may not be the case. There are practical physical and thermodynamic considerations that may prevent us from ever colonizing much in space, even if we were to try hard. In which case, preserving earth would not just be the best thing to do, it would be the only thing we can do.
Ultimately it's a moral judgement. The people living now are different in one key way from people who may exist in the future: they exist. At the core of economics is fulfilling peoples' revealed preferences. If peoples' revealed preferences show they prefer greater consumption now at the expense of people who may live in the feature, that's what will be optimised. What weight should the potential wishes of people potentially born in the future have compared to those of people actually existing now? That's ultimately a philosophical questions, outside the range of economics, maths or science. The one thing that economics shows is that the collective preferences of people existing now tend to put a lot more weight on the importance of people existing now than on people who might exist in the future.
The decision to put more weight on the present is mostly made in ignorance and wishful techno-optimism. Many people still think that we're somehow building a cheap-energy no-death space-faring future, or they're not thinking about it at all (though that does not stop them from making children). Going to space to escape the hard reality of life on earth and then never dying is basically the techno-optimist's replacement for the now outdated concept of heaven.
People on HN tend to go for techno-optimism. This is readily apparent when the AI, singularity delusion is treated as a grave and imminent civilizational problem but fossil fuel, energy shortage and climate change are dismissed with "PV will solve all of this. Evil greedy subsidy-loving coal and oil companies are the problem". Our fossil fuel powered civilization would quickly beg for these "evil" companies to resume their activity if they somehow decided to stop providing oil for a week.
Finally, this preference is also made at the expense of most of the wildlife and biodiversity that exists now (or not long ago for a significant chunk of it), which would very much like to continue exisiting too.
This claim is a prime example of the cargo cult pseudoscience that's in question here. No causal relationship is established between corporate globalization and it's just assumed as an axiom that "we must be responsible for it!". It totally ignores the factors of technological progress, decolonization and self-rule, as well as the efforts of countless NGO's. It's not just wrong: it's horribly misleading.
The last 40 years of globalization have done more to reinforce durable economic inequality—often along ethnic lines—in both the more and less developed partners in trade, globally, than any other comparable time period in history; since human misery is largely driven by relative rather than absolute deprivation, this is a fairly significant problem even before considering the ethnic component, and the ethnic aspect has been fuel for significant, mostly intrastate, ethnic violence.
You know someone has no credibility on the matter when they mention homo economicus, as if it was the keystone.
Yeah, as someone who actually has a degree in both computer science and economics, it's really embarrassing to see the level of discourse that pervades threads on economics.
It's like seeing an economics student who's taken half an introductory CS class argue that CS is "a fundamentally broken pseudoscience", because they just found an implementation of an O(log(n)) algorithm that was slower than an implementation of an O(n^2) algorithm.
Your defense in particular sounds a lot like an argument from authority.
You fall in the category of people who think that debate about science should be limited to those who know science theory. The problem I saw in the field is that people talking have to much to loose, hence forbidding a reworking of the fundamental assumption and a trashing of the useless models that we keep producing.
If you want to do real science, go ask the ones who are practicing economics daily about their heuristics. Nightclub owners figured out their economics interest long before two-sided market theory was out there, after all.
"The Duke scholars collected 11,600 such forecasts and examined their accuracy. The conclusion was straightforward: financial officers of large corporations had no clue about the short-term future of the stock market; the correlation between their estimates and the true value was slightly less than zero!"
"The wide confidence interval is a confession of ignorance, which is not socially acceptable for someone who is paid to be knowledgeable in financial matters. Even if they knew how little they know, the executives would be penalized for admitting it."
All the great economists of the liberal tradition up to and including Von Mises wrote monumental works without the need for equations. It was Keynes who first used mathematics both as a quest for respectability (Physics Envy) and as a way to convince credulous politicians like FDR that this stuff is complex and best left at "experts". The disastrous results are still with us today. And no, Keynesian politics did not end the Great Depression, they actually prolonged the misery and it took WWII and the destruction of all global competition to end it.
