Comment by tobmlt | Hacker News Reader

Comment by tobmlt | Hacker News Reader

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I appreciate your counter argument and am familiar with it. I disagree about the Great Depression and pretty much everything else you’ve said, but I mean no disrespect, only contend that there is a whole body of economic thought that agrees with me, and that mainstream Econ (recognizing the plurality of schools of thought here) has swept under the rug, because it’s inconvenient. I know “my side” is unpopular and “discredited”. I think it happens to mainly be right, simpler, and generally disabling to the status quo, which I’d characterize as built to enable active interventions. I’ve said nothing about what to Actually do to fix this all, because that is more complex, and not addressed properly, in the main, by anybody. I think one has to recognize the pain that unwinding all of this must cause, and not just “switch it all out”. Heck of a mess!

I’ll be happy to get my (Of course discredited) books out and recite the counter case about the Great Depression if anybody really wants me to later. Basically the fed and various policies caused what should have been a short sharp correction/stock-crash (at the end of a runaway fed built stock market streak) to extend into a long drawn out mess. Forgetting innumerable details I am sure. But yeah, I know you don’t agree. I do not find your case compelling.

While I have a chance, here is a good book on the Austrian case against the status quo narrative on the great depression:

https://cdn.mises.org/Americas%20Great%20Depression_3.pdf

This is, in the main, what I allude to on that one point (caveat, I am not a gold bug and of course Rothbard is. I think focusing on specific instances of "the way to implement an idea" allows people to laugh at the specific to forget/discredit the greater idea itself. Similar issues arise with Austrian rejection of stats and involved mathematical analysis.). I do not subscribe to those ideas, but find the bulk of the economic analysis itself compelling.

If you're talking Austrian economists, who are the primary proponent of the "fed is the bad buy, bring back the gold standard" argument, they explicitly reject any attempt at modeling or mathematical analysis. They are only interested in arguments based on "self evident" axioms.

I've read many of the books you're talking about, and there's a reason they are "unpopular" and “discredited".

There is no need to throw out the baby with the bathwater here.

Who cares about gold? Who cares about avoiding math? Not me. I guess I am no Austrian for those reasons. I do care, however, about restraining the inflationary tendencies of governments because I believe they are an engine of wealth redistribution from the poor to the rich and powerful. And sure, I suppose I do care about avoiding mathematical naval gazing, or statistical hackery. But those are side-issues.

But where's your evidence? For any economic school of thought to be a good approximation of truth, it needs to be able to make models that both describe what has happened, and predict what will happen. Any economist that can't do that is ultimately a quack.

Where are the Austrian models that describe and predict accurately?

I think local predictions are hard for any school to make accurately in economics, but broad swath stuff is doable. So, to have a decent shot at a good theory, you need to figure out what the most important drivers are in your situation of interest. In business cycle theory, I think it is the action of the interest rate over time which is the most important thing that gets short shrift in the main, and which drives the dynamics I speak about above.

I can make a regression say anything, but I predict the fed continues to operate, and the status quo of wealth flow from poor to rich continues. Now it can be modified by laws, and certainly will change with time, but the dynamics are there. You can superimpose other things on top and the results will vary. You can then make a model that focuses on one thing or another, and evaluate it statistically, and again, results will vary. This is some of how we ended up with a pluralist economics today.

I wrote up some other stuff about my anecdotal experience with modeling and searching for "good governance" in grad school, and how I disagreed with methodology of the papers I was reading, before abandoning the enterprise for a return to physical engineering, but I guess this is my chief point. Methodology designs in what you want to see. Economics is not a controlled science (I mean mostly the studies can have no actual control group), and therein festers a great rub. Good fun learning the statistical analysis methods though.

>Who cares about gold? Who cares about avoiding math? Not me. I guess I am no Austrian for those reasons.

The people who wrote those books that you said would support your argument certainly do.

>I’ll be happy to get my (Of course discredited) books out and recite the counter case about the Great Depression if anybody really wants me to later

>I do care, however, about restraining the inflationary tendencies of governments because I believe they are an engine of wealth redistribution from the poor to the rich and powerful.

Are you basing this belief on anything other than gut feelings and the work of Austrian economists who's books you've read? von Mises is an absolute crackpot, but he does a very good job of making you "feel" that his arguments are valid.

>And sure, I suppose I do care about avoiding mathematical naval gazing, or statistical hackery.

That's different than the Austrian position that mathematical analysis is impossible and harmful. Without accepting the basic premise of Austrian economics that "no measurement is possible" and everything can be derived from the first principle of "humans acting with purpose", the rest of their "proofs" are worthless. You can't just accept (and cite) their arguments while also acknowledging the fundamental flaws with the axioms they use to reach their conclusions.

I think their main point is that mathematical models, without connection to reality and logically tracing out the fundamentals of how and why people act, are dangerous in isolation. Statistics is useful, but statistics can lie. Having a conceptual framework of why people do things is valuable. Then add the mathematical models on top.

Sure, but having a conceptual framework of why people do things, with models on top [theoretical and empirical] is how mainstream economics works. Pointing out conceptual flaws in each others' models and how that leads to prediction error is how economists debate.

