Is economics education fit for the 21st century?

I opened with that because the person I’m replying to is claiming Econ is libertarian-esque propaganda

The three body problem means that we cannot predict the future of orbits of planets. Clearly astronomy is a science anyway.

Since the economy is made up of individuals who make chaotic choices, I think anyone claiming to be able to predict inflation perfectly is a charlatan. Especially since businesses and consumers react to the inflation predictions themselves which make them obsolete the moment they are published.

> inflation (aka how prices move)

How prices rise, decreasing purchasing power.

Notwithstanding that "science" isn't about forecasting, this is a Social Science, which shares the same pitfalls as Sociology and even Nutrition in most cases. What you have to work with is large datasets and logic, not observing and measuring material properties. Obviously that doesn't mean useful information can't be gleaned, nor that the scientific method isn't applied to research.

Ideas that we take for granted as a given now, like supply and demand, were not always. Data reflects it's a highly predictable effect. It's a moot point whether you want to call it science or not: data quality and interpretation matters.

Your use of science here is just a thought-terminating cliche meant to say "nooooooo don't pay attention to the facts!"

> Any "science" whose theories aren't falsifiable and cannot make useful predictions of future behavior isn't a science.

Economics makes all sorts of falsifiable statements, including (recently) on tariffs, and in the past, tax cuts and "expansionary austerity":

* https://en.wikipedia.org/wiki/Kansas_experiment

* https://en.wikipedia.org/wiki/Expansionary_fiscal_contractio...

There were predictions in the 2010s where some folks said QE wouldn't be a big deal, but others were giving dire warnings:

> We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

* https://www.hoover.org/research/open-letter-ben-bernanke

The real difficulty in economics is predicting what humans will do: Feynman once joked "Imagine how much harder physics would be if electrons had feelings"—or free will . Well, that's just the situation that economists are in.

For your inflation example, we know of causes such as demand-pull, cost-push, and expectations:

* https://en.wikipedia.org/wiki/Inflation#View_post-2000_to_pr...

The US saw demand-pull from the COVID recovery funding (to help kickstart the economy) and inflation was expected:

* https://www.piie.com/blogs/realtime-economic-issues-watch/in...

What wasn't expected was a simultaneous effect of cost-push factors due to energy and food prices spiking due to human actions:

* https://en.wikipedia.org/wiki/Russian_invasion_of_Ukraine

There was also a change in human behaviour between services demand and goods demand that had a long tail:

* https://www.frbsf.org/research-and-insights/data-and-indicat...

* https://www.frbsf.org/research-and-insights/publications/wor...

* https://www.frbsf.org/research-and-insights/publications/eco...

The difficulty is not in the predictions, but in accepting accurate ones from accurate models and living life and making policy based on them. Some folks simply do not wish to "accept" them, or wish to ignore them to pursue their own interests.

Climate change models are not inaccurate because people reject their accuracy and smother the findings.

Re predicting inflation in particular: we are in a global system with tons of factors which are themselves unpredictable. That doesn't mean that key factors like money supply don't have an impact! We don't know what global policymakers will decide and we don't know whether a pandemic is about to break. The global powers spent a fuck-ton and inflation followed, that's about as predictable as it gets. What isn't predictable is how and when that subsides.

Milei's policies curbed hyper-inflation in Argentina. Is that because he's a wizard? Is that because it's impossible to predict that drastically reducing deficit spending would reel in inflation? And if it's so fucking obvious that it would, what's the significance of denying those data points be scientific? They're either valid or not.

The theories that last e.g. supply-and-demand have lasted because they work. Guess what 20th century experiments didn't work?

This is absurd. An opinion column in the NYT does not constitute an authoritative reference on the matter.

Try some Milton Friedman [0] on for size:

    Now the first step towards understanding the cause of inflation is to
    recognize that it is always and everywhere a monetary phenomenon. It's
    always and everywhere a result of too much money - of a more rapid
    increase in the quantity of money than in output. [...] inflation in the
    United States is made in Washington and nowhere else. [...] We have
    evidence for the United States for over a hundred years; for Great Britain,
    for two hundred years; for Sweden, for two hundred years. There has never
    in history been an inflation that was not accompanied by an extremely rapid
    increase in the quantity of money. There has never in history been an
    extremely rapid increase in the quantity of money without an inflation.