Not to mention that what passes as "mathematics" among the economists is laughable among mathematicians. Latin was employed towards similar ends by the Roman Catholic Church (although a plausible defense could be mounted that a standard language better preseved the Doctrine against heresy). Ditto for the complex models sometimes employed by astrologists.
A con game, 'nuff said.
It feels like, "Physics can't unify QM and gravity, it must be wrong!" Well yeah, there might be parts that will be discovered to be broken, and it can't describe everything yet, but there are parts that are totally valid and incredibly important. Econ is like that, just younger and less mature. Not having all the answers doesn't make it astrology.
Imagine that some poorly understood aspect of physics was incredibly important. Maybe we get devastating earthquakes across the country every 6 years. Physicists can't predict these very well, so physics is astrology? Even without perfect understanding, the government has to make decisions about earthquake relief and planning. I would hope they turn to the scientists to see which areas have the highest risk, even though the predictions will likely still be way off. Earthquake-ology is young and hard, but it's better than letting actualy astrologers drive.
More surprising than anything in this article is the suggestion that the math and stats are a bad influence. I flip a coin, telling you it has a 60% chance of coming up heads. It comes up tails, 'proving me wrong.' Are you going to accuse me of peddling pseudoscience?
For that example, no. The actual issue is analogous to making calculations with very high precision when your input data is of much lower precision; if you use those latter decimals to draw conclusions, you may as well be casting tea leaves or whatever.
I think where people have an issue with Econ is where it takes some vague tendency in human behavior that kind of makes sense to think of as a rule that maybe holds, and then use it as a basis for making rigorous deductions on the supposition that the rule holds absolutely. (At least this is the complaint I'm familiar with, that much of its grounding is based in outmoded pop psychology.)
I chose the 'large earthquake' example deliberately. We can't do experiments on the level of large-scale earthquakes, it's very hard and pretty inaccurate, but we can still do quite a bit of real science. And it turns out that physics is more than just earthquakes, just as econ is more than macro.
This isn't to say that macroeconomics is spot on or even good, but just to say the challenges around experimentation aren't fundamental barriers to scientific understanding.
The trouble is, it doesn't work very well. So economists augment it with other unobservable variables like 'inflation expectations'. But if you go looking for evidence that these newer models are any better, 99% of what you'll find is theory.
The rules of the game reward you for making elegant models, not for making good empirical predictions.
HN discussion: https://news.ycombinator.com/item?id=14781426
Does anyone know about these topics? Are they really as successful as their proponents claim?
[0]http://noahpinionblog.blogspot.co.uk/2017/06/is-economics-sc...
Come at me.
Economists would do their profession a favor if they treated it as the social science that it is rather that the hard science they profess. A perfect example of advancement in the field is the Nobel Prize given to Daniel Kahneman in 2002 for his and Amos Tversky work on cognitive basis. Their field is psychology, yet they got their prize in economics. No where do you see math as the tool they used to get to their discoveries. Yes, they might have used statistics to refine their ideas but not to find the fundamentals. Yes, you might say that they call their field behavioral economics but the reality is that human behavior is what economists study and as such they should treated it as the soft science it is.
Of all criticisms you could make, this is pretty iffy. Did you complain in your physics class when they said "calculate speed of an object and assume no air resistance"? Or when they tell you to "consider it as a point mass"?
Here they are making the assumptions they work with apparent. You can't define exactly how people are, so we need to make some assumptions. That lets us clarify where and when these things might work or not work, and possibly look for explanations when our results are completely wrong. Imagine if they were to teach the same material, without the disclaimer "this only works if you make the assumption of homo economicus".
Any science works with models, and we need to define those models to be able to determine if they are useful or not.
"The best material model of a cat is another, or preferably the same, cat." --Norbert Wiener
They seem to be arguing that, because economists missed the Great Recession, economics is a failure.
The problem is the assumption is that a severe, large event is inherently very predictable because it is severe.
