Why Paul Romer Won the Nobel Prize in Economics
marginalrevolution.com
marginalrevolution.com
" At a time when trust and truth are in retreat, the social dimension is the one that matters. Jupyter rewards transparency; Mathematica rationalizes secrecy. Jupyter encourages individual integrity; Mathematica lets individuals hide behind corporate evasion. Jupyter exemplifies the social systems that emerged from the Scientific Revolution and the Enlightenment, systems that make it possible for people to cooperate by committing to objective truth; Mathematica exemplifies the horde of new Vandals whose pursuit of private gain threatens a far greater pubic loss–the collapse of social systems that took centuries to build."
Till now egalitarian Sweden has made no secret of their love affair with libertarian economists with 8 winning the prize. [2]
One would think the tide is finally turning after the banking crisis with macro economists in deep introspection on dubious models, data and narratives but just last week they were out in force demonizing Bernie Sanders amazon bill.
1. https://ccl.yale.edu/sites/default/files/files/The%20Trouble...
2. https://www.theatlantic.com/business/archive/2016/10/nobel-f...
Even macroeconomists criticize it. Why? Because it's a field that is legitimately hard to research and understand due to its complex nature and chaotic feedback loops. It gets manipulated by politicians seeking authority for their half-baked ideas. And people discredit the entire profession because they focus way too much on controversial political hotbuttons like business cycle theory, and subsequently use that criticism as a justification for ignoring research that is sound and has broad consensus even among academics of wildly differing ideologies. Their job sucks, and they know it.
1. A lot of soft hard to quantify schools of thought went totally off the rails after WWII in a head long rush to impose 'scientific rigor' by aping physics. And to curry favor with the suddenly terrifying political theories of the day.
2. Martin Gardner has line that when supporting evidence in a field is weak and opaque theory mimics the cultural biases of the scientists. "evidence in a field is weak and opaque" fits economics perfectly.
Put those two together is the conclusion is economics is mostly a huge pile of stinking garbage. At best it's mostly irrelevant.
Romer's work could be politically contentious if it wasn't so abstract and embedded in a history of technical economic ideas about development that way back when (in the Solow era) echoed the basic insights and biases of micro 101. Of course, HN (and everyone else) wants to have its own ideas about development and hamper on how "unrealistic" micro 101 is -- so development theory is never discussed.
Then there's charter cities, which is like Urbit for non-nerds.
Well, there's this guy called Paul Romer who thinks that too:
"Paul Romer says he really hadn’t planned to trash macroeconomics as a math-obsessed pseudoscience. Or infuriate countless colleagues. It just sort of happened."
https://www.bloomberg.com/news/articles/2016-11-18/blah-blah...
>Romer's work could be politically contentious
It is politically contentious. He wrote a paper on bankruptcy for profit, ffs. The Steve Keen loathing neoliberals on HN reading that sentence probably can't even conceive of such a thing being possible.
http://pages.stern.nyu.edu/~promer/Looting.pdf
Alan Greenspan famously, when challenged, also couldn't wrap his head around Akerlof and Romer's paper, but he's a high profile economist so naturally as a lowly programmer and "Steve Keen fan" I'm not allowed to call him out on it ;-)
It was written in 1994, but sums up the financial crisis pretty well.
If I understand his critique correctly, it's that macroeconomics has used mathematical rigor and internal consistency to mask the common-sense observation that the models' actual connections to the real world phenomena they seek to simulate have almost completely eroded away.
I, for one, can think of a couple of reasons that vein of criticism might not be the sort of argument HN is primed to embrace.
Piketty - 163 results
Krugman - 426 results
Milton Friedman - 69 results
Econtalk - 24 results
Tyler Cowen - 88 results
Bengt Holmström - 8 results
Keynes : 86
Adam Smith : 106
Is it common to assume economic growth can proceed at an infinite rate?
"Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist."
