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Four Basic Truths of Macroeconomics

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Re: Four Basic Truths of Macroeconomics

#191

Post by TheOtherHobbes »

dataking wrote: post #171
viburnum wrote: post #169

This is a good example of how so much economics is meant to distract you from what’s important. Cowen is framing economics to exclude things like unemployment, the process by which investment, savings, and income are determined, and the distribution of income. If you get people into the weeds about sticky prices and whatnot, it’s like putting blinders on a horse.

> This is a good example of how so much economics is meant to distract you from what’s important. I think your assumption of malice is unfounded. A likely benign explanation is that Cowen focused on areas there economists are in broad agreement without intent to mislead.

Economists are in broad agreement because they're paid to be. This is well-documented historically.

The Mont Pelerin Society was specifically founded to promote a certain view of economics, and the Chicago School was supported financially by some very rich sponsors who wanted a a pet academic alternative to progressive slant of Keynesianism.

The "consensus" in neoliberal economics and its core ideas - including "rationality" and "efficiency" - is a wholly manufactured political project, not an organic open-minded attempt to find credible scientific foundations.

Re: Four Basic Truths of Macroeconomics

#192

Post by OrderlyTiamat »

RobertoG wrote: post #176
lottin wrote: post #173

Earlier quoted context omitted.

The first "truth" he mentions is literally about wages and unemployment.

But he does it in a very specific framework that is never challenged. That's the trick and what, I think, the grandparent is referring to.

> in a very specific framework that is never challenged.

I'm not trying to be glib here, but that seems to fit with the intent and title of the piece, does it not?

Re: Four Basic Truths of Macroeconomics

#193

Post by another-dave »

xnx wrote: post #7

"I also think measures of price inflation are almost useless over the long run, because a person today consumes a very different bundle of goods than one in, say, 1950." I agree with this wholeheartedly. How do we put a value on the fact that, for the cost of no more than a day's labor, most in the US can have a handheld device with access to nearly the sum total of the world's knowledge and entertainment? No one, at…

> How do we put a value on the fact that, for the cost of no more than a day's labor, most in the US can have a handheld device with access to nearly the sum total of the world's knowledge and entertainment?

I know that this is a tangent to your point and I'm not trying to be pedantic, but it always crosses my mind when people mention "access to all the knowledge and entertainment" — how much that would actually cost someone, even with the internet?

For knowledge — You have access to Wikipedia and it's a great resource for what it is, and more and more, universities are making some of their material available for free. But there's still an awful lot of academic knowledge that's locked up in research journal subscriptions and a huge amount of knowledge & expertise in e.g. industry text books from publishers like O'Reilly.

For entertainment, leaving aside piracy (as otherwise a discussion on costs seems odd), how much would it cost you to be able to access all TV, films, music, books? You'd probably need recurring subscriptions to multiple platforms to even cover main-stream (Prime, AppleTV, Disney+ etc.) Then there's titles that aren't on any subscription service, etc.

I wonder how many days labour it would cost to actually get access to all of these?

Re: Four Basic Truths of Macroeconomics

#194

Post by DavidSJ »

TheOtherHobbes wrote: post #191
dataking wrote: post #171

Earlier quoted context omitted.

> This is a good example of how so much economics is meant to distract you from what’s important. I think your assumption of malice is unfounded. A likely benign explanation is that Cowen focused on areas there economists are in broad agreement without intent to mislead.

Economists are in broad agreement because they're paid to be. This is well-documented historically. The Mont Pelerin Society was specifically founded to promote a certain view of economics, and the Chicago School was supported financially by some very rich sponsors who wanted a a pet academic alternative to progressive slant of Keynesianism. The "consensus" in neoliberal economics and its core ideas - including "rati…

The existence of human irrationality is not unknown to economists.

Behavioral economics, which concerns itself with the effects of this phenomenon on economic decision-making, is one of the major branches of the subject studied today.

Re: Four Basic Truths of Macroeconomics

#195

Post by barry-cotter »

viburnum wrote: post #169

This is a good example of how so much economics is meant to distract you from what’s important. Cowen is framing economics to exclude things like unemployment, the process by which investment, savings, and income are determined, and the distribution of income. If you get people into the weeds about sticky prices and whatnot, it’s like putting blinders on a horse.

Cowen and Tabarrok have an entire section on Unemployment and Labour Force Participation in their online Principles of Macroeconomics course if you’d like to learn more.

https://mru.org/principles-economics-macroeconomics-0#

> The Economics of Choosing the Right Career Defining the Unemployment Rate Is Unemployment Undercounted? Frictional Unemployment Structural Unemployment Cyclical Unemployment Labor Force Participation Taxing Work Women Working: What’s the Pill Got to Do With It?

Re: Four Basic Truths of Macroeconomics

#196

Post by lmilcin »

> Nominal wages are sticky, for a complex mix of sociological reasons, and so employers do not always respond to lower demand with lower wages for workers. Instead they lay some people off, and that can lead to a recession.

And the main reason is that reducing wages creates unhappy, unmotivated people. If you own a business you want unhappy unmotivated out. By laying off people you keep people who (supposedly) are happy that they have not been and kept their salary.

If you are business owner, it is better to keep 90% of your crew but motivated vs keeping 100% but unmotivated.

