What Economists Still Don’t Get About the 2008 Crisis • Hacker News Board

Re: What Economists Still Don’t Get About the 2008 Crisis

#101

Post by bbstevecou » Mon, Jul 30, 2018, 7:37 PM UTC

paulpauper wrote: post #29

ksec wrote: post #9

My own theory after digging sometime into Economics is that no one seems to have a clear idea what on earth we are actually doing. We all seems to have our own theory, and they all seems to answer half of the question. And in practice none of them currently models the world we have now. And it will take a long time before any of those theory are proved to be correct this time around. May be we can finally say Keynesi…

China is not fudging the numbers. otherwise, it would imply that major US companies that do business with China are also fudging their numbers. Trade with china has surged in recent decades.

they ARE fudging the numbers

China’s 2015 GDP Was Exaggerated By Fake Data, Analysis Shows

https://www.bloomberg.com/news/articles/2018-02-01/china-s-2...

China's average GDP growth has been roughly 30% less than reported, based on the measures of its changes in national lighting

https://www.investors.com/politics/editorials/new-study-shin...

Another Chinese city admits 'fake' economic data

https://www.reuters.com/article/us-china-economy-data/anothe...

Re: What Economists Still Don’t Get About the 2008 Crisis

#102

Post by dv_dt » Mon, Jul 30, 2018, 7:37 PM UTC

JumpCrisscross wrote: post #90

smacktoward wrote: post #48

Earlier quoted context omitted.

> My own theory after digging sometime into Economics is that no one seems to have a clear idea what on earth we are actually doing. I still remember the moment I realized this. It was on the first day of my first class in Economics 101, when the professor began by telling us that economics was a science built upon the assumption that people are rational actors. I thought about all the people I'd ever known, and all…

> economics was a science built upon the assumption that people are rational actors You may have taken a statement made in jest literally. Homo economicus is a known fiction. Just as frictionless, airless physics are a known fiction. They're useful, however, for (a) defining a limit or ideal, (b) pedagogical purposes and (c) starting to think about a problem. Microeconomics makes falsifiable predictions which can be…

Physics was able to go on from the simplistic models, refine and extend them to both a wide scale and very high quality of theoretical and empirical concurrence in exquisite detail and generality.

On the other hand, economics goes on from Homo economicus into a mass of mathiness with very poor empirical correlation except perhaps in very very narrow circumstances.

Re: What Economists Still Don’t Get About the 2008 Crisis

#103

Post by nickik » Mon, Jul 30, 2018, 7:37 PM UTC

conanbatt wrote: post #39

closeparen wrote: post #23

Earlier quoted context omitted.

Active traders tend to lose money relative to the “rest of us” passive index investors.

This is something that will not work forever. If 100% of investors were passive, they would get fleeced. Passive investing works thanks to active investing. Funny huh?

No it wouldn't. Everybody could be a passive investor and the economy and your portfolio would just continue to exist.

Re: What Economists Still Don’t Get About the 2008 Crisis

#104

Post by zwaps » Mon, Jul 30, 2018, 7:38 PM UTC

Please also be aware that by reading pundits like Noah Smith, you are buying into what is basically a historical fanfic of economics "schools" fighting fiercly over who is right. This sells a lot of articles, but it doesn't really reflect academia (if it ever did).

The god to honest truth is that macroeconomics in aggregated form is an undertaking based on extremely scarce data, and it always was. Traditional statistical inference invariable fails if you basically only do observational studies where you observe everything once, more or less.

This is also why these grand theories have fallen out of style, except of course for those vocal pundits like Noah Smith, who literally has a job because he conjures up debates on political economy.

The gold standard in todays Macroeconomics are either some variation of VAR models, more or less assumptionless vector-autoregressions of whatever flavor, or more structural DSGEs, who are fine-tuned to explain certain mechanisms but are arguably incomplete as models. Neither of these models are Keynesian, or Austrian, or monetarist, or whatever.

It is also wrong that the mainstream is some sort of monolithic entity. The biggest econ association in Germany is trying to engage "heterodox" scholars, inviting them to conferences and such. Several universities keep clusters for agent-based models, complexity research and even econphysics. The research output, however, has been a bit lacking as of yet. In Paris, there is an active community of "Post-Keynesians" right in the top-7 econ university in the world. I know that figures like Prof. Keen are invited regularly.

In contrast, it seems to be in the interest of some heterodox scholars to conjure up a hostile "mainstream theory" and then refrain from actually engaging with it in academic channels.

The same is true for those pundits going on about Keynesians vs. Chicago boys in this day and age.

Insofar that academic discussions did occur, they have been extremely productive imo.

Well I am not an Macroeconomist but there you go.

Re: What Economists Still Don’t Get About the 2008 Crisis

#105

Post by nickik » Mon, Jul 30, 2018, 7:39 PM UTC

Finnucane wrote: post #17

I remember distinctly the moment I realized the housing bubble was going to end badly. I was wondering in the early 00's how house prices, more or less everywhere, could continue rising past what most people could actually afford to pay. I hadn't really being paying much attention to the financial world, but sometime in 2004 or so, I saw an ad on tv for a mortgage deal that seemed to make no sense. I looked it up and…

And yet Australia and many other had and have high housing prices as well and they didn't have recession.