The opposite often happens, though. As you say, predicting volcanic eruptions, earthquakes, suicide, violent acts are all notoriously difficult to predict, and you could make the argument that severe economic events are the same (I'm not saying this is true, only that it's an equal counterargument).
Economics is far ahead other social sciences because it uses mathematical modelling. Models make it easier to see the limits and the scope of the arguments. Ability of outsiders to clearly see oversimplification s is strength.
Rational actor model is the best first order approximation of behaviour. Moving to others, there are others, should be justified carefully.
Other social sciences have it worse.
Btw. Economics is only partially social science. Actors don't have to be humans.
Does it? Or is this totally confused in the practical world too?
For example, the austerity debate has been academically settled. Politicians took one academic paper (outlier) with error and used it to screw things up. IMF did mea culpa after data disagreed.
So you have to discern between academics trying to model the economy, and economists in industry just trying to make short-medium range predictions (and who are generally more accurate).
Next he says no economists predicted the Great Recession but then references Krugman. Krugman did predict it, he even republished his book predicting it, with a new foreword pretty much saying "I told you so." As well, economic theory did help us in the fallout from the crash. I can't say how my jaw dropped when he alleged it didn't.
The issue of economic accuracy isn't the math, it's that people treat it like a belief system instead of a science. Economics should not have politics involved, the science itself has no room for it. Tangentially, I blame religion for this tainting of the science's perception but that's a whole long other conversation. This same problem has affected the "hard sciences" throughout time and still does to date (i.e. Racism and bigotry in biology are still present).
Mathematics in economics is highly underrated by those who don't understand it or think for some reason it's malicious. Why? Because they don't understand how feeling and math can go hand and hand. People believe quantifying things is some sort of evil, but is it? Why? If you take enough economics you realize by and large the units people get so hung up on are nearly irrelevant compared to the relationship between them. Those relationships are economic models. Can models can be simplistic-- sure, but the assumptions are there for you on paper listed clear as day (normally).
The "rational man" isn't something people take seriously as a reflection of the world in Econ (at least sane educated people don't)-- it's merely a starting point which gives us traction to move forward and see how the real world measures against it. It's not permanent, it's not looked at as real, but it's merely somewhere to get some leverage to move forward.
Economics actually helped me understand a great deal of high level mathematics because I was able to "feel" it by looking at economic models. Something I couldn't do from pure math. The ability to talk about the world around us in mathematics is an advantage not a hinderance. Being able to then describe my world using math has a been a very great advanatage for me in life and one I would not underrate.
Finally, the author gives no hard examples of its failure but merely quotes some random people to support his claim. There is no real analysis here. The Li he refers to is a shit comparison. He shows no math or statistics and expects his point to be taken seriously. Why? Are the two even comparable? I mean c'mon. It's just the ramblings of someone who doesn't like not being taken seriously academically or is paid less.
Economics is hard and it's probably always gonna be that way, taking away the math isn't going to make it easier it's gonna make it even more bullshitty. Ignoring the math will leave gaping holes in your ability to understand and think critically about it.
People assume economists haven't figured out how to do things properly. They're wrong. What really has happened is politics and money have shit all over the science and made it difficult for outsiders to find those answers. One of the reasons I'm pro socialism is because that's what the science shows works. The sciences shows how having a gold standard is idiocy and only bothers the ignorant. Libertarians, republicans, and gold bugs hate me for saying that but it's true.
I'm tired of ranting and economics on HN is literally worse than Twitter because people think they're educated on the subject so I'll stop right now.
"They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts."
Sounds more like ideology than a science to me....
Arguing that your subject, which most definitely is attempting to model part of the real world is actually a part of the a mathematical world and therefore not subject to the same rules as sciences seems a bit dubious to me.
It uses a priori truths and deduction from it to arrive at new results.
Additionally several branches of philosophy and logic use a priori facts to derive results from it.