Can global economic growth proceed at a modest positive average rate for centuries? It might not, but there’s no obvious reason to believe it can’t.
I quoted the sentence that claims this guys main discovery was that the process of economic growth does not "explode without limit".
It isn't just a hypothetical exercise. This sort of relationship with returns over time is common in both economics and finance. I, for example, experience it as a futures trader. It's not uncommon for successful day traders who intentionally limit their trading capital to get returns averaging 1% per day. Those returns, however, are completely infeasible when talking about trading capital even on the small end of mutual funds. When your trading capital increases, it becomes much harder to grow at the same rate, and returns rates diminish greatly. But they still may have positive returns.
No economist I know of would ever presume that growth can happen without limit or diminishing returns. Reasonable economists will inevitably disagree on parameterization of their models though, which is entirely to be expected.
Infinite rate = adding wealth at infinity dollars per hour. Clearly absurd.
Unbounded growth = adding 100 dollar per hour without an end date in sight. I can argue this is feasible:
Let's say you and I are trading loaves and fishes between us (using dollars as a medium of exchange). This makes a stable economy grounded in tangible goods. Then we introduce notion of intellectual property: I make paintings and you make software. Each year you make better software and sell it to me at higher price, then I make better paintings and sell them to you for the higher price. The price of bread and fish remains the same, so when the government comes in to measure the CPI they will see that the food price did not go up, therefore there is no inflation. So the dollar value of all transactions is going up, but the inflation is not going up. This can easily go on forever because it doesn't rely on any kind of natural resource that could be exhausted, apart from your hunger for better paintings and my desire for better software.
It has struck me, though, that this standard of living increase is actually dependent upon a very specific system of production. I live in Japan and I have an interest in traditional Japanese clothing. I can buy traditional Japanese clothing made the same way it was always made, but I can't afford it. So in a way, we are not comparing apples to apples when we measure our increase in standard of living. The very fact that an artisan making traditional goods in the traditional way desires the same increase in standard of living as I have means that their goods are at least as expensive (as a ratio of average income) as they always were. Sometimes because they have a very limited market, their prices are considerably higher in order to achieve an acceptable income.
In that way, I think economic growth is a bit of an illusion. We can still improve efficiency a lot -- how many people are limited in their life because they simply lack capital? I would argue that the vast majority of people on the planet fall into this category. We can grow the economy in very real terms by ensuring that more people get access to more capital. But a lot of it is smoke and mirrors. Externalities are not accounted for -- whether it be environmental degradation or simply loss of lifestyle and culture. Our march of progress steamrolls things that are valuable, without much thought.
But today you have a much higher chance of actually having something to wear independently from the scale of your income. 100 years ago having _something_ to wear was a luxury. Today you can buy it at any quality/price you'd like.
It's The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
http://exiledonline.com/the-nobel-prize-in-economics-there-i...
Just imagine the ridicule if instead of the Turing or Shannon awards we'd have the ACM Prize in Computer Science in Memory of Alfred Nobel, or the IEEE Prize in Electrical Engineering in Memory of Alfred Nobel.
BTW, here's a great paper by George Akerlof and Paul Romer who both won the prize: http://pages.stern.nyu.edu/~promer/Looting.pdf
> It's The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
Also known as the Nobel Prize in Economics, selected by the same institution as the other prizes (the Royal Swedish Academy of Sciences), announced at the same time as the other prizes, awarded at the same ceremony as the other prizes, and selected "in accordance with the rules governing the award of the Nobel Prizes instituted through [Alfred Nobel's] will."
> Just imagine the ridicule if instead of the Turing or Shannon awards we'd have the ACM Prize in Computer Science in Memory of Alfred Nobel, or the IEEE Prize in Electrical Engineering in Memory of Alfred Nobel.
Why would that be ridiculous?
I'm pretty sure the history of the prize is accurate.
> Why would that be ridiculous?
Because that's so blatant in using the reputation of the Nobel Prize to bolster their own questionable discipline.
