Earlier quoted context omitted.
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.
Four Basic Truths of Macroeconomics
221–230 of 286 posts
Re: Four Basic Truths of Macroeconomics
#222What are the best introductory books to get more grounded in economics
“The Worldly Philosohers” is very good. Economics is full of controversies and contested ideas so it’s best to take them head on rather than pretending it’s physics. If you’re looking for a textbook, this is the best (it’s also free): https://www.core-econ.org/the-economy/book/text/0-3-contents...
Reminds me of a guy I once met, who told me that "this is the best bakery in the city" (>1.5e6 inhabitants). Interestingly, the city's best bakery was just around the corner of his appartment. Once he moved to a different appartment in 10min walking distance, he never went back to the best bakery. He found out that the bakeries closer to his new appartment were at least equally good...
Re: Four Basic Truths of Macroeconomics
#223The third great truth in this list is "an increase in the money supply leads to inflation, except when it doesn't" which is hard to argue with. Clearly a field where Nobel prizes should be awarded.
To be fair it's not a real Nobel prize. It's paid for by a bank and it was first issued in 1968. One of Nobel's descendants is on record speculating that Nobel would never have agreed to the award. It's very much about public relations for the field of economics. The field's effect on the world has been to undermine democratic governments through the establishment of treaties that people never voted for and organizat…
Hand-waving charts are how the subject is taught to indifferent undergraduates. And the charts aren’t hand waving, though they may seem like it when the undergraduates don’t understand. (Source: “hand-waving” chart using economics professor, though I do my best to help them understand.)
Research as practiced in university departments does not rely on “hand waving charts.” You’ve probably never been to a research seminar in economics. It is all about how parameters in a model are identified.
Whether “the math is opaque” I cannot say. Is it more opaque than computer science? Or math in math departments?
If you can find a simple, not opaque way to do the same, the world’s macroeconomists will beat a path to your door to learn from you. They’ll even nominate you for their fake Nobel. You can refuse it if your conscience (or the sprit of Alfred Nobel!) demands it, but like all Nobel prizes it comes with a cash reward.
Also... no one in the field cares that it’s the “bank of Sweden memorial prize in honor of Alfred Nobel”. Make it just the “bank of Sweden economics prize” and we’ll still be excited about it. We could care less that it has Nobel’s name on it.
The paper you cite is published in... an economics journal! And it is not the only one on the topic. We are aware that the standards for empirical work may need to be higher. Indeed, this is the second time in thirty years we have come to that conclusion. This problem is not unique to economics.
Re: Four Basic Truths of Macroeconomics
#224The third great truth in this list is "an increase in the money supply leads to inflation, except when it doesn't" which is hard to argue with. Clearly a field where Nobel prizes should be awarded.
The fourth great truth barely counts as a statement, really. You can't make the first great truth that demand drops cause economic shocks through layoffs, argue that's not obvious, then make the fourth great truth that things other than demand drops can cause economic shocks.
Re: Four Basic Truths of Macroeconomics
#225The only truth: central banking facilitates theft of savings through debasement of the currency. This is the reason the founding fathers fought to keep central banking out of the US.
If I give you a fresh $100 bill and you put it in a drawer (ie save it), how does that affect inflation? What mainstream economics can't handle is financial saving. Quite literally it is abstracted away from their models, yet it exists in the real world. And that's why they keep getting things wrong. It's the savings, stupid.
An extremely bizarre claim. Literally the first macroeconomic models you learn in grad school have savings. This is always an option to consumers so it’s always going to be in the model.
Moreover, actual macro models (even extremely simple ones) will permit you to save in cash or in some financial instrument (eg bonds).
Your claim is not well informed.
Re: Four Basic Truths of Macroeconomics
#226Earlier quoted context omitted.
It is tricky, but they try to apply what are called "hedonic adjustments." [1] If a new iPhone comes out that is way better than last year's iPhone, but it is the same price, then that's deflation! You got more stuff for the same price. Or even if your new plasma TV is more expensive than the old CRT, how do you compare them to decide whether the price level has increased or decreased while attempting to hold "qualit…
Progress is different from deflation. Hedonic adjustments is a trick to steal the benefits of progress from workers.
This claim is crazy. Sorry. No one in the BLS or BEA is trying to “steal benefits”. They are trying to understand the very hard problem of valuing consumer goods for which prices are generally falling and quality is generally increasing.
Re: Four Basic Truths of Macroeconomics
#227"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…
Re: Four Basic Truths of Macroeconomics
#228Earlier quoted context omitted.
It appears to me that Cowen has set out (his own right-wing understanding of) assumptions underlying macroeconomics, in line with the editorial position of Bloomberg. The assumptions are set in stone before you can begin to do macroeconomics, given to you when you take Macro 101, to lay the foundation of your future work, rather than examined and challenged. I don't think this is exactly malicious, but it bothers me…
> don't think this is exactly malicious, but it bothers me that the field largely operates on unchallenged assumptions What do you know about the research done by contemporary macroeconomists? Anything? Do you know how it is taught in graduate programs? If you did, you would know that all macroeconomists have opinions about where their assumptions (basic and otherwise) limit their models and spend their careers tryin…
Re: Four Basic Truths of Macroeconomics
#229Earlier quoted context omitted.
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.
Yet it still gets grouped in as "heterodox."