Praxeology is one of different ways of scientific reasoning. Just because you cannot get quantitative results from it, doesn't mean its unscientific. It cannot get you very far in predicting concrete human action, because in its view, humans act based on a subjective value "function" that has a discrete scale (you can only say: A is better than B, not by how much). and since every human is unique with their own values, which are simply not objectively comparable, there is just no way to make predictions or qualitative assumptions from this approach to science.
Praxeology as defined by wikipedia, "is the deductive study of human action". Deduction is deeply rooted philosophy, mathematics and logic. A very valid way of scientific reasoning.
It is a different way of doing science, than the "scientific method", which uses observation and quantitative methods.
The Austrian school derives consequences from human action, allowing to describe what can happen in an economy, qualitatively. But their method doesn't allow to make quantitative statements, which makes it "useless" to politicians wanting to change the economy.
Edit: A lot of the stuff around praxeology sounded rather like Marxism in that its proponents argue that it can't be refuted. Turns out that Hayek actually reached a similar conclusion and favoured a Popperian view that "any system which claimed that it was irrefutable was by definition not scientific".
I will agree that it is extremely logical and extremely internally consistent - but it doesn't describe the real world (in a macro sense) at all. Much of the problem is that it tries to reason about the behaviour of individuals or individual companies and extrapolate it into a macroeconomic theory - classic fallacy of composition.
The austrian economists in turn don't pretend to know that macroeconomics work this or that way, they can make assumptions of effects that can happen due to policies, but don't attempt to quantify them.
I think the austrian school is largely ignored for two reasons:
- from it derives a very libertarian view of the world, which many people reject because of political views. after the WW2 libertarian views were not popular, so Hayek and Mises where largely forgotten. - because its philosophical approach is exhaustively researched and you cannot add more fundamentals, leaving economists with the problem of not having much to work on.
I think some of the most promising macroeconomic modelling I've seen has been Steve Keen's complex dynamic systems work, which is all derived from actual definitions and identities, rather than trying to scale up individual behaviour. It's all stock-flow consistent too, which means it ensures everything actually follows the laws of accounting (strangely this isn't necessarily the case in mainstream models).
The article seemed to say that econometrics or some such was not within their criticism and that, instead, they were criticizing the -- pure, theoretical, mathematical Nobel-prize seeking, etc.? -- economists or some such. Uh, it was not too clear just which brand, type, style, category, etc. of economists they were criticizing.
Okay, I'll defend some of the economists!
The field of economics is a train wreck, a theoretical, empirical, practical, intellectual, scientific, academic train wreck. E.g., they still have no F = ma (Newton's second law), and their predictions are as bad as those for the weather.
Why? Sure, likely like the weather, the economy is darned complicated.
Next, it's tough to get good data about the economy, e.g., the usual US Department of Labor, etc. statistics are crude approximations to reality.
E.g., for the crash of 2008, it was mostly a fairly closely held secret just how bad so many of the mortgages were, and those bad mortgages were the key to the crash. So, for the 2008 crash, which was over 8 years ago and that we are still pulling out of, that is, has been 2/3rds as long as the Great Depression, we were missing clear views of just the basic data. Outrageous. E.g., at
http://www.pbs.org/wgbh/pages/frontline/oral-history/financi...
see the Frontline interview of Well Fargo CEO Richark Kovacevich with in part:
"... when they came to me, I would say: 'This is toxic waste. We're building a bubble. We're not going to like the outcome. I'm very concerned.'" Not many people had enough data to see the problem. Outrageous.
Next, emotions, fear, mob behavior, the news looking for headlines all can affect what people do and the economy.
So, to do economics as a science is tough.
Well people in high end academics are supposed to do research. In the case of economics, they are supposed to try to make a good science out of it. So, they try.
In particular, the most respected work in science mathematizes the field.
Recently on the news was a remark about something else, but we can use it here: "Ask a Navy Seal how to eat an elephant, and he will say 'One bite at a time'".
