The 'Dismal Science' certainly is dismal, but is in no way a science

Philosophy professors Alex Rosenburg and Tyler Curtain ask, “What is economics good for?”. And the answer, as far as they can tell, is “Not much.” Richard Epstein, a noted libertarian law professor, dissents somewhat from this view.

Normally I would be in full-throated agreement with Professor Epstein, but I think he kind of misses the point in his essay (though his heart is certainly in the right place). Epstein's point, boiled down, is that even if economics is not predictive it still has value as a modeling theory and helps us to define our terms and establish boundaries when discussing economics. But here again economics falls down -- its practitioners cannot even agree on a basic model. Keynesian school? Austrian school? Chicago school? Marxist school? Anarcho-capitalist school? These models do not overlap much and often lead to wildly-different results. (Disclaimer: I am a partisan of the Austrian school of economics.)

Economics is not a science of any kind (though I guess you could wedge it in as a sub-specialty of human psychology). It is not predictive, and not at all rigorous either in theory or practice. Never mind the fancy mathematics or complex models: modern economics isn't far removed from astrology or the casting of bones or reading tea leaves.

Professor Epstein tries to retrieve the field of economics from the dustbin by drawing a line between macro economics and micro economics, and seems to assert that economic theory can be rigorous on the scale of the micro. I find this unpersuasive, because macro is simply a scaled-up micro -- the phenomenology is more complex, but contains the same basic elements. Chemistry is still chemistry, whether you're talking about a few molecules or a whole bucketful of goo; physics is still physics, whether inside an atom or at the scale of a whole galaxy.

Macro economics is simply micro economics writ large. If you can’t scale your theory up, then there’s something wrong with your theory. (Physics, it must be said, faces this exact problem with its inability to unify gravity with the other basic forces. There is something wrong, or at least incomplete, in the current model. It is nevertheless observationally accurate and highly predictive, and so remains valuable as a scientific theory.)

I've always thought that a useful conceptual model for economic systems would be cellular automata. It still wouldn't be predictive, but it would provide insight into how scarcity and environmental factors influence emergent systems (human behavior being an emergent phenomenon). You can't "fix" economics until you "fix' human behavior, and that's just never going to happen...so the next best thing is to understand chaotic, emergent behavior a lot better than we do now.

Perhaps what we need is more philosophy and less science in economics. The question of "how" in economics matters less to me than "why" (beyond the obvious existential reasons) -- human motivations and goals in economics are the real questions we're trying to answer, after all, not simply the tracing of every financial transaction and manufactured good.

But it's not as if the philosophers inspire confidence. Rosenburg and Curtain throw out this howler:

For the foreseeable future economic theory should be understood more on the model of music theory than Newtonian theory. The Fed chairman must, like a first violinist tuning the orchestra, have the rare ear to fine-tune complexity (probably a Keynesian ability to fine-tune at that).

Well, of course it would be a Keynesian symphony, wouldn't it? (You'll have to imagine the sarcasm-dripping tone of voice here.)

Clearly, I think that Rosenburg and Curtain’s assertion that economics can be understood like music theory to be absurd. Doubly so if you include the Keynesian fallacy they introduce; Keynesian music theory would simply posit that more tones equals better music, regardless of their placement in the staff or the instrument playing them. And it should be up to the conductor and not the composer to decide when and where to introduce all those new tones. The end result would not be particularly musical, but then in Keynesian music as in Keynesian economics the benefit of the audience is not really the point.

The more basic objection is this: if you screw up a piece of music, the only harm you have done is to the ears of your audience. If you screw up the economy, you can destroy your entire society. The stakes are just a bit higher with economics than they are with a musical performance. Once again we see the ancient leftist desire for control, the conceit that they can tinker with some fantastically-complex (and badly-understood) phenomena without any negative consequences.

The best approach to any potentially-dangerous phenomena you don’t understand is to use extreme caution, and limit your interference as much as possible. Hippocrates understood this many centuries ago when he founded the science of medicine: First, do no harm.

We have discovered, through many centuries of trail and error, that market capitalism performs the best of any economic model we’ve tried so far. That doesn’t mean there aren’t better ones, just that no one has discovered any yet. The wonderful thing about market capitalism is that it runs pretty well with very limited intervention. It doesn’t require a great deal of regulation or fine-tuning -- in fact, regulation and fine-tuning tend to degrade the performance of a market-capitalist economy rather than improve it.

There may come a time when economics becomes a robust, predictive science, but I rather doubt it. As I said before, economics is really the study of human behavior, and creatures as irrational and contrary as we are resist definitive analysis. I think we’ll have to make peace with the fact that all we can do in terms of “managing” the economy is to “manage” it is little as we possibly can.

Posted by: Monty at 08:15 AM



Comments

1 If economics was predictive, economists wouldall be rich. They aren't. QED

Posted by: pep at September 05, 2013 08:24 AM (eGE0w)

2 Economics is not as precise a science as physics, but it is predictive. Raise the minimum wage, reduce employment; tax something, you'll get less of it. People, in their personal and business capacities, respond to incentives. Now, you'll say that economic predictions aren't accurate. True, but neither are those of physics if the problem is sufficiently complex, as is true of economic situations. E.g., can a physicist predict exactly where the shards of glass will fall when one throws a rock through a window? This case is much more akin to cases where economists make predictions (i.e., economy-wide) than to the laboratory experiments where physicists do much of their predicting.

Posted by: Joe Louderback at September 05, 2013 08:25 AM (B5PO1)

3 ... But it's for the children!

Posted by: dogfish at September 05, 2013 08:25 AM (nsOJa)

4 Nice post Monty,

Economics is not and will never be a predicative force to any degree greater than Meteorology BUT it is a useful tool for taking prior performance and winnowing out near term implications of data flow....

YEARRRRGGGGHHHH

Posted by: sven10077 at September 05, 2013 08:27 AM (9jfyN)

5 I thought economics was the science of bullsh*tting?

Posted by: Lucky Pierre at September 05, 2013 08:27 AM (5fSr7)

6 Seems to me this idea that an economic model can be "better" is racist and hetero normative.

Posted by: blaster at September 05, 2013 08:28 AM (q47VT)

7 Economics is the study of systems that are far removed from equilibrium and have unknown boundaries and unpredictable patterns of behavior.

Kinda like women.

*ducks*

Posted by: eman at September 05, 2013 08:28 AM (AO9UG)

8 "I find this unpersuasive, because macro is simply a scaled-up micro"

But in physics there is a definite break between the physics of the micro (quantum physics) and the macro (relativistic physics) and for a long time physicists have been trying to find a way to unite the two (GUT). Personally I suspect Professor Epstein is on the right track here.

Posted by: major major major major at September 05, 2013 08:29 AM (fRYRo)

9 I blame economists more than I blame economics. Better yet, we should probably blame whatever idiots pay all these charlatans. I'll stop right there, before I start bashing the Fed.

Posted by: Randall Hoven at September 05, 2013 08:30 AM (Sihtm)

10 Whatever school you adhere too on economics I think they all beat the alternatives ie: living in squalor or pillage and plundering your neighbors.

Posted by: Regular Guy at September 05, 2013 08:30 AM (N3Al8)

11 Economics:Mathematics:olitical Science:Science

Posted by: mugiwara at September 05, 2013 08:30 AM (W7ffl)

12 Well that didn't come out right, but I do like smiley faces.

Posted by: mugiwara at September 05, 2013 08:31 AM (W7ffl)

13 9 Randall Hoven,

Reporting for Doody

Posted by: P Krugman Reel Geen E Yuss Honk if you need to lose 17 trillion dollars! at September 05, 2013 08:31 AM (9jfyN)

14 When you say "there's something wrong with your theory" if you can't scale it, you're stating an ASSUMPTION, not a fact. Where is it written that the large is just an amped up version of the small? Who has proved that? In mathematics in order to talk about the very very small we are forced to use estimates (lim as x --> 0 stuff). Even in the pure language of mathematics, we can't scale seamlessly from the small to the large without bumps.

Posted by: major major major major at September 05, 2013 08:32 AM (fRYRo)

15 I'm no economist. I was really interested in it until I took my first course in college, and I lasted a week. 40 years later and I'm still recovering from college.

But it seems to this nobody, that there's two factors. One is the reality of economic interactions, which is as fixed as a lever's function. The other is the psychology of economics as you say - psychologically, one either understands gravity or doesn't, with predictable consequences, yet look at how many attempt to defy it!

The physics of economics is consistent up and down the everyday scale from home economy to planetary.

The psychology... Well according to Asimov, you have to have a pretty big sample base to process humanity's choices.

Think I'll go revisit Free to Choose.

Posted by: mindful webworker, economically unbalanced at September 05, 2013 08:32 AM (1s+pS)

16 Economics can't get around the problem of predicting human behavior, but they can measure outcomes in terms of money. That gives economics a big advantage over other the other social sciences.