A little? It's obvious they have an ideological axe to grind, even stooping to name-calling.
> I'm pretty sure the history of the prize is accurate.
What about its history is accurate?
> Because that's so blatant in using the reputation of the Nobel Prize
The Nobel Prize in Economics has existed since 1968 and, like I said, is awarded by the same institution as the other prizes, in the same ceremony, and in accordance with the same rules governing the awarding of the other prizes. What's dubious about that?
> to bolster their own questionable discipline.
What discipline is questionable?
It's called understatement.
The Exile never tried to hide their ideological bent or claim any sort of objectivity. You can read their work, disagree with their point of view, but still respect the reporting.
> What about the history of the prize is accurate?
The purpose of starting the prize.
> The Nobel Prize in Economics has existed since 1968 and, like I said, is awarded by the same institution as the other prizes, in the same ceremony, and in accordance with the same rules governing the awarding of the other prizes. What's dubious about that?
Sure, but it is not a Nobel Prize. It is parasitic growth on the Nobel Prize reputation.
> What discipline is questionable?
Economic Sciences. There are great economists, and great economic research (see the Akerlof and Romer paper I linked to above), and some even win the prize. But it is not a science.
Not sure why I should ever respect reporting that doesn't even attempt to be objective. If you are not aware of your biases, they have a tendency to irreparably color your "facts".
Why should I respect reporting that doesn't claim any sort of objectivity? How can I trust reporting that doesn't even aspire to be objective?
> The purpose of starting the prize.
Can you be more specific?
> It is parasitic growth on the Nobel Prize reputation.
Can you explain why you think it is a "parasitic growth"?
> Economic Sciences. There are great economists, and great economic research (see the Akerlof and Romer paper I linked to above), and some even win the prize. But it is not a science.
What definition of "science" are you using? Is literature a science? Is peace a science?
What about anthropology? Geography? History? Linguistics? Political science? Psychology? Sociology?
Do you think computer science and electrical engineering are "questionable disciplines"? If not, what point did you intend to illustrate with them in your original comment?
Also known as the Nobel Prize in Economics, selected by the same institution as the other prizes (the Royal Swedish Academy of Sciences) ...
"Nobel Peace Prize" is selected by Norwegian government. ( see https://en.wikipedia.org/wiki/Nobel_Peace_Prize )
Technically by an independent committee appointed by the Norwegian government.
If there's any slight it's to Alfred Nobel, who didn't create a prize for economics.[1] Apparently Nobel's great-great-nephew was upset by the conflation. "In 2001 [he] asked the Bank of Sweden to differentiate its award to economists given 'in Alfred Nobel's memory' from the five other awards". See https://en.wikipedia.org/wiki/Alfred_Nobel#cite_note-31
[1] Is there any evidence that this was deliberate? If not then I fail to see what's substantively lost in the conflation.
If someone created a price for pedophile arts, brain studies of humans of lesser value, or other questionable "sciences" in the memory of Alfred Nobel, do you think we should call it a Nobel price? Do we have evidence that Nobel would disagree with such a price?
I would say we have no evidence, but it is highly unlikely that Alfred Nobel would like that. I think the question that should be asked is: do we have any evidence (or even any sign at all) that Alfred Nobel wanted a Nobel price in economics???
https://www.nobelprize.org/prizes/lists/all-prizes-in-econom...
Hey look, it's the guy who shows up every year to point out a technicality that no one cares about. Thanks!
This is so common now it's an SMBC meme.
What really matters is the prestige and good judgment of those who give it has created for the award over time. Nobel for economics has much better reputation than literary and peace prices. It's up to par with Nobels in physics and other sciences. They don't give it for people who don't deserve it.
Nobels in physics have more controversies than economics. For example the Nobel committee failed to recognize Albert Einstein's work in Brownian motion, general relativity, special relativity or mass-energy equivalence.