Well, in trying to make economics a science, in particular, to mathematize the field, about all the high end research academic economists can do is try one bite at a time. So, they do. So, the work has not yet eaten all the elephant, moved all of the mountain, cleaned up all the mess, finished building the castle, etc. So, it's a work in progress. In particular, for the castle, they are still working on the foundation, and so far there is nothing like a roof. So, when it rains, there's no roof and anyone in the castle gets wet. Or, the kitchen just isn't ready to serve good food yet; the land is not cleared, and we are not ready to grow a crop yet.
Some of the mathematics I studied for my Ph.D. and some of the math research I did and published is close to some of the math some of the economists have tried to use. So, that math gives me a view of math in economics.
For that math, some of it really is okay for some questions about economic things. E.g., optimization, mathematical programming, e.g., linear programming, linear integer programming, actually can and sometimes do save money in some economic, business situations. The academic economists usually call such situations micro economics. So, some decades ago, as such math was developed for operations research or whatever, the math got used by academic research economists. IIRC linear programming was the core math of several Nobel prizes in economics.
My view is that linear programming, and optimization more generally, has next to nothing to do anytime soon with predicting, say, the growth in GDP over five years, but one could call that use of math in the research one bite of the elephant, one brick for the castle, one tree stump on the way to clearing the land ready for row crops, etc.
E.g., there was a famous paper in mathematical economics by Arrow, Hurwicz, and Uzawa. Arrow won his Nobel prize long ago, and Hurwicz won a few years ago. The paper makes use of optimization, in particular, the Kuhn-Tucker conditions (KTC) of non-linear optimization. So, in grad school, when I was studying the KTC (not much like KFC), I saw a tricky problem, didn't see a solution in the library, did some research, and got a solution. Later when I went to publish I saw that my work also answered a question stated but not answered in the Arrow, et al. paper. Okay.
So, alright, in some sense I knew the KTC as well as or better than Arrow, etc. My opinion of the KTC is that they have next to nothing to do with predicting, say, the growth in GDP over five years, but maybe that use of the KTC is a little progress. Maybe that work got some Nobel prizes not because it was especially good work, say, did for economics what Newton did for physics, but because it was the best work in economics the Nobel committee could find that year!
So, net, economics is not yet a science; some researchers are trying to make it a science, in particular, to mathematize the field.
There is a description of how this research goes: The researcher looks at some math and the economy, makes some simplifying assumptions about the economy, so, has a model of the economy, sees where they can apply that math to that model, makes the application, reads off the consequences for that model economy, publishes the stuff, and hopes for a Nobel prize, at least for tenure, and hopes that their students will do more along such lines. Yes, it's like in freshman physics were we have a frictionless ball bearing and no air resistance and, then, calculate how fast the ball would roll except, e.g., the KTC, much worse.
Gee, if the research is really bad, then there should be a big opportunity to jump into the field, get a relatively good salary, maybe get a Nobel, get famous, get high consulting fees, maybe get some adoring coeds, etc.
For me? I've got a startup. I've already done the original applied math research and written the software and am eager to go live. If the startup works, I'll be nicely wealthy. So, I'll stay with my startup!
Besides, when I tried to study economics, I thought that the subject was so badly done I should just close the book and f'get about it.
But once it was suggested that I take a course in economics. So, I did. I showed for the class, took notes, and said nothing. That was the first day with lots of freehand supply and demand curves. After the class, with just the prof and I, I asked him, nicely I thought, just what he was assuming about his curves, continuous, differentiable, continuously differentiable, infinitely differentiable, continuous and differentiable almost everywhere with respect to Lebesgue measure, convex, pseudo-convex, quasi-convex, etc. (or some such). Soon I got a call and was told "You are out of the economics class.". Gee, I was just asking!
Gee, those questions were not so bad! For that thing I did for the KTC and the Arrow, et al. paper, part of the work was to show that for the real numbers R, a positive integer n, a set C a subset of R^n and closed in R^n with the usual topology, there exists an infinitely differentiable function f: R^n --> R so that f(x) = 0 for all x in C and f(x) > 0 otherwise. E.g., the Mandelbrot set is closed. So, there's an infinitely differentiable f 0 on the Mandelbrot set and strictly positive otherwise. Instead of the Mandelbrot set, use a sample path of Brownian motion, a Cantor set of positive measure, etc. -- amazing. So, gee, for the Arrow, et al., paper I considered infinitely differentiable!