Posted by: Dave at September 05, 2013 08:33 AM (OMNfZ)

17 "But in physics there is a definite break between the physics of the micro (quantum physics) and the macro (relativistic physics)"

--------------

We say that, but it's not necessarily true. We just can't manage to unify the two models yet -- that doesn't mean they *aren't* unified. In fact, our inability to unify them means that there is something wrong with both the relativistic and quantum models. The fact that we haven't been able to do this yet doesn't mean that we won't ever do it. Look how long it took to unify the theory of electrical and magnetic fields.

Posted by: Monty at September 05, 2013 08:35 AM (G8OwX)

18
This is easy.
Keynesianism and Monetarism are not science; they are not even economics. They are pseudo-scientific doctrines (like phrenology or astrology) which are used by Statists to provide a rationale for State action and the growth of the State. When the State wants to redistribute money to its clients in the Ruling Class and its voters, it hires a Keynesian to shout "insufficient aggregate demand!". When the State wants to inflate the money supply to benefits its Ruling Class members, the banks, it hires a Monetarist to shout "credit destruction!"
Of course, we have had a multi-year real world experiment in whether either of these pseudo-sciences work. Running Keynesian $1trillion annual deficits has not fixed things, nor hashaving the Monetarists double the size of the Fed balance sheet.
Real economists are called classical or Austrian. Their solutionsare based on smaller government, free market principles. But since these economists do not fulfill the needs of the State for a rationale, they are not included in the debate.

Posted by: Steve in Greensboro at September 05, 2013 08:36 AM (sugnf)

19 What? No DOOM kitteh today?



Posted by: EC at September 05, 2013 08:37 AM (GQ8sn)

20 monty, what is the diff between Austrian and Chicago schools? I didn't realize they were that different...

Posted by: Underground Vulgarian at September 05, 2013 08:37 AM (7+iaE)

21 17 Monty,

Macro Economics is a Jedi mindtrick by the Keynesians so they can sell the perpetual motion machine...

I've understood that since I was 8....

remember the tag end of the "Carter Miracle" where we suffered through the last mini spat of Weimar price fluctuations in foods and such that was in real time at the grocer?

Stuck with me always....they just fuck the value of the entire dollar now.

Posted by: P Krugman Reel Geen E Yuss Honk if you need to lose 17 trillion dollars! at September 05, 2013 08:38 AM (9jfyN)

22 Physics can safely say that a boat on a calm sea will drift with the current and the breeze, and that when a gale strikes the boat will be washed out to sea, or crashed onto a reef, or safely deposited on a beach, but physics can't predict which thing will happen.

Economics should be boiled down to a simple list of things never to do, and then be put to rest.

Mostly these days Economics is a refuge for control freaks and Communists (a subset of control freaks).

Posted by: eman at September 05, 2013 08:38 AM (AO9UG)

23 With respect to interventions in free-market capitalism, I suppose it is not irrelevant to mention the recent findings/claims that "managed" mutual funds underperform inex or non-managed funds.

Posted by: Ray Van Dune at September 05, 2013 08:38 AM (qIFL7)

24 Chicken entrails can be highly predictive, but you must have an advanced degree from an Ivy League school to avoid reichwing bias. The readings aren't for amateurs.

Posted by: Paul Krugman at September 05, 2013 08:39 AM (JQuNB)

25 Good morning morons!

Posted by: DangerGirl at September 05, 2013 08:40 AM (Ryac4)

26 17 "But in physics there is a definite break between the physics of the micro (quantum physics) and the macro (relativistic physics)"

--------------

We say that, but it's not necessarily true. We just can't manage to unify the two models yet -- that doesn't mean they *aren't* unified. In fact, our inability to unify them means that there is something wrong with both the relativistic and quantum models. The fact that we haven't been able to do this yet doesn't mean that we won't ever do it. Look how long it took to unify the theory of electrical and magnetic fields.
Posted by: Monty at September 05, 2013 08:35 AM (G8OwX)

Actually the problem may be the idea they should be unified in the first place. Gravity and QM may never have been unified.

Posted by: eman at September 05, 2013 08:41 AM (AO9UG)

27 Do economic conceptual models have elbows?

Posted by: Diogenes at September 05, 2013 08:41 AM (1/RiT)

28 In the long run, we're all buttfucked.

Posted by: John Maynard Keynes at September 05, 2013 08:41 AM (JQuNB)

29 The main problem occurs at the apex of personal philosophy (Libertarian, Marxist, etc.) and economic modeling. In my opinion, the field has been corrupted by a choice based on preferred outcomes as opposed to the merits of methodology.

One might make a counterpoint that is a "chicken or egg" argument. Perhaps, but when arguing the merits it often becomes less about the practicalities or methodology and ultimately finds it's roots in philosophical outlooks.

You can also argue, somewhat successfully, that the two are intertwined. That has some merit if you explore each. I believe that is also ultimately the basis for arguments about the usefulness of the economics field in general as contemporaries, right or wrong, believe it is a field which is easily corruptible.

Given that outlook, it's also not an absolute, as is most honest science.

YMMV

Posted by: Marcus at September 05, 2013 08:45 AM (GGCsk)

30 You can't "fix" economics until you "fix' human behavior, and that's
just never going to happen...so the next best thing is to understand
chaotic, emergent behavior a lot better than we do now.



Bingo. I have a fairly quick and dirty way to determine if something is best categorized as science or philosophy. Does it involve studying things? Science. Does it involve studying people? Philosophy (also theology in some regards).


Jeff Goldblum illustrates this nicely: http://youtu.be/n-mpifTiPV4


Which isn't to say philosophy isn't important, of course it is. But it has its limits. My problem with most economists who claim to be scientists is their refusal to abide by the scientific method. What's that you say? QE didn't work and, by most measures, is a dismal failure? Why, double down on it, of course!

Posted by: alexthechick - Team SMOD at September 05, 2013 08:45 AM (Gk3SS)

31 Cereal, you guys!

Posted by: Bigby's Kung Fu Grip at September 05, 2013 08:45 AM (3ZtZW)

32 28 John Maynard Keynes!,

My Master let me get the lube....

Posted by: P Krugman Reel Geen E Yuss Honk if you need to lose 17 trillion dollars! at September 05, 2013 08:46 AM (9jfyN)

33 Currently, the US economy is proof a first-world economy can run on momentum alone.

Posted by: Money from Nothing at September 05, 2013 08:47 AM (vO/a0)

34 Who would have thought that ammunition would be like Gold and evidently more plentiful as cost rise 500%. And the government has reduced bullets to the have and have nots.

Posted by: Clemenza at September 05, 2013 08:47 AM (3GuQx)

35 is economics a pseudo-science? because its practitioners seem to be all over the place with their pronouncements. Also, if you can 'prove' your personal opinion with 'science', it's not science.

Posted by: Jones in CO at September 05, 2013 08:48 AM (8sCoq)

36 monty, what is the diff between Austrian and Chicago schools? I didn't realize they were that different...

-------

It's a long subject. The Chicago school is usually exemplified by Milton Friedman and his cohort. It tends to be more monetarist than the Keynesian theory, and more market-oriented in terms of stuff like public choice and so on. But the Chicago School and the Keynesian School have interbred so much in the past decades that they're kind of hard to tell apart these days. It depends largely on who you're talking to.

The Austrian school is considered the more "fringe" theory because it operates more on assumed axioms, and tends to focus more on behavioral models than abstract quantitative models. Ludwig von Mises and Friedrich Hayek also contributed what is known as the "Austrian Business Cycle Theory", which illustrates the effect that central-bank policies have on the availability of credit. Austrian school proponents are often (but not always) fans of a return to hard money -- even specie currency. Austrian school advocates believe that fiat currency is destructive to an economy.

This is *vastly* oversimplified, by the way, but like I said: it's a long subject.

Posted by: Monty at September 05, 2013 08:48 AM (G8OwX)

37 "We say that, but it's not necessarily true. We just can't manage to unify the two models yet -- that doesn't mean they *aren't* unified. In fact, our inability to unify them means that there is something wrong with both the relativistic and quantum models. The fact that we haven't been able to do this yet doesn't mean that we won't ever do it. Look how long it took to unify the theory of electrical and magnetic fields."
Yes, but by this logic, macro and microeconomics haven't been unified yet, either-- they're still looking for their own "string theory" or what-have-you.

Posted by: Redshirt at September 05, 2013 08:49 AM (JpC1K)

38 Posted by: Steve in Greensboro at September 05, 2013 08:36 AM (sugnf)

Very well stated.