The Austrian School on the other hand, is centred on Mises, whose magnum opus insisted that all his conclusions were logically deduced from the premise "humans act with purpose" and therefore unfalsifiable, stated that "no measurement is possible" in the field of economic activity (!) and who later described econometrics as "childish play with figures". That's a very different position from the many other mainstream and non-mainstream economists who simply think other economists' models are insufficiently connected to reality .

The problem is that mainstream economics fails to accept that the choice of metric to perform their analyses encodes biases. Ivory tower economists don't really grok what affects the working class. (I can't say I totally do myself, but at least I drove for Lyft full time for a year and a half).

Mainstream economics says that monetary intervention is necessary to "stabilize" the economy, as measured by metric X Y or Z. Who benefits from that stability? I would say mostly the upper echelon status quo. And what is the social cost of the stability? Mainstream economics also measures the widening wealth gap but it's incredibly infuriating that they can't fucking put two and two together and understand that the gap is the social cost of their stability measures. Especially so since there is a clear straight line mechanism for that to be the case.

> Mainstream economics also measures the widening wealth gap but it's incredibly infuriating that they can't fucking put two and two together and understand that the gap is the social cost of their stability measures.

Because it's not. It's the cost of fiscal policy decisions made overtly to aid “job creators” in the supposed hope that the wealth they drink in will trickle down as a golden shower for the rest of society.

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

"Even in the long run, it's really really hard to cut nominal wages..."

Don't get it wrong. Inflation is a tool to cut wages. It is fundamentally anti-labor.

And yet [ceteris paribus] a wage rise for a proportion of workers literally is inflation.

It is difficult to paint the alternative of artificially restricting the money supply to a level where the private sector [as a whole] must reduce some employees' nominal wages or fire them every time it offers pay rises to its most in-demand staff as more pro-labour. It doesn't sound any more pro-labour when people preferring that arrangement argue that recessions are a more appropriate mechanism to hold down wages, and acknowledge the purpose of zero inflation [and acceptance of economic downturns] is to allow wealth to be preserved for years or even generations without the need for it to be used in job creation.

Yes, it makes real wage cuts instead of catastrophic job cuts more practical when particular forms of work lose market value, which also reduces the degree to which future risk of decline needs to be built in up-front to wages.

But it's a blunt instrument. Providing tools to aid those workers adversely affected by those market shifts, whether by declining real wages or lost jobs, is the role of fiscal, not monetary policy.

It's really presumptuous to say that it's better to cheat the labor class out of its earnings than have them deal with job losses (which you don't even know would happen).

> Mainstream economics says that monetary intervention is necessary to "stabilize" the economy, as measured by metric X Y or Z. Who benefits from that stability?

The people who lose absolutely everything they've ever worked for in the event of a sustained recession. They tend not to be rich, nor comfortable with the rival Austrian solution of waiting it out because if wages drop low enough the rich might eventually deign to act by unburying their gold and investing in capital formation and job creation again.

> it's incredibly infuriating that they can't fucking put two and two together and understand that the gap is the social cost of their stability measures

It's incredibly frustrating when the school of economics most founded by a man who stormed out of a meeting of the right wing Mont Pelerin society screaming "you're all a bunch of socialists" for discussing possible solutions to income equality masquerades as egalitarian. Other economists can and do discuss causes of and solutions to inequality, including establishing the fact "the rich get richer" was a truism when gold standards were everywhere. Austrian economics doesn't even acknowledge the possibility of "social cost", rejects the possibility of making meaningful claims about some people needing a dollar more than others and wants to set a floor on how much of the future economy the 1% control by ensuring their 'sound money' is still good for that share of future economic growth even if they impede that growth by withdrawing it from circulation.

But yes, it's very good at scapegoating the Fed as the root of all evil as its oil baron funded adherents join often successful lobbying efforts against every single policy that might make working class people's lives less uncomfortable.

You don't have to be an austrian to acknowledge that some of what they say is sensible. Discarding a theory in toto because it's adherents are odious is exactly the sort of hubristic political bullshit that results in you fucking everyone over.

Sure, but you don't have to take any notice whatsoever of Austrian economics to critique the biases encoded in an economic model (indeed not being overtly hostile to the concept of economic modelling per se leads to much more parsimonious critiques of models and explicit identification of second order effects). I'm not really sure that Austrian economics has much to say that is sensible beyond illustrating basic microeconomic concepts and noting that inflation can [sometimes] be bad, business cycles are a thing and the predictive power of equilibrium models is limited, and you get all that in a mainstream undergrad textbook.

Not being an Austrian helps you conclude that their arguments that economics isn't quantitative, positivism isn't useful and reducing income inequality is actually a goal a government might wish to consider wrong though. :)

I'm not austrian (for example, I believe that the velocity theory of monetary value is partially true). You're the one that boxed me into that category. Only about 20% of what they say is any good, but those parts are definitely not being said by anyone else.

I didn't say you were an Austrian, though I must admit I'm intrigued by what you think they are saying that is useful and nobody else says (even arguments favouring gold standards are not unique to Austrians; a priori praxeology, perhaps, but I would have difficulty concluding their a priori praxeology was "any good"). At a stretch, maybe Hayek's free banking, but then others have described natural experiments with free banking but just reached somewhat different conclusions...

s/nobody else/the major economic schools/

So like chicago, keynes, socialism, mmt (which admittedly is niche)

Better?

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