An economist is a mixture of 1) a businessman without common sense, 2) a physicist without brain, and 3) a speculator without balls.
Those with brains no balls become mathematicians, those with balls no brains join the mafia, those w no balls no brains become economists.
To have a great day: 1) Smile at a stranger, 2) Surprise someone by saying something unexpectedly nice, 3) Give some genuine attention to an elderly, 4) Invite someone who doesn't have many friends for coffee, 5) Humiliate an economist, publicly, or create deep anxiety inside a Harvard professor.
A trader listened to the firm's "chief" economist's predictions about gold, then lost a bundle. The trader was asked to leave the firm. He then angrily asked him boss who was firing him: "Why do you fire me alone not the economist? He is too responsible for the loss." The Boss: "You idiot, we are not firing you for losing money; we are firing you for listening to the economist."
Discussing growth without concern for fragility: like studying construction without thinking of collapses. Think like engineer not economist.
Success in all endeavors is requires absence of specific qualities. 1) To succeed in crime requires absence of empathy, 2) To succeed in banking you need absence of shame at hiding risks, 3) To succeed in school requires absence of common sense, 4) To succeed in economics requires absence of understanding of probability, risk, or 2nd order effects and about anything, 5) To succeed in journalism requires inability to think about matters that have an infinitesimal small chance of being relevant next January, ...6) But to succeed in life requires a total inability to do anything that makes you uncomfortable when you look at yourself in the mirror.
[On his greatest disappointment]: That I am unable to destroy the economics establishment, the press.
Friends, I wonder if someone has computed how much would be saved if we shut down economics and political science departments in universities. Those who need to research these subjects can do so on their private time.
Being nice to the wicked (or economist) is equivalent to being nasty with the virtuous.
May be its not a 'science' subject as physics or engineering. In my part of the world it is still listed an arts subject.
Or does it perhaps tell you that this top b-school PhD graduate, who
1. works on similar financial-math topics as the people he viciously smear in the media
2. publishes in the same journals that econ/finance academics publish in
3. had key results inspired or derived from previous economists including Daniel Ellsberg (who, by the way, is a national hero)
4, and was repeatedly hired by top econ/finance departments, but was never able to keep the same appointment for more than a few years
perhaps has deep-seated personal, psychopathic issues that prevent him from simply getting along with other academics in his own discipline, and that the academic world wasn't stacked against him and his insights?
and perhaps his actual academic analysis don't give you the sweeping indictment of his fellow academics that he'd have you believe in his bitter tirades?
and maybe you shouldn't take him that seriously when he periodically goes into his online rants and show a vicious tendency to smear and destroy any individual that's responsible for a perceived slight on him?
As Hazlitt taught:
'The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.'
Anyone interested in clearing through the crud should read Henry Hazlitt's Economics in One Lesson.
You create something that is really not science and call it social "sciences" and then you put inside those stuff like economics and all the shebang.
Of course that some people think those are actually scientific and then, when all the predictions fail not only stop believing the social "sciences" like economics, but in fact start looking at all sciences, even the real ones, as some fake agenda from someone.
In the end it's a double wrong, first because you are telling people that social "sciences" like economics actually predict anything and second because we are destroying the public view of real science.
I think what we need is some outreach program that explains people what the real sciences are in order to regain credibility for science and to get people suspicious of any predictions coming from social "sciences".
Not to say that some social "sciences" are not worthy of research, but we must understand that they are only ad hoc fields of knowledge and that they don't predict anything. For instance like history, a respected area that doesn't need to get some fake validation from calling itself a science.
Also, if a model doesn't make predictions how can you compare it to reality to see if it is actually a useful model or not?
How is that different to normal scientific predictions?
So being able to "explain" past economical phenomena is not very useful if you then cannot use the (now validated) model to guide present and future decisions.