Posted by: slatz at September 05, 2013 08:49 AM (mE0Rl)

39 and let me take this opportunity to pimp Orville Redenbacher's Popcorn Microwave Bowl....

good stuff...

it explodes the corn like quanitative easing explodes the debt

Posted by: P Krugman Reel Geen E Yuss Honk if you need to lose 17 trillion dollars! at September 05, 2013 08:49 AM (9jfyN)

40 Excellent post Monty. But I don't agree with your assertion that micro and macro are the same. In physics, many phenomena look continuous at the macro level, but we believe that they are discrete at the micro level. And the chaos of many individual decisions can produce predictable macro behavior.

That said, I wholeheartedly agree that politicians should refrain from meddling in private economic decisions. A basic respect for liberty demands it.

To me, this is the key point. It doesn't matter whether the governments' mass of rules and regulations makes the macro economy better or worse. Just get out of my face and let me live my life as I choose, as long as I'm harming no others' rights in the process.

Posted by: Blue State Political Hostage at September 05, 2013 08:51 AM (DSeW+)

41
>>>There may come a time when economics becomes a robust, predictive science, but I rather doubt it.

In order to have a robust science within the social sciences, IMHO one must establish where the upper and lower bounds are. It can't be done in, for example, psychology.
Within economics it would seem easier to find those but it really isn't. How much money is "too much"? How much squalor can a human being endure in a purely economic sense before that endpoint is reached? I dunno, but it does look like this misAdministration is determined to find out.
So we have that going for us, I guess.

Posted by: Bigby's Kung Fu Grip at September 05, 2013 08:52 AM (3ZtZW)

42 My personal economic theory is that the inspiring flame of the Holy Spirit infuses our interaction through out society, including economics. This uplifting force of hope and encouragement works hand-in-hand with the pruning effects of Adam Smiths Invisible Hand that discourages the inefficient. So as, attempting to define, measure, and manage the will of God is impossible; economics as a science is doomed.

I agree it can provide terminology and a frame of reference for discussions. Beyond that ...

Posted by: Jean at September 05, 2013 08:54 AM (CMlD4)

43 41 Bigby's Kung Fu Grip by Invisible Hand,

Eh.....

I can take a lot of Squalor....

when I was locked in my safe room with Mr. Bigglesworth for six months after election 2010 I found the lower limits...

Posted by: P Krugman Reel Geen E Yuss Honk if you need to lose 17 trillion dollars! at September 05, 2013 08:54 AM (9jfyN)

44 Before Chemistry, there was Alchemy. Economics is obviously the precursor to something based in science, too.

Posted by: Mssr. de Fleppard at September 05, 2013 08:55 AM (QjSgY)

45 This thread makes me feel dumb. I like breakfast cereal better. I like Fruit Loops bestest.

Posted by: Dick "I'm A Dick" Durbin at September 05, 2013 08:55 AM (9ng2u)

46 Economics is what thieves use to justify their actions...it's science.

Posted by: CanaDave - Dusting off the anti-war slogans at September 05, 2013 08:56 AM (Q3Q2H)

47
>>>I like Fruit Loops bestest.

F**k that Sh*t!

Pabst Blue Ribbon!

Posted by: Bigby's Kung Fu Grip at September 05, 2013 08:58 AM (3ZtZW)

48
Economics is not predictive in part because large groups of people can suddenly behave strangely, like a quantum rogue wave. Natural disasters and all sorts of other wildcard factors can shift your carefully-graphed curves all over the place.

Economics is at best a picture trying to explain amulti-dimensional universe.

Posted by: Beagle at September 05, 2013 08:59 AM (sOtz/)

49 In physics, many phenomena look continuous at the macro level, but we believe that they are discrete at the micro level.

--------

Who's "we"?

Isn't the whole string-theory/quantum-loop effort an attempt to unify gravity with the other forces?

And you are right that perhaps, maybe, some day, economics will be "unified" into an actual science. But the difference between physics and economics is that physics is both highly predictive and highly accurate *even in the incomplete state*.

Economics cannot make that claim. Even in the broadest statistical terms, our current economic models do not even describe the *current* system very well, much less predict future outcomes. As I said, economics at present is on the same level as augury, divination, and astrology. It may some day *become* an actual scientific discipline, but it's a long way from that yet.

Posted by: Monty at September 05, 2013 09:00 AM (G8OwX)

50 Geez, I shoulda changed nick to "Bigby's Severed, Bug-covered Hand" for that comment

Posted by: Bigby's Kung Fu Grip at September 05, 2013 09:00 AM (3ZtZW)

51 >>>I like Fruit Loops bestest.
Kaboom FTW!

Posted by: Al Shabbah at September 05, 2013 09:01 AM (H6jRZ)

52 I love lamp

Posted by: Jones in CO at September 05, 2013 09:03 AM (8sCoq)

53 You'll realize most of Washington thinks Sid Meier defined economics and they can run the world efficiently with four staff meetings (turns) a week.

Posted by: Jean at September 05, 2013 09:04 AM (CMlD4)

54 economics usually can tell us how rational people will react in certain economic conditions
The Problem with economics , beside there seems to be a lot of economist who are communist/socialist or their toadies, is humans can occasionally be irrational.

Posted by: Kyon at September 05, 2013 09:06 AM (mT+TO)

55 "large groups of people can suddenly behave strangely, like a quantum rogue wave"

And then there are those who create those waves.

Posted by: George Soros in the bathtub at September 05, 2013 09:07 AM (F3WsD)

56 Economic theory is pretty predictive in terms of where your expectations fall in the spectrum between totally free markets vs government control/management and central planning.

The Leftists that espouse the latter are usually insufferable pricks that need to pat themselves on the back while picking your pocket.

The Austrian School's Hayek is only rivaled for prescience for our current dire circumstances by Orwell who came at it from the opposite side and a completely different discipline.

Posted by: ontherocks at September 05, 2013 09:08 AM (iWVi5)

57 Jones, http://www.turnkeylinux.org/

Posted by: Jean at September 05, 2013 09:09 AM (CMlD4)

58 Kaboom's for "those" people. I'm one of the elites. So...yeah. Fruit Loops, better health care. Know your place.

Posted by: Dick "I'm A Dick" Durbin at September 05, 2013 09:09 AM (9ng2u)

59 Jones and this: http://www.informit.com/articles/article.aspx?p=472693

Posted by: Jean at September 05, 2013 09:11 AM (CMlD4)

60 58 Dick Dick Durbin,

I have been to the Heart of Darkness...or at least the bowels of the safe room...

I have tasted the grapenuts of wrath....

Freedom is when you only have a quadrillion and a half more in mineral wealth to blow....

Posted by: P Krugman Reel Geen E Yuss Honk if you need to lose 17 trillion dollars! at September 05, 2013 09:11 AM (9jfyN)

61 Vegemite Ohs.

Tastes just like Economics. Mmmmm, mmm, mmm.

Posted by: Tanelorn Rules at September 05, 2013 09:12 AM (vO/a0)

62 Economics could be a science if you could kick all the charlatans out. It's like having to consider the witch doctors of Boonga-Boonga when talking about a cure for cancer or psychic surgeons when studying treatments for vaginal warts. So many economic theories are blatant BS and don't work at all yet they are still relevant because of liberals clinging to them like a belief in Santa Claus.

Posted by: Dang at September 05, 2013 09:15 AM (Hx2XA)

63 Comment #59 is spam

Posted by: Jones in CO at September 05, 2013 09:15 AM (8sCoq)

64 53 Jean,

WRONG!

I accepted it took at least five a week when I met Joe Biden...

Posted by: P Krugman Reel Geen E Yuss Honk if you need to lose 17 trillion dollars! at September 05, 2013 09:15 AM (9jfyN)

65
>>>Tastes just like Economics.

The Dismal Cereal. [which would be Frosted Mini-Wheats, left in milk too long]

Posted by: Bigby's Kung Fu Grip at September 05, 2013 09:16 AM (3ZtZW)

66 Jones why is 59 spam, it's a bit old but dissects lamp fairly well.

Posted by: Jean at September 05, 2013 09:17 AM (CMlD4)

67 >>> Know your place.
Bowin', scrapin' and pullin' on my forelock here, Boss.
::: mutterin' under breath "damn cerealists; come the revolution..." :::

Posted by: Al Shabbah at September 05, 2013 09:18 AM (4iWKM)

68 1 If economics was predictive, economists wouldall be rich. They aren't. QED
Posted by: pep at September 05, 2013 08:24 AM (eGE0w)

This is a very narrow view of economics. My brother studies labor theory. This in no way would allow him to get rich, as it isn't stock market prediction.

Posted by: HoboJerky, now with 56% more DOOM! at September 05, 2013 09:18 AM (09o/X)

69 In physics, you can describe the behavior of individual molecules with mean free path equations. You can get the same results with the gas laws and when you are dealing with gas in greater than near vacuum pressures you pretty much have to.


I kind of look at that as the difference between micro and macro economics. The gas laws are not just scaled up mean free path equations.