Or otherwise, "inflation is a printing press phenomenon." There is very clearly a falsifiable hypothesis here: inflation increases if and only if the monetary supply increases. The induction is based on decades of empirical data, and Friedman presents a series of charts to illustrate the correlation. This, to me, sounds at least like an attempt at science - falsifiable hypothesis verified against empirical data, and clearly predicts that inflation will result if the monetary supply is increased.

We may quibble over the specifics and the numbers, just as one may quibble over what the exact percentage probability of rain is on any given day. Given that both economics and weather are chaotic systems, it is inherently difficult to make precise predictions in either domain. That does not mean that we cannot observe basic patterns and causal relationships.

More broadly, I dislike this form of modern journalism because I would rather read the source directly instead of having someone pre-digest the ideas for me which are thereafter coprophagically consumed. People read the headline, which is an oversimplification of an article which itself already oversimplifies, misrepresents, or misunderstands the source material, and all they repeat are the clickbait titles without bothering to look into the actual details.

I in fact looked up the book referenced in the opinion piece, and the reality of what the book asserts is far more nuanced than what the article quotes, to the point where I consider it a deliberate misrepresentation of the material:

    [...] we have no compelling theory of inflation dynamics
    that would allow us to understand the Phillips
    correlation — or the historical shifts in the Phillips
    curve — on anything like a deep level,” he writes.

What is surreptitiously omitted is the next sentence:

    What this means is that we also have no good way to
    explain the two most important changes to the inflation
    process that have taken place over the past fifty years;
    namely, the near-constancy of inflation’s stochastic
    trend after the mid-1990s, and the reduced sensitivity
    of price inflation to real activity.

... which is a far more technical claim than the article would have you believe. This sleight of hand is repeated again:

    The fact that “we simply don’t know what caused the U.S.
    economy to transition into an inflation regime” like the
    one of 2021 and 2022 [...]

...which leaves out an important qualification from the full sentence:

    What all this implies is that we simply don’t know what
    caused the US economy to transition into an inflation
    regime where inflation became a mean-reverting process
    and the price Phillips curve flattened.

This kind of mis-representative op-ed journalism is exactly what brings mainstream media and the progressive cathedral into disrepute. Rudd is not even talking about 2021 and 2022 in the preceding passages, he is talking about inflation expectations in the late 20th century and flattening of the Philips curve in the 90s.

This is not a collage, where you cut out passages from magazines and books and paste them together onto bristol board for artistic effect or political messaging. As a technical discipline the surrounding context and the integrity of the entire idea, as a whole, are important too.

[0] https://www.youtube.com/watch?v=B_nGEj8wIP0

Indeed, debt is simply a tool that can be used in the good or bad ways. I think we agree that this tool is sometimes used poorly in general by countries, often because voters/politicians don't listen to prescriptions by economists.

What I am saying is that poor use of this tool leads to not only economic problems, but it is fundamentally at odds with democracy. If you vote to take on large debts that the future generation have to "pay" [1], you have taken away their democratic right, in a way that is distinct from other economic tools.

The current generation can vote to have low taxes or high taxes, but that doesn't have much impact (modulo infrastructure maintenance) on future generations ability to exercise their democratic rights.

Debt is unique in this regard.

[1] Pay in quotes because future generations might pay directly via taxes, or indirectly via higher inflation or by working hard to make gdp larger etc.

In a busy season at work more people work overtime, which is a very simple a marginal cost that increases with production.

If we have a sudden surge in production, suppliers can get us goods much faster than usual but only if we pay more, another marginal cost, no?

If there is not marginal cost, then there is never decreasing economies of scale, which is blatantly wrong if you've ever seen the HR of a company get less efficient as it grows

I get that the marginal cost to copying a piece of software is a few cents of electricity, but for sure in the real world there are plenty of marginal costs.

Standard theories of production clearly distinguish between fixed and variable costs. Moreover, it is well understood that this distinction depends on the time horizon, with more costs being variable for longer horizons.

Moreover, concepts like economics of scale (with low marginal costs of producing an additional unit, as you state as an example) are well understood for certain products in certain circumstances.

The distinction between and relevance of average and marginal costs is taught in undergraduate classes.

Whether or not you can draw a nice diagram of supply and demand is pretty irrelevant for professional economists and our understanding of markets, their dynamics, and equilibria.

This thread isn’t about Trump