> That may sound pretty simple. But it is one of the most important discoveries in history.

I wonder why is that. If you are a business owner this is common sense.

> The second thing to know is that well-functioning central banks can offset such demand shocks to a considerable degree.

It is unfortunate that they are called "banks". We need to have better differentiation in naming, as central banks and regular banks don't share same goals.

Except they do, and that is next point.

> The third thing to know is that if central banks go crazy increasing the money supply, the result will be high price inflation.

Because the reality is that increasing money supply is theft/taxation (is there really a difference?) By printing money central bank taxes each unit of currency decreasing its value.

While central banks print money directly, the "regular" banks "print" money indirectly. By having ability to lend more than the cash they actual have the "regular" banks are also creating supply of money out of thin air. This can't be called taxation anymore so the only way to call it is theft.

Re: Four Basic Truths of Macroeconomics

#197

Post by RobertoG »

OrderlyTiamat wrote: post #192
RobertoG wrote: post #176

Earlier quoted context omitted.

But he does it in a very specific framework that is never challenged. That's the trick and what, I think, the grandparent is referring to.

> in a very specific framework that is never challenged. I'm not trying to be glib here, but that seems to fit with the intent and title of the piece, does it not?

Yes, but that's my point too. The framework is never challenged.

He says "The first and most important thing [..] is that a strong negative shock to demand [..] leads to a loss of output and employment"

Fair enough. Not even a comment of what causes the demand shock, but it's OK.

And then he jumps to:

" Nominal wages are sticky, for a complex mix of sociological reasons, and so employers do not always respond to lower demand with lower wages for workers. Instead they lay some people off, and that can lead to a recession."

The are a lot of assumptions there than are not for discussion, are just part of the framework.

He says: "The third thing to know is that if central banks go crazy increasing the money supply, the result will be high price inflation."

This is just not true, the central bank can increase the money supply all that they want, if the money is not spend in the economy there is not going to be inflation. This has been tested empirically by Japan in the last decades and the Fed and ECB more recently, but it seems that the theory is not going to change, not matter what the reality says.

The fourth truth is truth, I think :-)

Re: Four Basic Truths of Macroeconomics

#198

Post by notahacker »

ctchocula wrote: post #160
sadmann1 wrote: post #92

What are the best introductory books to get more grounded in economics

For a solid intro to economics, I found a real gem of a suggestion by an econ professor at UC Berkeley [1], so I'll share with you. His advice is to start from the father of economics himself, Adam Smith. Then follow that up with Das Kapital (which I know is an unpopular stance here on HN) and some Keynes (who is credited with coming up with the economic theory that helped bring the UK and US out of the Great Depress…

I'd suggest Adam Smith and Marx were terrible starting points tbh, since both were writing long before anything resembling the theories and methods of modern economics - or actual modern economies - actually existed and the one thing they had in common (a labour theory of value, though Marx's is more sophisticated and fundamental to his theories) is something essentially no modern economist believes. Not that they're not interesting reads and influential on what came after, but it's like trying to get a grounding in computer science from reading Ada Lovelace.

Arguably even the bad theories are better understood in the context of modern economics (Marx's "Iron Law of Wages" which proposes that wages inevitably fall to subsistence levels makes much more sense as a special case of there being more supply than demand for that type of labour; one prevalent in the middle of an Industrial Revolution which made many craftsmen obsolete but less evidently a universal truth after a century of most people in the West earning well above the minimum necessary to keep them alive)_

Re: Four Basic Truths of Macroeconomics

#199

Post by brazzy »

Leparamour wrote: post #174
brazzy wrote: post #170

Earlier quoted context omitted.

> but if you can't afford to have a roof over your head I'd argue the smartphone is irrelevant. I'm pretty sure that the vast majority of homeless people would disagree vehemently. Not only does smartphone make it much easier to find a job and get back to the point where you can afford a roof over your head, it allows you to stay in touch with people you care about, people who may help you out now and then. And it gi…

Can homeless people afford data plans? Luckily I haven't been homeless yet, but there were times when I was too poor to have enough phone credit for internet or even regular calls. Granted, there are places that offer free wifi but only with an order if you are a paying customer, which I think most homeless people aren't.

The availability of cheap data plans and free Wifi varies radically between different places.

And most homeless people absolutely can afford to be a paying customer somewhere - a low-cost gym membership for access to showers is fairly common.

A homeless person is just someone who can't afford a home. They're not all your stereotypical pan-handling drug addict in torn, dirty clothes.

Re: Four Basic Truths of Macroeconomics

#200

Post by teddyh »

ido wrote: post #177
xyzzyz wrote: post #29

Earlier quoted context omitted.

Yes, but you can easily buy a smartphone for <$50. It might be crap by today standards, but it will still be better than any smartphone was in 2010.

I thought so too and then bought a cheap motorla android phone (it was more than $50, i think more like $100+) and it was absolutely much worse than a 2010-vintage iphone 4 (or the highest end android you could get in 2010). The CPU is faster and it has more RAM but somehow the user experience is absolutely atrocious - it was not even fast enough to be able to reliably answer calls (the UI was stuttery and it took mu…

postmarketOS might be useful for you or anyone in a similar situation.
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