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Economists versus the Economy

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Re: Economists versus the Economy

#101

Post by ScottBurson »

crdoconnor wrote: post #68
smallnamespace wrote: post #63

Earlier quoted context omitted.

> Whoops According to the data, not really. Short-term mortgage rates increased steadily for the next several years; long-term rates also ticked up, but not by as much. He basically refinanced his home exactly at the bottom [1]. [1] http://www.bankrate.com/finance/mortgage-rates-history-0112....

I think we need to change the scales and put it in context: http://mortgage-x.com/images/graph/fhfb_contract_rate.gif According to the data, yes really.

If the 2008 crisis hadn't happened, do you really think interest rates would be where they are now? I think it's easy to imagine a very different tail on that curve post-2008, which would have left the 2003 low intact.

If you're asking Krugman to have predicted the 2008 crisis in 2003, I think that's a bit much.

Re: Economists versus the Economy

#102

Post by wfo »

rhizome wrote: post #38
goalieca wrote: post #2

I'm familiar with work in he philosophy of science. Is there a growing interest with he philosophy of economics?

Philosophy is a soft science, so I'm gonna guess "not on your life."

Philosophy is not a science at all, it's the mother of all science and it fits firmly within the humanities. The philosophy of economics is what we now call 'economics' except they've abandoned philosophy. Karl Marx is a philosopher and was an economist until the current neoliberal econ regime wrote him out of all the textbooks and retroactively reclassified him so they didn't have to think about his ideas or those of his followers.

Re: Economists versus the Economy

#103

Post by r_smart »

eli_gottlieb wrote: post #96
r_smart wrote: post #95

Earlier quoted context omitted.

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.

So then are there just no organizations other than government that can get done what you want? Why advocate for higher taxes rather than upping your voluntary contributions?

I just listened to this [0] Sam Harris podcast episode yesterday so it's kind of on my mind, though this is admittedly a tangential issue to the podcast.

[0]: https://www.youtube.com/watch?v=PxStuUxaZxQ&t=4171s

Re: Economists versus the Economy

#104

Post by ep103 »

neffy wrote: post #34
conistonwater wrote: post #14

Earlier quoted context omitted.

Re (2): Glenn Hubbard (the dean you mention) has a relatively long history (depending on who you ask, of course) of having dubious ideas on economics. For example: http://krugman.blogs.nytimes.com/2012/08/10/culture-of-fraud... , Krugman's blog has lots of examples. So in that context, writing a report "at the behest of Iceland's Chamber of Commerce" is pretty small potatoes. It's far more likely that they commission…

1) Historically Keynes is certainly known for profiting on foreign exchange bets, Irving Fisher on the other hand is notorious for predicting multiple times that the recovery of the 1929 crash was about to begin - and his funds followed his predictions into oblivion. 2) It was Fredrik Mishkin - and he was paid well over $100,000 for it. https://www.utanrikisraduneyti.is/media/Raedurogerindi/Finan... This is the repor…

So in most science, if someone comes out with a study saying that (say, for example) climate change isn't real, they'll be buried under the remaining 99% that came to consensus in the other direction.

Sure, Industry will bankroll lobbyists to fight any potential change in government, and fund crackpot theories, but ultimately, the evidence that will accrue will be damning.

Why wasn't that the case for Iceland? Why doesn't that happen more for economics as a whole?

Is it a function of time? In economics, people are more focused on sub 10 year plot lines? Perhaps our understanding of macroeconomics is so poor that we're surprised by "big changes" every few years, and evidence doesn't get a chance to accrue? Whereas evidence for climate change can accrue year after year?

Re: Economists versus the Economy

#105

Post by woodandsteel »

AaronFriel wrote: post #49
mannykannot wrote: post #44

Earlier quoted context omitted.

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.

Outside of some people involved in the very-much off the books and unregulated bond markets, I doubt many economists had much to go off of. Before default rates rose catastrophically in a short period of time (I think, two and a half years or so?) there was no visibility into what would quickly become a failing market. The complex instruments being bought and sold, likewise, there were economists who looked at those…

Your reply about why the economists failed to predict the 2008 crash is an example of the problem the article is about. The economists didn't need a lot of technical information. They just needed to know that for a couple of hundred years banks had been careful about who they gave mortgages to because if they defaulted they would take a loss, but then they started bundling and selling them, so they felt safe to make it far too easy to get a mortgage. And that the bond rating agencies had a severe conflict of interest because they were paid by the people selling the bonds. And that credit default swaps are unregulated insurance.