They don’t have heterodox people (eg marxists, Austrians, or MMT). Nor should they. CS departments won’t hire people who (for example) believe computers work via magic. Dollars and tenure lines are scarce and can’t be wasted on BS. There is a lot more diversity of thought in economics departments than commenters here know, but there are limits, as there are in every field.
Re: Four Basic Truths of Macroeconomics
#230Earlier quoted context omitted.
> Well, they also fought for slavery, they weren't perfect people. They did not, under any reasonable interpretation of US history, “fight for slavery”.
Well they sure didn't fight against it. We the people didn't exactly include "we the black people" or "we the womenfolk." Slaveholders outnumbers non-slaveholders 2:1 and men outnumbered women 1:0. [1] Some of the founding fathers were slaveholders and pro-slavery. Not all. My point remains that they were fallible humans, and it's really strange to hear folks appeal to these proto-deities 300 years later on matters o…
It was fairly well documented that the Founding Fathers were pretty much all opposed to slavery, but saw it as a huge political shit sandwich that would jeopardize Federalization. The United States is one of the only unions on the planet in which every single member state (without exception) voluntarily ratified and agreed to join. Had the Founding Fathers pushed for abolition, the South would never have joined the Union, and slavery may not have been abolished in the 1860s.
> Slaveholders outnumbers non-slaveholders 2:1 and men outnumbered women 1:0.
Yes, because the population of the South outnumbered that of the North. This is why the Founding Fathers installed various checks and balances to ensure that a pro-slavery political majority doesn’t outnumber the pro-abolition minority at the Federal level. The Three-Fifths Compromise was put in place to dilute the South’s influence in the Federal government; whereas the Southern slave states wanted to count slaves for apportionment despite slaves obviously being unable to vote. In fact, it was essentially an incentive to abolish slavery, since the way that it was worded, it only applied to “non-free Persons”; if the South wanted more power over the Federal legislature, all they had to do was abolish slavery. The Senate, as an institution, was put in place as a check on the more populous South, which advocated for a unicameral legislature apportioned strictly by population (the Virginia Plan).
Finally, a really good way to understand how the Founders felt about slavery is to look at how those that literally advocated for starting a new nation based fundamentally on the institution of slavery (the Confederates) felt about the Founding Fathers. The Cornerstone Speech was an address given by the Vice President of the CSA just before the Civil War began, and includes commentary around how they felt about the “old Constitution” and its framers: https://en.wikipedia.org/wiki/Cornerstone_Speech#Cornerstone
The relevant bit:
“The new constitution has put at rest, forever, all the agitating questions relating to our peculiar institution, African slavery as it exists amongst us – the proper status of the negro in our form of civilization. This was the immediate cause of the late rupture and present revolution. Jefferson in his forecast, had anticipated this, as the “rock upon which the old Union would split.” He was right. What was conjecture with him, is now a realized fact. But whether he fully comprehended the great truth upon which that rock stood and stands, may be doubted. The prevailing ideas entertained by him and most of the leading statesmen at the time of the formation of the old constitution, were that the enslavement of the African was in violation of the laws of nature; that it was wrong in principle, socially, morally, and politically. It was an evil they knew not well how to deal with, but the general opinion of the men of that day was that, somehow or other in the order of Providence, the institution would be evanescent and pass away. This idea, though not incorporated in the constitution, was the prevailing idea at that time. The constitution, it is true, secured every essential guarantee to the institution while it should last, and hence no argument can be justly urged against the constitutional guarantees thus secured, because of the common sentiment of the day. Those ideas, however, were fundamentally wrong. They rested upon the assumption of the equality of races. This was an error. It was a sandy foundation, and the government built upon it fell when the “storm came and the wind blew.””
So the idea that the Founders “fought for slavery” or in any way were responsible for its existence is just ahistorical revisionism, up there with Confederates arguing that the Civil War was about “states rights” and not about “slavery”.
> My point remains that they were fallible humans, and it's really strange to hear folks appeal to these proto-deities 300 years later on matters of modern economics.
> Nobody in England asks "What would William Pitt the Elder do?" [2] - I'm not sure, but I suspect it wouldn't be compatible with modern life.
At the time the US Constitution was written, the concept of a creedal nation obtaining its legitimacy from a governing document, in it providing checks & balances to limit the power of government, along with a bill of rights that guarantee broad protection of rights pertaining to speech, bearing arms, impartial trial, privacy (searches and seizures) — was truly unique to the US. That it is now commonplace in the West is a testament to one of America's many lasting contributions to the world. The Founding Fathers set that trend, and that’s why we talk about their philosophies; the very concept of a liberal republic under the rule of law flows from the principles and ideals that they documented. All of those ideas are agnostic to sex or race; their articulated arguments in favor of individual liberty and the freedom of speech (for example) don't lose any merit when you make them in the context of men, women, Black people, or brown people. The Founding Fathers of the US also essentially wrote the equivalent of an entire RFC alongside the actual document — the Federalist Papers — which were a profound exposition on political science and philosophy. This was a historical aberration, and you can’t say any of this about William Pitt the Elder.
Also, for the sake of argument, even if one were to accept that the Founders “fought for slavery” (they absolutely did not, but let’s just say), bringing that up in a conversation about monetary policy doesn’t make any sense. It’s like disregarding any argument about racial justice made by Martin Luther King Jr because he allegedly abused women (https://theconversation.com/im-an-mlk-scholar-and-ill-never-...).