71–80 of 115 posts
> Economists claim to make precise what is vague, and are convinced that economics is superior to all other disciplines, because the objectivity of money enables it to measure historical forces exactly, rather than approximately. Economist here. Maybe some economists make this very bold, presumptive claim. But I'll be honest, money very rarely enters into the paradigm; rather resource allocation and maximizing utilit…
Earlier quoted context omitted.
Your graph shows the same as the one from smallnamespace: 2003 was a good year to refinance because rates were at a bottom.
Krugman's bet - in his own words and using ISLM - was that interest rates would skyrocket because of deficit spending on the Iraq war in 2003. He paid extra to make this bet. Where on that graph did rates skyrocket exactly?
That's pretty much what happened:
http://www.gridgit.com/postpic/2011/09/us-inflation-rate-his...
Inflation doubled from 2002 onwards, then the housing bubble popped, causing inflation to fall. Thankfully not into a long-term deflationary spiral, though.
Earlier quoted context omitted.
>resource allocation and maximizing utility are the common approach. Utility maximisation has always struck me as a horrible way to do modelling. In most cases your results must depend heavily on the form of utility function you choose. And you always have to make a choice since utility functions are unobservable.
I guess the follow up question to this is: what superior alternative do you propose we use for evaluating competing government policies?
One problem is of uncertainty (this was pointed out by Keynes) - people simply do not trade higher risk for higher profits, even if the mean value increases in the mathematical sense. Rather, they set a horizon of uncertainty.
The other big problem is that utility is ill-defined for an individual. We are competitive beings and value many things for reasons that are related to how other people value them. This cannot be modeled within the theory of rational choice. (It's also somewhat related to the fact that supply-demand is not that great model.)
In other words, we should augment the models to take the above issues (at least, IMHO those are the biggest problems but certainly not the only ones) into consideration.
Earlier quoted context omitted.
tl;dr - the policymakers who made the decisions were not economists, they were politicians who ignored economists' advice. Namely, they refused to embrace fiscal measures (deficit spending, including through the self-triggering methods of the welfare state) and relied entirely on "confidence-building" measures and on the monetary tools available to central banks - which were, as economists' models predicted, ineffect…
If economists, collectively, had demonstrated a bit more prescience before 2008, they might have had a bit more credibility afterwards. Nor does it help that it seems you can find a distinguished economist on either side of any issue that matters.
Earlier quoted context omitted.
The fact there is no alternative doesn't mean we should use something that we know barely works. This is exactly the problem with economism
That all sounds very clever and all, but there's still a rather important question being left unanswered here: on what basis should a government make decisions? Coin flips? Gut feelings? The phase of the moon? Let's say you're the King of the United States. One of your noblemen comes in to your palace and says 'Your majesty, I suggest we eliminate corporate taxation and replace the lost revenue with a tax on consumpt…
Earlier quoted context omitted.
The fact there is no alternative doesn't mean we should use something that we know barely works. This is exactly the problem with economism
That all sounds very clever and all, but there's still a rather important question being left unanswered here: on what basis should a government make decisions? Coin flips? Gut feelings? The phase of the moon? Let's say you're the King of the United States. One of your noblemen comes in to your palace and says 'Your majesty, I suggest we eliminate corporate taxation and replace the lost revenue with a tax on consumpt…
Oh and use "muddling through" more openly, because that's what life is about no matter how much data you collect. So don't pretend that there even IS an "optimal" answer, and/or that you know it and/or even that anyone can find it. Let's admit that we are all just trying things and that failure IS an option. So create systems that a) actually encourage and allow experimenting, and b) let those fail safely.
It's possible to graduate from an economics program without knowing what the IMF does, or how a bank works, or how trade agreements work, or what the major imports and exports from China are. That suggests to me that something has gone badly wrong with economics education.
There were plenty of economists that warned of the bubble well before it popped but they were routinely ridiculed and dismissed since explaining themselves took longer than a 15 second slot between questions on a news show.
In Bratislava, the town I come from, there's Comenius University which has many faculties, one of them being Philosohical Faculty. Among many departments in Philosophical Faculty there's a department of sociology.
There is also a fully separate Economics University, with its own faculties and departments.
It's a nice example of how the fact that economics is just one of many subdisciplines of sociology is concealed and instead, an impression is created that economics can exists as a fully separate discipline independent of any sociological factors.
Earlier quoted context omitted.
The fact there is no alternative doesn't mean we should use something that we know barely works. This is exactly the problem with economism
That all sounds very clever and all, but there's still a rather important question being left unanswered here: on what basis should a government make decisions? Coin flips? Gut feelings? The phase of the moon? Let's say you're the King of the United States. One of your noblemen comes in to your palace and says 'Your majesty, I suggest we eliminate corporate taxation and replace the lost revenue with a tax on consumpt…