Except for the cds part, all that was common knowledge. A little common sense would tell you this was a recipe for disaster, and in fact this was pointed out by people like Dean Baker at the time. The question is why the great majority of economists didn't take 30 seconds to look at the facts and agree, and the answer seems to be they simply lack common sense.

Re: Economists versus the Economy

#106

Post by woodandsteel »

cs702 wrote: post #4

I don't agree with everything Skidelsky (the author) writes, but his main point rings true: "Today’s professional economists... have studied almost nothing but economics. They don’t even read the classics of their own discipline. Economic history comes, if at all, from data sets. Philosophy, which could teach them about the limits of the economic method, is a closed book. Mathematics, demanding and seductive, has mon…

I think the very unfortunate narrowness of economics has partly to do with its history. Economics got going before any of the other social sciences and also ecological science, and early on had an enormous practical success with the development of free market theory, and so got the mistaken idea that it could proceed just fine without these other sciences.

Another problem is that economics is very closely connected to political policies, so it is very vulnerable to ideological influences.

Re: Economists versus the Economy

#107

Post by woodandsteel »

edblarney wrote: post #26

There are two bits of premise I think that are unfair in the article: 1) 'Economists don't know what is going on'. Yes, they do know what is 'going on'. They can measure it, and tell you. The sneaky assumption in the question is the assumption that if "they knew what was gong on, then they would know how to solve it" This is totally unfair. Jobs and the economy were never entirely managed through centralized economic…

>This is not fair either. 100% of economists would have predicted the outcome if they knew the vast scope of homeowners lying on their applications, that banks were misleading others by packaging crap loans as good ones, that the ratings agencies were not doing their jobs and actually rating the loans properly.

It was very widely reported at the time that banks had drastically lowered their standards for loans, and that this had lead to a boom in housing prices. And all this was publicaly defended by conservative politicians and commentators. And it takes only a little thought to figure out the banks were misleading investors, and the bond rating agencies were helping them out. The reason the economists didn't figure it out is they lack the needed common sense.

Re: Economists versus the Economy

#108

Post by woodandsteel »

One of the problems with the economics profession today is a lack of real societal responsibility. An example is supply-side economics, which is promoted by conservative politicians, including Trump. The economists all know it doesn't work, and so they ought to make that clear to the country. But instead they just sit back and say nothing.

Re: Economists versus the Economy

#109

Post by spangry »

cmdrfred wrote: post #94
sprafa wrote: post #89

Earlier quoted context omitted.

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.

Well, after arguing that it's impractical to run RCTs I guess it's time for a bit of a 'climb-down', because this is a really great idea. I could definitely see this working in a place like the USA, where you have lots of big States with diverging political views.

I wonder what would be the best way to implement something like this? Just spitballing, but what about Federal grants to partially fund the 'treatment' States (with non-participating States acting as controls), with the policy issue and various 'treatments' negotiated between the Fed and State level? And then after that, States sign on using a mechanism similar to California proposition voting during State elections maybe?

Or maybe even push it down to a local government level? I seem to remember somewhere in the US conducting trials of basic income around the 50s or 60s. Maybe there's a model there...

Re: Economists versus the Economy

#110

Post by 8a »

tomrod wrote: post #84
8a wrote: post #71

Earlier quoted context omitted.

How easy is it to get feedback? How quickly do you see results?

Can you expand a little bit on your question? I'll answer the best I understand your question. Being in industry with a large firm, feedback is very simple to get, I just go give a talk at an internal seminar. Results of a model or an implementation? Repeated observations/out of sample analysis often help with validating models. Implementation depends on the project.

Sure. I was trying to understand how hard it is for economists to make progress fast. I would imagine an economic model takes months to years to validate. I'm used to getting instant feedback from a computer when writing a program.

Do you see the way economic models are built and tested improving or happening faster? Or is the main barrier not lack of diverse data points, but needing enough time to pass to stress the model.

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