So this oversimplified theory is really just your confirmation bias.

Re: What Economists Still Don’t Get About the 2008 Crisis

#106

Post by mcguire » Mon, Jul 30, 2018, 7:39 PM UTC

gshulegaard wrote: post #7

Not a great opinion piece with an overly-dramatic title. The forecasting failures of major world economic bodies leading up to the 2008 financial crisis were (and somewhat still are) widely examined and criticized. > https://www.economist.com/free-exchange/2011/02/11/the-warni... From that article a choice quote from a referenced report: > "In the United States, for example, it did not discuss, until the crisis had a…

"So to say that Economists still "don't get" the 2008 crisis is a somewhat heavy rose-colored embellishment of the actual state of the field."

Have economists actually changed their models, or are they still referring to the 2008 crisis as an unexpected shock?

What are the chances that their "understanding" of the 2008 crisis will prevent them from being surprised by the next one?

Re: What Economists Still Don’t Get About the 2008 Crisis

#107

Post by crdoconnor » Mon, Jul 30, 2018, 7:40 PM UTC

nickik wrote: post #76

dalbasal wrote: post #19

It's a pleasure to read an article by a writer who understands of the history economic thought, though I suspect I will disagree with him on a lot of things. Anyway, this is interesting. I'll look up these economists. On the face of it, I think it's interesting how economists are hesitant to consider money real. Money is fictional to most economists. What's real is consumer surplus, utility or some other abstract way…

> It's a pleasure to read an article by a writer who understands of the history economic thought He basically wrote two paragraphs with the most oversimplified and honestly often wrong intellectual history of economics. > First, because I like his intellectual shit-stirring. You mean you like it if somebody writes a book criticizing another profession even while he clearly has not studied either modern economics or e…

>You mean you like it if somebody writes a book criticizing another profession even while he clearly has not studied either modern economics or even the history of intellectual thought in economics. I wish more people would do that, sound like a healthy thing for science.

You do realize that it's a history book and is not actually about economics at all?

I didn't read much in that book that even discusses modern economic thought. The closest he gets is debunking the story about money arising because of a coincidence of wants. That's hardly a lynchpin of modern economic thought though - it's a story told to 19 year olds in econ 101.

A lot of people don't like him because he's left wing, I suppose.

Re: What Economists Still Don’t Get About the 2008 Crisis

#108

Post by nickik » Mon, Jul 30, 2018, 7:41 PM UTC

debatem1 wrote: post #85

Adjusted household income has been essentially flat since the 70s. The percentage of those households with two earners has gone from 25% to 60% during that time. Productivity has grown nearly every year during that time. This, combined with our rising income inequality, means that the economy is not okay for most people even if a few widely-watched numbers are high. It should not come as a surprise that such an econo…

Whatever the truth is about the numbers you present.

The argument that the recession happened because of a fragility of inequality is a highly speculative theory. I have not heard a single economist make that claim.

Also, it fails as an explanation because you are explaining a momentary event with a long term situation.

Re: What Economists Still Don’t Get About the 2008 Crisis

#109

Post by marnett » Mon, Jul 30, 2018, 7:42 PM UTC

criddell wrote: post #41

dfee wrote: post #21

Earlier quoted context omitted.

I wonder that same thing today. To me, it feels like the bubble burst in 2007. But, that we're still here today, seems to indicate it didn't really pop, but instead it's a side-effect of another system. Recently in Southern California, listening to the local NPR affiliate, they were covering a candidate race where one candidate accused the other of not hearing his constituents: ~"House prices have fallen, and that's…

> "House prices have fallen, and that's bad for our voters. I hear them, and he doesn't." There are a few things that are absolutely essential to life: housing, clothing, food are among the most basic. If the price of clothing or food increased at the same rate as houusing, people would be rioting.

oddly enough we aren't told that food or clothing are investments.

Re: What Economists Still Don’t Get About the 2008 Crisis

#110

Post by nickik » Mon, Jul 30, 2018, 7:46 PM UTC

hayekfan wrote: post #8

Keynesian Economics are the economics of political convenience. If something goes wrong, we can juice the economy by engaging in extaordinary activities which generate the illusion of wealth resulting in increased spending. These ideas were very popular until Great Britain encountered stagflation - conditions under which both economic recession and inflation coincided and traditional Keynesian levers and predictions…

I am a fan of Austrian economics and von Mises and Hayek. However I think you are seriously mis-characterizing them.

The von Mises Instiute is a very finge even within the Austrian tradition. They are essentially Hard Core Southern Rothbardians. They mis-characterize Mises as the perfect pre-Rothbard.

Peter Schiff in particular is not even an Austrian economist and he widely mis-characterizes the Austria Business Cycle theory.

If you want to learn actual Austrian Economics monetary economics go read Selgin, White, Horowitz. In general the GMU Austrians are far better then anything that comes out of the Mises institute.