Posted by: Obnoxious A-hole at September 05, 2013 09:19 AM (31Nrp)

70 This is *vastly* oversimplified, by the way, but like I said: it's a long subject.
Posted by: Monty at September 05, 2013 08:48 AM (G8OwX)

My brother says Austrian Econ is a crock, due to these axioms. He says the good parts were all taken by mainstream economists, and that they left the rest.

Posted by: HoboJerky, now with 56% more DOOM! at September 05, 2013 09:20 AM (09o/X)

71 I enjoyed CLEPping out of both macro and micro doing the 'night before, skim the study guide' method. Probably some of my lower scores overall, but at least it meant I didn't actually have to think about any of this pseudobullshit 'science'.

Posted by: akula51 at September 05, 2013 09:20 AM (pUGYz)

72 One should differentiate between macroeconomics and microeconomics, and econometrics.

People behave in predictable ways, all things being equal, of course.

But the macro shit is always fucked up by govermenta.

Posted by: rev dr e buzz the main maing at September 05, 2013 09:21 AM (/a/gI)

73 "The gas laws are not just scaled up mean free path equations."

----

But both sets of equations are subsumed under the larger theory of physics. They are not totally separate fields. You can get an accurate answer by knowing which equation(s) to use.

In economics, it's a crap-shoot: the Black-Scholes equation *might* get you an accurate way to price a derivative, but just as often it's completely off the mark. You'd do almost as well to throw darts at a board. The only benefit the B-S equation brings is that you know your cohorts are using the same flawed set of assumptions as you are, so your failure zone will be roughly concomitant. (In other words, it's statistically better than nothing. But only just.)

Posted by: Monty at September 05, 2013 09:24 AM (G8OwX)

74 Damn, sneaked in aq post and nobody came forward like a man (or a Moron) and told us on the news thread.


And I had to Bing up Anarcho-capitalist because it doesn't seem to me that those two terms go together. People who subscribe to that are idiots.



Here in the US we are about 50% socialism, 40% communism (and growing), and 10% capitalism and shrinking.

Posted by: Vic at September 05, 2013 09:26 AM (zZbNF)

75 The fact that the Chicago econ dept now seems to hate Milton Friedman is a good testament that all institutions, unless explicitly right-wing, become left-wing over time.

Chicago School rose to power so ... the Left just took over the Chicago School.

Posted by: Flatbush Joe at September 05, 2013 09:26 AM (ZPrif)

76 "Economics is not a science of any kind"


Perhaps not, but then again, something doesn't have to be "science" for it to be a useful mode of inquiry or a potential route to epistemic advancement, either.

Posted by: Titus Quinctius Cincinnatus at September 05, 2013 09:26 AM (YYJjz)

77 Hayek rules keynes drools.

Posted by: kreplach at September 05, 2013 09:26 AM (iy7de)

78 Remember Reagan's Voodoo economics?....Good times.



Wait...what??




Posted by: G.H.W. Bush at September 05, 2013 09:27 AM (jvd3N)

79 A Keynesian symphony is like a Sheila Jackson Lee twerk.

http://tinyurl.com/kw55mu6

Posted by: WalrusRex at September 05, 2013 09:27 AM (Hx5uv)

80 Good time to bust out the simulation.
Nick Bostrom - The Simulation Argument (Full)

http://youtu.be/nnl6nY8YKHs

Posted by: 13times at September 05, 2013 09:27 AM (fGPLK)

81 As for Keynesian economics anyone who still espouses that after the disaster that was FDR is truly insane. But Liberals never give up on anything even when you mash the shit pie in their face.

Posted by: Vic at September 05, 2013 09:28 AM (zZbNF)

82 If economics is such a useless field of study (and I agree), why would you spend so much time studying it?

Posted by: Empire of Jeff at September 05, 2013 09:28 AM (CJjw5)

83 Economics might be more predictive if they went back to reading the entrails of birds.

Posted by: WalrusRex at September 05, 2013 09:29 AM (Hx5uv)

84 Analytically, the correct response to Rosenberg and Curtain is that social scientists can make real progress in understanding the economic system by confining their attention to problems big enough to matter, yet small enough to generate sensible predictions. Rosenberg and Curtain eventually gravitate to that position by ending the article with this critical aside: “Fixing bad economic and political institutions (concentrations of power, collusions and monopolies), improving good ones (like the Fed’s open-market operations), designing new ones (like electromagnetic bandwidth auctions), in the private and public sectors, are all attainable tasks of economic theory.” Thankfully, much of economics, especially at the applied level, is devoted to just those issues.

Posted by: Cherokee Liz Warren at September 05, 2013 09:29 AM (e8kgV)

85 I'd disagree. Economics can predict behavior. We know certain things are true, and by seeing repetitive behavior over and over, we can make good inference into the future.

Many people confuse economics and accounting.

Posted by: Jeff at September 05, 2013 09:29 AM (MOSsR)

86 Hayek rules keynes drools.

Posted by: kreplach at September 05, 2013 09:26 AM (iy7de)

Indeed...

http://tinyurl.com/k75a6dr



NSFW

Posted by: dananjcon at September 05, 2013 09:29 AM (jvd3N)

87 Saw a bumper stick this morning which read; "Rebuild America, Vote Democratic." A much more accurate bumper sticker would be; "Destroy America, Vote Democrat."

Posted by: Ammo Dump at September 05, 2013 09:29 AM (GgPam)

88 I have a degree in music composition. Music theory is much more rigorous than economics.

Posted by: Long-time Commenter, First-time Reader at September 05, 2013 09:30 AM (pl1y3)

89 If anyone wants to see keynes get a thourough beating search the intertubes for two videos.

Fear the boom and bust and fight of the century.

Hayek levels Keynes

Posted by: kreplach at September 05, 2013 09:31 AM (iy7de)

90 82
If economics is such a useless field of study (and I agree), why would you spend so much time studying it?


1. Tenure
2. Grant Money
3. WTF else are they gonna do?

Posted by: akula51 at September 05, 2013 09:31 AM (pUGYz)

91 Physics is not Physics at all levels. Much like economics we struggle to predict at the quantum level. There are dozens of theories currently in Physics for Quantum Mechanics. Economics is science it is just an Indeterminate equation. There are so many variables we struggle getting a model that is predictable in some way. This is much like the climate change models. So many variables they cant create a model that works. You can try and turn some variables into constants to clean it up but that adds error. Do that to much and you create an inaccurate model. Same goes for economics. It is science it is just to complex to model accurately, for now.

"All models are wrong, but some are useful."

Posted by: scot4999 at September 05, 2013 09:31 AM (LTquJ)

92 I thought economics was the science of bullsh*tting?

***

No, no. That's climate science.

Posted by: WalrusRex at September 05, 2013 09:32 AM (Hx5uv)

93 Economics is predictive in a vacuum like most experiments. Add any number of variables and the predictivity is thrown out the window.

Posted by: polynikes at September 05, 2013 09:32 AM (m2CN7)

94 I think that the better physics-based analogy (i.e. compared to quantum physics vs gravity) for the difference between macro and micro is the difference between physics based on macroscopic matter and quantized matter. An example is the theory of fluids (liquids and gases) which in the macroscopic scale can be approximated with ideas such as pressure, temperature, viscosity, etc. On the atomistic scale, these are approximated usually using kinetic theory, but increasingly molecular dynamics are being used (sometimes using Newtonian forces, sometimes QED interactions) and can often find significant surprises that match observation.

The important thing is that all of these views of nature are approximations that are valid over a limited length scale. Stuff such as string theory goes down much much further to the sub-nuclear scale. Although physics, in principle can move through all of these areas, nobody in their right mind would apply QED to working out the physics of a tornado. It's just too complex.

What we really need is a Hari Seldon to discover the Seldon functions that allow a simulation in the continuum of chaotic individual action. I do like the concept of examining cellular automata. It reminds me of the part in Goedel Escher Bach where the intelligence of an ant colony can be perceived even though no single ant has any idea what's going on. It's the rules of interaction that ultimately describes the whole system. This appears to be the case for the human body as well.

Posted by: MichiCanuck at September 05, 2013 09:33 AM (CSJ7f)

95
How do free market economists keep losing the debates to supposed progressive do-gooders?
Take one example, the housing bubble and pop causing the mortgage-backed securities crisis.
Rather than let the housing market seek a natural bottom they keep throwing federal money at it and propping up bad paper.
You know what you get if the market bottoms out? Cheap housing. Affordable, cheap housing. No residential real estate growth is sustainable if actual working people in particular economic niches cannot afford them. Cheerleading rapidly increasing housing prices is odd in the context of the prices of everything else. And I own mine.

Posted by: Beagle at September 05, 2013 09:33 AM (sOtz/)

96 thanks monty. I def fall on the Austrian side.

Posted by: Underground Vulgarian at September 05, 2013 09:33 AM (7+iaE)

97 One chart that always makes interesting reading is the Heritage chart of economic freedom and how well the individual countries are doing. The US used to be up near the top but since Obama gained the throne we have been steadily slipping in both categories.


