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Economists versus the Economy

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Re: Economists versus the Economy

#91

Post by crdoconnor »

bildung wrote: post #72
crdoconnor wrote: post #70

Earlier quoted context omitted.

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?

From the article: "And as that temptation becomes obvious, interest rates will soar. It won't happen right away. With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation , there are much higher interest rates in our future." (emphasis mine) That's…

"unless we slide into Japanese-style deflation"

Yeah, that was the best part. "This is going to be awful. It's going to happen. Unless, that is, the exact opposite of what I'm betting on happening actually happens".

Re: Economists versus the Economy

#92

Post by tormeh »

iopq wrote: post #46
crdoconnor wrote: post #9

Earlier quoted context omitted.

I'd say it was as much practical as it is ideological. Keynesian spending is inherently inflationary and creates jobs. As a member of the 1%: * Inflation is your enemy. It not only causes the value of your cash holdings to decline, it causes the value of the money you lent out to decline. * Creating jobs is your enemy. If you employ people you want as little competition for labor as possible to reduce your wage bill…

Inflation causes the value of your investments to increase, so it hurts the people who rely on cash more than people with stock portfolios

Bond returns are fixed, I think. So even though inflation is fine for stock investors it's bad for bond investors.

Re: Economists versus the Economy

#93

Post by tormeh »

acjohnson55 wrote: post #62
gaius wrote: post #58

Earlier quoted context omitted.

That's not really true if they're refusing to push the Keynesian levers for ideological reasons. snort Everyone's a Keynesian when it's time to spend but Keynes also said to pay down your debts on the upswing of the cycle, and guess what everyone didn't do?

...But that doesn't make them wrong. That just makes society spineless when it's time to start the unglamorous work paying back.

Being impossible in practice because of political dynamics isn't particularly great for a policy suggestion, though.

Re: Economists versus the Economy

#94

Post by cmdrfred »

sprafa wrote: post #89
cmdrfred wrote: post #80

Earlier quoted context omitted.

We live in a large nation, why not let a few states trial a program before running it nationally? Move fast and break things isn't good enough when lives and livelihoods are at risk in my opinion.

Controlled experiments (by behavioural psychologists) could probably do very well

Testing on human subjects is limited and I don't think you can build a sample size that is large enough.

Single payer is a great example, Californian or NY voters will likely vote in such a system while Texans would likely opt into a free market approach. Wait a few years and see the outcomes of each policy. Now you can make an evidence based decision rather than a political one.

Re: Economists versus the Economy

#95

Post by r_smart »

eli_gottlieb wrote: post #86
gaius wrote: post #58

Earlier quoted context omitted.

That's not really true if they're refusing to push the Keynesian levers for ideological reasons. snort Everyone's a Keynesian when it's time to spend but Keynes also said to pay down your debts on the upswing of the cycle, and guess what everyone didn't do?

Well, I was a teenager before the housing bubble went bust, but I'm just fine with paying higher taxes in boom times. Don't snort at me: raise my taxes! It's what I'm already voting for. Tax me and my high-tech salary. It can pay for schools and trains in my own community, it can pay down the national debt, etc. Redistribute my wealth, because I'm exceptionally well-off for my age group.

Why not just make voluntary contributions to organizations you support? Governmental or otherwise. Why wait for someone to take it from you when you could give it instead?

Re: Economists versus the Economy

#96

Post by eli_gottlieb »

r_smart wrote: post #95
eli_gottlieb wrote: post #86

Earlier quoted context omitted.

Well, I was a teenager before the housing bubble went bust, but I'm just fine with paying higher taxes in boom times. Don't snort at me: raise my taxes! It's what I'm already voting for. Tax me and my high-tech salary. It can pay for schools and trains in my own community, it can pay down the national debt, etc. Redistribute my wealth, because I'm exceptionally well-off for my age group.

Why not just make voluntary contributions to organizations you support? Governmental or otherwise. Why wait for someone to take it from you when you could give it instead?

I already do that. I spend more money on each organization I support each month than I do on cable internet.

Re: Economists versus the Economy

#97

Post by rhizome »

mannykannot wrote: post #45
rhizome wrote: post #36

Earlier quoted context omitted.

To be fair, Alan "flaw in the model" Greenspan was still Chairman of the Fed in 2003.

Ah, yes, Alan Greenspan - the guy who took much of the credit that Paul Volcker earned.

I think we can forgive Krug for believing in Greenspan's scam. Information asymmetry and all that.

Re: Economists versus the Economy

#98

Post by acjohnson55 »

tormeh wrote: post #93
acjohnson55 wrote: post #62

Earlier quoted context omitted.

...But that doesn't make them wrong. That just makes society spineless when it's time to start the unglamorous work paying back.

Being impossible in practice because of political dynamics isn't particularly great for a policy suggestion, though.

You simply need to change the dynamic. We have the Fed, which is structured to insulate our monetary policy from politics, and it has worked quite nicely for the past 70 years. It's not insane to imagine doing something similar for at least some aspects of our fiscal policy.

Re: Economists versus the Economy

#99

Post by damptowel »

rvern wrote: post #40
stephen_g wrote: post #20

Earlier quoted context omitted.

I think Economics is a fairly big outlier though. There's quite a good book by Economics Prof. Steve Keen called Debunking Economics, which is very accessible and goes over how most of the core tenants of neoclassical (mainstream) economics have been known to be flawed for decades, yet it's all still taught as fact. It's not a scholarly work, but references a great deal of scholarly work. It's fascinating to read and…

Neoclassical synthesis is still taught because, even though it's flawed, we have nothing better. Economists know that the assumptions behind neoclassical models aren't always fulfilled. All science is always done with models and we just use the best models we have, while taking into account their limitations. People don't usually object to this in other fields, but in economics they do because they have stronger Opin…

This is a commonly held belief, but it's wrong, the dominant economic models in use today are neither rigorous (internally inconsistent, extremely poor empirical verification, major aggregation errors, lack of essential inputs) nor representative of an economy (a dynamic system, not an extremely stylized static equillibrium model). You should read Keen's book, it's point is not that those assumptions don't always hold, it's that they under _any_ real world circumstance will invalidate themselves.

Re: Economists versus the Economy

#100

Post by Noseshine »

spangry wrote: post #87
Noseshine wrote: post #76

Earlier quoted context omitted.

Coin flips are actually okay when you don't know something: Create many small experiments instead of trying the "world formula" solution. Also, create an environment where responsibility and decision making authority is as low as possible, not as high as possible - meaning where both the data and the consequences can both be found together. Oh and use "muddling through" more openly, because that's what life is about…

While I respect what you're saying, and agree to a limited extent, I don't agree with the idea that people, and society, are completely impermeable to analysis. Perhaps you truly are neutral on the question of democrats and republicans, and have no preference regarding Hillary, Trump, Sanders or Kim-Jong Un (given your view that we can only understand something through experiment and direct experience, and not throug…

  I don't agree with the idea that people, and society,
  are completely impermeable to analysis.
Nice strawman - I never said that.

This is just like medicine: You can theorize all you want, but in the end only a clinical trial shows you if your plans actually work. The subject is too complex. All you can do with your models is use them as input into the trials. If you skip trials you will get disaster and failure on an unsafe scale.

  And good luck designing experiments around, say,
  national healthcare policy
If you don't you will still run a trial - only that your trial is a very large population. Good luck with that.
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