It is interesting to see it laid out that way because year after year the countries that rated high in economic freedom also did well economically, and vice-versa.


And RR was right, a rising water level raises all boats.

Posted by: Vic at September 05, 2013 09:34 AM (zZbNF)

98 To me, the reason economics isn't predictive is the same problem as predicting the outcome of a sporting event: knowing the parameters of the game, and even having detailed information on the past performance of the players, one cannot with certainty predict an outcome due to the variable of human performance.

To beat the analogy into the ground: in the same way that you can predict the economic changes of a single variable at least as a trend (like, say, raising the minimum wage, as noted upthread), you could predict the impact on overall number of quarterback sacks if blocking rules are adjusted one way or another in football. But you still can't predict the outcome of the game. This is the weird thing about economics--you *can* see trends, or it sure seems sometimes like you can see trends, but even if that's correct, you cannot always account for how humans will respond. Case in point: the increase in the number of part-time jobs and companies holding down total number of employees in response to Obamacare rules. Easily predictable. What other adjustments might come to the workforce as a result is harder to say--what does the rise of 49 employee companies do to, say, the office lease market? Will people find unexpected efficiencies at that particular scale? Will there be more opportunities for additional businesses as firms hesitate to cross that line? It's stupid that we have regulatory environment creating these structures, but what ultimately will come of them is hard to say.

Posted by: TexasDan at September 05, 2013 09:34 AM (Fa3Hi)

99 What we really need is a Hari Seldon to discover the Seldon functions that allow a simulation in the continuum of chaotic individual action. I do like the concept of examining cellular automata. It reminds me of the part in Goedel Escher Bach where the intelligence of an ant colony can be perceived even though no single ant has any idea what's going on. It's the rules of interaction that ultimately describes the whole system. This appears to be the case for the human body as well.
Posted by: MichiCanuck at September 05, 2013 09:33 AM (CSJ7f)

Worst dirty talk ever!!!

Posted by: There's a blonde joke in their somewhere at September 05, 2013 09:37 AM (m2CN7)

100 Ben up

Posted by: Vic at September 05, 2013 09:37 AM (zZbNF)

101 How many actual economists subscribe to the Austrian school?
Isn't it very fringe? Not saying it's wrong, just that it seems few embrace that label.

Posted by: Flatbush Joe at September 05, 2013 09:38 AM (ZPrif)

102 Just my view

Free market capitalism, the best system man has come up with to date, is like our Constitution, also the best system to date.
To paraphrase a founder, wholly dependent on a moral population.
This is one of the reasons we have to have the necessary evil of govt.
Also the reason we need a moral, alert population keeping an eye on what our govt is doing and trying to make sure only the "proper individuals" (see John Jay's most famous quote) area elected to serve us.

Posted by: nothinglefttolose at September 05, 2013 09:40 AM (d4o2E)

103 40
Excellent post Monty. But I don't agree with your assertion that micro
and macro are the same. In physics, many phenomena look continuous at
the macro level, but we believe that they are discrete at the micro
level. And the chaos of many individual decisions can produce
predictable macro behavior.

That said, I wholeheartedly agree
that politicians should refrain from meddling in private economic
decisions. A basic respect for liberty demands it.

To me, this is
the key point. It doesn't matter whether the governments' mass of rules
and regulations makes the macro economy better or worse. Just get out
of my face and let me live my life as I choose, as long as I'm harming
no others' rights in the process.

Posted by: Blue State Political Hostage at September 05, 2013 08:51 AM (DSeW+)


91
Physics is not Physics at all levels. Much like economics we struggle to
predict at the quantum level. There are dozens of theories currently in
Physics for Quantum Mechanics. Economics is science it is just an
Indeterminate equation. There are so many variables we struggle getting a
model that is predictable in some way. This is much like the climate
change models. So many variables they cant create a model that works.
You can try and turn some variables into constants to clean it up but
that adds error. Do that to much and you create an inaccurate model.
Same goes for economics. It is science it is just to complex to model
accurately, for now.

"All models are wrong, but some are useful."


Posted by: scot4999 at September 05, 2013 09:31 AM (LTquJ)
**********************************************

You're both right, and Monty's wrong about micro versus macro. Microeconomics, under the right circumstances, has outstanding predictive and explanatory power (for example, natural resource or commodity chemical pricing models; transportation equilibria; factor analysis for cost projections; long-term average cost for capital investment). The key is to isolate the system, limit the number of variables, and hold everything else constant.


In macroeconomics, on the other hand, there are so many variables interacting in ways that are not well-understood (or are explained using untestable paradigms), that it really is more a tool for policy than a science.

Posted by: Caesar North of the Rubicon at September 05, 2013 09:42 AM (lYnAR)

104 101 How many actual economists subscribe to the Austrian school?

Isn't it very fringe? Not saying it's wrong, just that it seems few embrace that label.

Posted by: Flatbush Joe at September 05, 2013 09:38 AM (ZPrif)


That is because you only hear about the ones in government, big government liberals one and all. There are lot of Hayek fans out there.

Posted by: Vic at September 05, 2013 09:43 AM (zZbNF)

105
If you want some precise kind of sciencey science then just get into science, duh. Not everything on the planet is physics, and thank God for that.

Posted by: Bigby's Kung Fu Grip at September 05, 2013 09:43 AM (3ZtZW)

106 I don't think so. I think I hear about very few Austrian economists because ... there are very few Austrian economists, very few who embrace that label.

Presumably there's a larger group of economists who think Hayek had useful things to say, but who still reject the Austrian label.

Posted by: Flatbush Joe at September 05, 2013 09:46 AM (ZPrif)

107 In order to model a sufficiently complex system to be useful as a predictor, the model would have to be equally complex as the thing it is modeling. Which sort of defeats the purpose.

And the modelers would have to ascertain the initial conditions at a nearly infinite level of precision.

But, it is still possible to derive a set of coherent theories that explain systemic behavior.

In economics, the degree of economic development is a direct expression of the extent to which people derive the most benefit for the least cost. Costs and benefits are, of course, subjective, and therefore vary widely from person to person, and change over time as conditions change.

Since everyone is both a consumer and a producer, the quality of an economy is, in essence, dependent on the extent to which production is well-coordinated with consumption preferences -- producing the preferred goods, in the optimal way, in the optimal amount, relative to everything else that could be produced or consumed.

Aggression causes an increase in economic dis-coordination. It causes the wrong things to be produced, in the wrong ways, at increased cost, an in the wrong amounts.

The State is aggression incarnate. Its economic actions therefore cause an overall economic decline.

Thus is the history of the world.

Posted by: Phinn at September 05, 2013 09:46 AM (oFH2D)

108 Seems to me that economists have correctly predicted any number of things: communism is unworkable, Social Security is going bankrupt, incentives for the fishing industry that would preserve halibut stocks.

If the complaint is that it can't predict the stock market, well, neither can biological sciences.

Posted by: Original roy at September 05, 2013 09:51 AM (qbx7g)

109 "My brother says Austrian Econ is a crock, due to these axioms. He says the good parts were all taken by mainstream economists, and that they left the rest."


Your brother is wrong. Buy him a copy of Rizzo and O'Driscoll's The Economics of Time and Ignorance to understand why the Austrians are still relevant. The mainstream formalist approach still has fatal holes in it, particularly in its epistemology.

The Times piece gets off on the wrong foot almost immediately (I mean factually, the BA/BS thing is almost immediately able to be shown wrong); these guys have an unrealistic view of how the other sciences operate and their track record of prediction. Look at where "climate science" is. Look at how often astrophysics has been wrong with respect to what we're learning about exoplanets (distance from suns, size, etc.). Science is a process of prediction, analysis and model revision. It's not a single leap to every right answer in the universe.

As a professional economist (Ph.D., top-ten program) who came up during a significant political shift in the discipline in the 80s and 90s, I can say that economists acted against their class interest in the pursuit of the truth until relatively recently -- but now are fulfilling the entirely predictable trajectory of pushing meddling because meddling creates a derived demand for economists. I can also say that if it weren't for many of my forebears trying to keep the political class from doing stupid shit for the last 50 years we'd be in worse shape than we're in.

Posted by: DrSteve at September 05, 2013 09:57 AM (wwKgz)

110 Math is the only real science. Economics is really psychology. Psychology is really biology. Biology is really chemistry. Chemistry is really physics. Physics is really math. QED.

Posted by: Bud Norton at September 05, 2013 10:01 AM (6cOMd)

111 Someone upthread likened economics to meteorology, and I think that's a good comparison. Economics can be somewhat accurately predictive over short time frames, and when the scope of the prediction is justly delimited. We know, for example, that if you increase the supply of money, you'll get inflation. But that depends on everything else being equal, which it never is.

When I was studying econ in the 80s, dynamic analysis, rather than comparative statics was just starting to be developed. I haven't really kept up with what's going on in that area, but I suppose if they'd made any major breakthroughs, we'd have heard about it.

Incidentally, econ is one of the few fields outside of the hard sciences where you can still find conservative and libertarian professors. True there are a lot of Keynesians, but there are others as well. Certainly being in the econ department at BU in the 80s definitely gave me a more libertarian/capitalist outlook than I'd had before I got there.

Posted by: Farmer Joe at September 05, 2013 10:04 AM (HJsDx)

112 Late to the thread.
But IMHO, economics needs to take into account more Chaos and Complexity theory.
There is no "Homo Economus" it doesn't exist. And the only way to account for millions of people making a combination of random decisions and logical ones (and decisions on the continuum between random and logical) is complexity theory.
I think Friedman understood this at some level, and felt that on the balance things would sort of normalize out to something average.
The Keynesians have no concept of how any of this works.

Posted by: tsrblke at September 05, 2013 10:12 AM (GaqMa)

113 A real functioning economic system is a fine example of the concept of Good Enough. It's made of billions of decisions by millions of people, many of which are wrong, or inefficient. Yet the diffusion of decision makers, each mostly seeking there best interest using their local knowledge, leads to a running crowd-sourced machine that functions well enough, provided you don't let central planners stick their grubby ignorant paws in there.

Posted by: toby928© for TB at September 05, 2013 10:13 AM (evdj2)

114 A real functioning economic system is a fine example of the concept of
Good Enough. It's made of billions of decisions by millions of people,
many of which are wrong, or inefficient.


Exactly. An airplane following a vector is off-course almost all of the time. But if the pilot has reliable information, and the ability to adapt depending on conditions, then he can make constant corrections, which is what allows an airplane to fly all the way across the ocean to a specific destination.

Prices are information. People use that information to decide what to produce and what to consume -- to adapt to conditions that are constantly changing and unpredictable.

Governmental interference with prices destroys people's ability to adapt properly. They go off-course, and have no ability to know the extent to which they're off-course, or what to do to correct it. As a result, instead of correcting, the errors snowball, and the problem grows until it reaches a point of political embarassment that cannot be hidden any longer. See, e.g., every government program ever.

Posted by: Phinn at September 05, 2013 10:24 AM (oFH2D)

115 Economics cannot do prognostication when it can't even agree on how to properly describe what it is observing.

Posted by: Mikey NTH - The Fall Obstreperousness has arrived! Get Yours Today! at September 05, 2013 10:29 AM (hLRSq)

116 Where's the cat? I demand cat with my DOOM.

Posted by: steveegg at September 05, 2013 10:29 AM (o44nj)

117 Economics provides a "scientific" cover with lots of big words for the actions that politicians want to do anyway.

Posted by: Mikey NTH - The Fall Obstreperousness has arrived! Get Yours Today! at September 05, 2013 10:36 AM (hLRSq)

118 Sirs,.
All ofeconomics in two sentences:."Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Posted by: Zombie Charles Dickens at September 05, 2013 10:38 AM (Xv7f/)

119 Why's .22LR so hard to come by, 'specially the high velocity stuff?Don't need no Nobel Prizein economics toanswer that.

Posted by: Duck Dynasty Economist at September 05, 2013 10:43 AM (Xv7f/)

120 Why's .22LR so hard to come by, 'specially the high velocity stuff?Don't need no Friedman or Hayek or no Nobel Prizein economics toanswer that.

Posted by: Duck Dynasty Economist at September 05, 2013 10:44 AM (Xv7f/)

121 Economics is not a science of any kind (though I guess you could wedge it in as a sub-specialty of human psychology). It is not predictive, and not at all rigorous either in theory or practice.
------

A lot of natural science was descriptive rather than predictive, especially in the early days, but even now in a lot of respects. So I'm not really sure that economics is eliminated as a science based on that.

Nor do I accept that in order for a field of study to count as a science the practitioners in that field must agree on basic modeling methods.

"Science" does not mean infallible. Science does not mean complete understanding. Science does not mean accepted facts or theories never change.

Economics is not a natural science, obviously. The underlying phenomena that it studies do not obey natural laws -- so there is no one Right Answer the way there is in the natural sciences (which is not to say that currently accepted tenets of natural science can't be rejected or refined later, based on better experimental methods and analysis). But it is, or can be, a rigorous discipline employing many of the tools we associate with science, like mathematics and statistics, and it seems to me econometricians do make testable predictions.

So I guess I don't see the point in arguing over whether or not it's a science. It's more important, to me anyway, that we get laypeople to understand what the limitations and strengths of Science are.

Posted by: Y-not at September 05, 2013 10:44 AM (5H6zj)

122 121
Economics is not a science of any kind (though I guess you could wedge
it in as a sub-specialty of human psychology). It is not predictive, and
not at all rigorous either in theory or practice.
------------------------<br>
But there's math!

Posted by: A.S. at September 05, 2013 10:49 AM (Xv7f/)

123 Having read Epstein's article, I think he's much nearer the mark.

Posted by: Y-not at September 05, 2013 10:53 AM (5H6zj)

124 lotsa good stuff in this thread ... thanks.

Hayek seems right (Fight of the Century is a good YouTube summary), but I'm not read up on every detail.

The main issue seems to be similar to global warming. The science is settled, Keynes won, Bernanke is a genius and almost as godlike as Greenspan. They could babble forever.

But Bill Fleckenstein says Greenspan is one of the most destructive men in history. Bernanke is always wrong in predictions, just as clueless and maybe more damaging. Maybe Greenspan was right about "irrational exuberance", but he acquiesced to higher powers, and became "Easy Al".

We can't test economics as a science since it can't be put in a lab. Instead theory is used as an excuse to print vast sums of money, or with AGW to control "carbon output". Both have ulterior motives, and are based on "settled science", in both cases proven wrong, but continued as propaganda.

All sciences flow seemlessly I suppose, micro to macro, biology to astrophysics. But that doesn't mean we don't divide them and specialize. An individual's family economy is different than global manipulations of fiat currencies, and vast transfers of wealth to those that buy power.

Control of our money without the purest intent will result in misallocations. Gold put a check on that, so that was done away with. Voodoo economics and deficit spending advanced the ball. Gingrich may have briefly slowed things (Clinton took credit), but bubbles began bursting, then 911 enabled more deficits. Obama broke it open with Quantitative Easing.

The trillions extracted to shadow bankers or villains, some transferred off shore, is not deployed based on family/micro economics. Rather it is a tool to buy politicians and power, maybe even to move armies around, or destroy a great nation. Micro is more supply and demand, macro is about cornering markets of power. Macro distorts the micro, because laws are not enforced, and all fiat currencies go to zero, after bad things happen.

Posted by: Illini Bill at September 05, 2013 10:54 AM (GDobg)

125 Alex Rosenburg was on my dissertation commitee, just to be a name-dropping mofo

Posted by: DAve at September 05, 2013 11:05 AM (OksBo)

126 Economics is not a natural science, obviously.

I disagree. Biology is a science, and evolution is a scientific study of the systemic behavior of biological organisms over time.

Evolutionary science can't predict how future organisms will evolve, but it can explain the process of prior evolution generally.

The science of economic systems works the same way -- we can explain systemic features and principles, even explain (partially) past economic events. This can be true (and genuinely scientific), even if the system as a whole is too complex to predict.

In fact, it is the science behind systems theory that allows us to prove that some systems are too complex to predict, even with all the computing power in the universe.

Posted by: Phinn at September 05, 2013 11:17 AM (oFH2D)

127 Forget Quantum Mechanics. The best analogy is Thermo Dynamics and Basic Physics.

The higher level BOTH are _only_ statistical.

Posted by: Sweyn at September 05, 2013 11:24 AM (SQOXc)

128 >>126 Economics is not a natural science, obviously.

I disagree. Biology is a science, and evolution is a scientific study of the systemic behavior of biological organisms over time.

Evolutionary science can't predict how future organisms will evolve, but it can explain the process of prior evolution generally.
----
Yes, it can explain evolutionary changes based on processes that obey natural laws which are subject to random events or external forces that cannot be predicted, such as events that originate from outside our Earth's ecosystem.

There are no equivalents in economics to the biophysical laws governing how organisms evolve, because human beings - who are the basic units of economics - have free will.

Posted by: Y-not at September 05, 2013 11:43 AM (5H6zj)

129 One should differentiate between macroeconomics and microeconomics, and econometrics. People behave in predictable ways, all things being equal, of course. But the macro shit is always fucked up by govermenta.
Posted by: rev dr e buzz the main maing at September 05, 2013 09:21 AM (/a/gI)

Damn, you just stole my 500-word post in three sentences.

Posted by: rockmom at September 05, 2013 11:47 AM (aBlZ1)

130 There are no equivalents in economics to the biophysical laws governing
how organisms evolve, because human beings - who are the basic units of
economics - have free will.


While humans have free will, statistically, their choices are within bounds. Some people may commit suicide, the vast majority will not, etc. That most people will act within their perceived self-interest approaches a governing law.

Posted by: toby928© for TB at September 05, 2013 11:49 AM (evdj2)

131 I’ve been told that “Anyone who eats tomatoes is going to die“.


Since I can’t disproved this statement (or disprove that anyone is going
to die, eventually, no matter), I continue to eat tomatoes.


I guess this makes me a “denier” of sorts.

Posted by: Chef Boyardee at September 05, 2013 11:49 AM (e8kgV)

132 125 Alex Rosenburg was on my dissertation commitee, just to be a name-dropping mofo

Posted by: DAve at September 05, 2013 11:05 AM (OksBo)

I took Public Finance from Martin Feldstein. Does that count? My master's is in public policy (Harvard Kennedy School) and my thesis was graded by Mike Dukakis, LOL. (Got an A too, he had no idea how conservative I was.) My bachelor's is in economics, but from a crappy state U. Though I did have a hella good professor in monetary economics. He was a definite Milton Friedman disciple.

One of the best things I have taken from my study of economics is a really good understanding of inflation and the havoc it wreaks. Also, understanding what a liquidity trap is (and that is what we are in now.)

Posted by: rockmom at September 05, 2013 11:54 AM (aBlZ1)

133 Lots of good explanations and formulations here. Here's mine:

Economists postulate rules of behavior but all the actors find it profitable to continually and imaginatively BREAK THE RULES and cheat.

Businessmen HATE a free market. As economists rightly point out, there is seldom any PROFIT in it so businessmen always seek to create a monopoly of some sort, often through crony capitalism.

Consumers always want SOMETHING FOR NOTHING, and will vote for those offering Obamaphones or a pointless military base nearby.

Economics in a free market is human ecology but we're too smart for that!

The more economics explains, the more people use it for insight how to cheat.

Posted by: Whitehall at September 05, 2013 11:55 AM (k876Y)

134 #130 One thing economics does not take into account, though, is that many people are just dumb about money. They do not always act in their self-interest when it comes to spending, saving, borrowing, and investing. Societies and cultures can also change over time in this regard, as we have witnessed in the U.S. since the Great Depression. Saving habits especially are largely culturally based.

Posted by: rockmom at September 05, 2013 11:56 AM (aBlZ1)

135 While humans have free will, statistically, their choices are within bounds. Some people may commit suicide, the vast majority will not, etc. That most people will act within their perceived self-interest approaches a governing law.

--

The beauty of God's creation of human beings with Free Will is that the actions of one person can influence millions. Or none. Ultimately, people may behave within a statistically predictable distribution, but the impacts of those behaviors are not knowable.

So in terms of the sub-argument about economics as a natural science, I think my position is correct. There's a big difference between a field of study in which ultimately there are knowables - if only we understood perfectly the laws of nature we *could* do so much in biology, chemistry, and physics - as compared to a discipline in which the basic units of activity have free will.

Ultimately in terms of the original question - whether economics is a science or not - I still think it's a science, just not a natural science. I think it's more of a science than, say, computer science, which to me is engineering, not science.

Posted by: Y-not at September 05, 2013 11:57 AM (5H6zj)

136 If economics is not predictive, then how did I predict that ObamaCare would make insurance premiums skyrocket?

(Okay, I know I'm being simplistic, but I felt like ranting.)

Posted by: Mindy at September 05, 2013 11:58 AM (PRyXF)

137 BTW I don't think anyone besides an economist could have come up with this commentary, by Milton Friedman:

Recessions are always the product of normal business cycles. Depressions are alwaysthe product ofbad public policy.

Posted by: rockmom at September 05, 2013 11:59 AM (aBlZ1)

138 In economics, it's a crap-shoot: the Black-Scholes equation *might* get
you an accurate way to price a derivative, but just as often it's
completely off the mark. You'd do almost as well to throw darts at a
board. The only benefit the B-S equation brings is that you know your
cohorts are using the same flawed set of assumptions as you are, so your
failure zone will be roughly concomitant. (In other words, it's
statistically better than nothing. But only just.)


The only people that use B-S to price options are academics and the IRS. It's not "statistically better than nothing," it's demonstrably worse than nothing. Much worse. Actual option traders have known this since way before LTCM blew up.

Posted by: Gristle Encased Head at September 05, 2013 12:08 PM (+lsX1)

139 Ha. I work in an office with a bunch of academic economists. Their heads would explode at the notion that it's not a science.

Posted by: Wolfus Aurelius at September 05, 2013 12:21 PM (BDU/a)

140 If you don't specify exactly what predictive failures of economics you're talking about, you're not being scientific yourself.

For example, if you expect economists to be able to predict future stock prices, then you don't understand the concept of market efficiency.

As for the financial crisis, economist Edward Gramlich published a whole book about the likely effects of the subprime lending frenzy in 2007, which he obviously started writing well before that.

Any good micro economist knew that Obamacare would fail miserably.

Yeah, there are lots of economists who let their left-wing political views color their "analysis", but that's a failing of those individuals and not of economics.

Posted by: Chip S. at September 05, 2013 12:27 PM (vhzUB)

141 "One thing economics does not take into account, though, is that many people are just dumb about money. They do not always act in their self-interest when it comes to spending, saving, borrowing, and investing."

The field of "behavioral economics" would claim that they do take this stuff into account. Bounded rationality, it's called. The problem is -- and it's one of the really unsung qualities of the whole Arrow-Hahn-Debreu GE framework (as unrealistic as that is) -- once you postulate a *departure* from rational calculation and perfect knowledge, you're dealing with a *specific* bound on rationality and your results are no longer generalizable. Different postulated cognitive tweaks give different results. The effect is basically antitheoretical -- it means you can't say anything any more. We're back, at that point, to pre-Methodenstreit ad-hoc-ery.

Posted by: DrSteve at September 05, 2013 12:31 PM (wwKgz)

142 Any good micro economist knew that Obamacare would fail miserably.

It was designed to fail.

Florida has a socialist property insurance company, called "Citizens" (nice, huh?). It is required by its charter to insure the uninsurable. It also takes over for failed insurance companies, insuring the customers who can't find any alternative.

This company is not able to be successful. It insures the worst risks, and assumes the worst policies of people who were insured by the worst companies, and thus when they collapse, those people cannot find anything better.

There hasn't been a major hurricane in Florida since 2005, and it was
really just a smallish one. There were four big storms in 2004, and
those payouts drove a huge number of properties and companies into
Citizens. When the next one comes, Citizens will not be able to cover
all of the losses. It is destined to fail.

It was made to be the receptacle --the poison container -- for properties that are not insurable. It was made to give the appearance that these properties are insured. It's like creating a "school" inside a juvenile prison -- it's not going to be a place where academic geniuses congregate. It's not going to be a high-performing school. The design of a prison-school is to make it seem sort of like a school.

Citizens is not economically sound, because it was never intended to be economically sound. It was designed to merely imitate the outward appearance of an insurance company, using the same terminology ("premiums" and "underwriting"), but it's just a mimic. It doesn't actually behave as an insurer would, on purpose. If it did, some insurer would be doing it. The existence of Citizens eliminates any possibility of changing the way the building and pricing and insuring of properties in Florida is done.

Obamacare is similarly designed to fail. It was given the appearance of an insurance scheme, but that is only a facsimile. It can't work. It can't lower costs and improve quality of the good provided. It's literally, scientifically impossible.

If an organization is not made to succeed, then it is made to fail, and thus for some other purpose other than economic viability. And if it is made to fail, then it serves someone's interest that it be created, and survive, while failing. It is designed to be economically inferior to the various profitable alternatives.

People are presumed to intend the natural and inevitable consequences of their actions. Once we understand that governmental enterprises are ALWAYS built for the purpose of killing off the most successful competitors, and they are ALWAYS promoted through lies and mimicry and imitation of successful businesses, then we can draw the conclusion that government's main purposes and functions in this world are: (1) the aggressive destruction of property and markets, and (2) produce an endless stream of lies to facilitate Objective No. 1.

Does it take an economist to see the failures coming?

I think it's more a matter of ethics, definitions, psychology, etc. Once we accept the reality that Obamacare was made in order to fail and cause misery and hardship, and disregard the sloganeering and salesmanship (i.e., the lies), and just look at the way it operates, then the truth is obvious.

The main hurdle to seeing the truth is not economic theory. It's that people's relationship with assholes like Obama is a big form of Stockholm Syndrome, or like having a sadistic, abusive parent. The problem is not their inability to see the ways that Obama is harming people. It's their psychological refusal to accept the idea that he wants to hurt people.

Posted by: Phinn at September 05, 2013 01:14 PM (oFH2D)

143 I find your dismissal of the difference between micro and macro economics to be very unconvincing. To my trained ear, it sounds as though you are unfamiliar with the techniques, methods, and approaches of the different research areas.

Why is macro hard? Because macro models generally like to use a couple of pieces of information (GDP, price level, things they think relate to those things) to try to model a very complex, large system of moving parts. With data on only a few things and a giant black box under it, predictions are not going to be good. My macro friends can correct me if this is too much of an oversimplification, as my personal areas of research are micro and very much not macro for these reasons.

Micro is looking at a smaller situation and trying to understand it. Each situation has its own complex nuances that need to be accounted for and can be accounted for. You can account for these things and make a pretty good model. You have some pretty good ideas about how outside markets influence the market of interest, and can successfully account for those too. But every market affects different markets, which all affect other different markets.

Building macro from micro foundations is messy and requires massive amounts of data (which would dwarf the current collection levels of the government, secret and not) and extremely detailed models if you want to get them right. In some sense, the theory guiding micro does apply at the macro level, it is just super complex, messy, and difficult. And it is all of these things without accounting for dynamically changing parameters. Failure of command economies is due to this ridiculously high information and complexity barrier, and the ability of a capitalist system to work out the needs and wants of everyone without this information is its main economic benefit. In other words: NOT EASY, REALLY HARD

Unfortunately, I will have to be more skeptical of your posts in the future due to the naivete you express with such absolutism and confidence in this post.

Posted by: Professorson at September 05, 2013 01:31 PM (/Mw0M)

144 “Since you decided to say
‘cancer is not an excuse’ and think that it’s OK to swear at your
employees like you do ALL the time…WE QUIT. This is why you can’t keep a
store manager longer than a year. You abuse your [role] and staff.
Enjoy the fact that you lost a store manager, co-manager and key holder
in the middle of back to school. Think next time you treat people the
way you do.
We aren’t allowing it anymore.”http://tinyurl.com/l899w9xhey monty, your essay reminded me so much of the above. Also reminded me of every jack a** I had in college who said environment had nothing to do with heredity, even in the face of some very convincing experiments with separated twins.We seem to be losing "the art" in almost everything. Our Spockian quest to base everything on logic, reason and therefore, science is leading to a loss of "the art of management" as regards the economy. It's happening in other places as well. The generalist in medicine has gone the way of the wind in favor of specializing in minutia. ie retinal specialists. Everything is based on meta data and no one wants to have to think and reason any longer. They want to follow the data to draw their conclusions.
This reliance on data, is leading to the Spockians wanting to completely take God out of the picture or anything else taken on faith that cannot be proven. The market in many ways is a reflection of the society that fosters it. A society without nuances, that can't see the colors of differences and subtly within, is doomed to a sort of mechanized failure by it's own hand.
It's almost as though the US economy is hell bent on committing suicide and the suicide prevention hotline has been phased out because it deals in nuances and not metadata.

Posted by: question at September 05, 2013 02:26 PM (/b8+5)

145 Macro models that don't sum over heterogeneous representative-agent behaviors, and in particular that don't take into account relative prices (rather than some general "price level") are not going to be useful in modeling most interesting phenomena.

I think I've written about this before, but one of the pedagogical issues with macro is that you lose the undergraduates pretty quickly with the math involved in any theory that emerged after (read: improved on) the Hicksian-synthetic IS/LM models (which you generally show the students using a 4-quadrant chart). That's from 1936!! Rational expectations? You really need dynamic programming for much of that. Farmer-Woodford? Same deal.

Posted by: DrSteve at September 05, 2013 02:28 PM (wwKgz)

146 Ecnomics isn't about human behaviour, or psychology, it's about all imaginable puposeful behaviour (according to the Austrian School).

Posted by: nood at September 05, 2013 02:32 PM (q35Iv)

147 Unfortunately, I will have to be more skeptical of
your posts in the future due to the naivete you express with such
absolutism and confidence in this post.


Posted by: Professorson at September 05, 2013 01:31 PM (/Mw0M)
Uncle Benny, is that you?You can't possibly be a republican/conservative. How can I know this? Your response was within the "you Americans are incapable of figuring this out on your own and we your betters will just handle it for you, while you remain silent and just defer to us cause we are the smarties with all the degrees" camp.You are witnessing market forces coming from the American people. I guess in your view it's gumming up the works of your perfect economic model. But hey, it's real subtle, you can easily miss it mired in those numbers and all that theory, which btw is just that, theoretical.Monty's essay does an excellent job of bringing to fore the discussions and concerns of the American people. I know you might like to think that everyone is at Walmart at midnight on the first of their month with their check and EBT cards but some of us went to several labor day barbeques where regular Americans decided to discuss the elephant in the room. Everyone was welcome to the discussion, those who knew more educated those who didn't. The PHD didn't say to the guy running the plumbing business "this is not easy it's really hard and we don't need you in this discussion cause you don't get it". Rather the PHD guys were really interested in talking to the plumber to get his take on the economy and further their understanding.

Posted by: question at September 05, 2013 02:39 PM (/b8+5)

148 Keynesian Econ = YOLO

Posted by: adc at September 05, 2013 02:52 PM (pt0vj)

149 148
Keynesian Econ = YOLO

Posted by: adc at September 05, 2013 02:52 PM (pt0vj)
You owe me a keyboard, lol.

Posted by: question at September 05, 2013 02:54 PM (/b8+5)

150 Professor Rosenburg was a professor of mine and I'm not trying to be insulting when I say you don't know what he's talking about. As much as it offends modern sensibilites the social sciences aren't sciences

Posted by: DAve at September 05, 2013 04:41 PM (OksBo)

151 Is Syria A Manufactured Distraction From Barack Obama’s Looming Economic Armageddon?
http://tinyurl.com/m84vey8

Posted by: question at September 05, 2013 07:59 PM (/b8+5)

152
You miss the point---the NYT has given up on saying that Obama's economic policies haven't worked, and they are shifting the blame to say that no one could have donebetter so don't blame him. And they found a couple of academic jerks who also worship at the shrine of Obama to write the piece.
Or, the jerks wrote the piece for the aforementioned reason, and when they sent it to the NYT the editors recognized it was just what they wanted--for that reason. Either way--potato, potahto...
That is ALL this is about. It doesn't deserve the thought that went into Epstein's response or your post. It's just Obama-worship garbage.

Posted by: Marty at September 06, 2013 12:23 AM (Nc3Yq)






Processing 0.02, elapsed 0.0278 seconds.
15 queries taking 0.0074 seconds, 161 records returned.
Page size 121 kb.
Powered by Minx 0.7 alpha.

MuNuvians
MeeNuvians
Polls! Polls! Polls!
Frequently Asked Questions
The (Almost) Complete Paul Anka Integrity Kick
Top Top Tens
Greatest Hitjobs

The Ace of Spades HQ Sex-for-Money Skankathon
A D&D Guide to the Democratic Candidates
Margaret Cho: Just Not Funny
More Margaret Cho Abuse
Margaret Cho: Still Not Funny
Iraqi Prisoner Claims He Was Raped... By Woman
Wonkette Announces "Morning Zoo" Format
John Kerry's "Plan" Causes Surrender of Moqtada al-Sadr's Militia
World Muslim Leaders Apologize for Nick Berg's Beheading
Michael Moore Goes on Lunchtime Manhattan Death-Spree
Milestone: Oliver Willis Posts 400th "Fake News Article" Referencing Britney Spears
Liberal Economists Rue a "New Decade of Greed"
Artificial Insouciance: Maureen Dowd's Word Processor Revolts Against Her Numbing Imbecility
Intelligence Officials Eye Blogs for Tips
They Done Found Us Out, Cletus: Intrepid Internet Detective Figures Out Our Master Plan
Shock: Josh Marshall Almost Mentions Sarin Discovery in Iraq
Leather-Clad Biker Freaks Terrorize Australian Town
When Clinton Was President, Torture Was Cool
What Wonkette Means When She Explains What Tina Brown Means
Wonkette's Stand-Up Act
Wankette HQ Gay-Rumors Du Jour
Here's What's Bugging Me: Goose and Slider
My Own Micah Wright Style Confession of Dishonesty
Outraged "Conservatives" React to the FMA
An On-Line Impression of Dennis Miller Having Sex with a Kodiak Bear
The Story the Rightwing Media Refuses to Report!
Our Lunch with David "Glengarry Glen Ross" Mamet
The House of Love: Paul Krugman
A Michael Moore Mystery (TM)
The Dowd-O-Matic!
Liberal Consistency and Other Myths
Kepler's Laws of Liberal Media Bias
John Kerry-- The Splunge! Candidate
"Divisive" Politics & "Attacks on Patriotism" (very long)
The Donkey ("The Raven" parody)
News/Chat