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Four Basic Truths of Macroeconomics

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Re: Four Basic Truths of Macroeconomics

#231

Post by mellavora »

another-dave wrote: post #193
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…

Or how much time it would take to find them under the barrage of adds and non-relevant links.

Or how much of the world's knowledge is actually relevant to what you want to access at a given moment.

Re: Four Basic Truths of Macroeconomics

#232

Post by gmtx725 »

huitzitziltzin wrote: post #229
pessimizer wrote: post #221

Earlier quoted context omitted.

Yet it still gets grouped in as "heterodox."

No. Behavioral economics is absolutely not considered heterodox. Mainstream departments (Chicago, mit) all have behavioral people. 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 dep…

my main problem with economics is it makes a philosophical error in that it assumes people and economic agents are inert objects to be studied as you would chemicals or atoms, without the capacity to react and respond to economic "laws" thereby changing them. Reflexivity is a thing.

Re: Four Basic Truths of Macroeconomics

#233

Post by onion2k »

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…

No one, at any cost, could've had such a thing even 30 years ago.

30 years ago was 1991. That was one year before the IBM Simon was announced - https://en.wikipedia.org/wiki/Smartphone#Forerunner People definitely imagined smartphones back then. When it went on sale a couple of years later it cost a little over $1000, or less with a cellular phone contract.

You couldn't get the internet on it though. Web access on mobile devices didn't arrive until about 1999 with things like iMode.

Re: Four Basic Truths of Macroeconomics

#234

Post by gmtx725 »

huitzitziltzin wrote: post #213
TheOtherHobbes wrote: post #191

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…

> Economists are in broad agreement because they're paid to be. This is well-documented historically. This is *complete* nonsense. No one pays me to think or say anything. No one pays anyone in my department anything to take a particular position. For a simple example of what nonsense your claim is: the economist’s definition of rationality is that preferences are (1.) complete and (2.) transitive. That’s it. (See an…

It's not that simplistic, it's not a conspiracy it's a self-selecting self-replicating system.

How do economics professors get hired? By impressing other economics professors. And by having the power to win funding for the department. Who are the people that tend to fit those criteria? Mostly, those who already agree with the existing establishment, and those who already have views amenable to the well-resourced bodies that distribute funding.

Re: Four Basic Truths of Macroeconomics

#235

Post by nojs »

huitzitziltzin wrote: post #223
9oliYQjP wrote: post #57

Earlier quoted context omitted.

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…

> I think everybody who practices the field is unconsciously aware of it too which is why they lean on hand-waving charts and opaque math that anybody in a harder science would instinctively call bullshit on. 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” ch…

Unrelated, but I’m curious why people say “could care less” - don’t you mean “couldn’t”?

Re: Four Basic Truths of Macroeconomics

#236

Post by neilwilson »

huitzitziltzin wrote: post #225
neilwilson wrote: post #116

Earlier quoted context omitted.

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.

> 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. 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 sav…

"Literally the first macroeconomic models you learn in grad school have savings. "

Go look it up in MankiW. You'll find those aren't financial savings.

Money plays no part in RBC models. It's a one-to-one match with stuff.

Re: Four Basic Truths of Macroeconomics

#237

Post by neilwilson »

huitzitziltzin wrote: post #217
neilwilson wrote: post #109

Earlier quoted context omitted.

If you want actual Macroeconomics rather than the myths from this article try https://www.amazon.com/Macroeconomics-William-Mitchell/dp/11...

This is not a good recommendation. Wray and the MMT school have a bizarre set of views which are wildly outside the mainstream of macroeconomic thinking. Moreover, when serious macroeconomists have tried to engage with MMT on its own terms (which they do!) the MMT people always get evasive and vague in response to the very simple question: “why didn’t your monetary ideas work for Venezuela/Zimbabwe/Weimar Germany?” T…

"“why didn’t your monetary ideas work for Venezuela/Zimbabwe/Weimar Germany?”"

What a bizarre response. They weren't even attempted there as the literature shows.

https://gimms.org.uk/2020/11/14/weimar-republic-hyperinflati...

Presumably you also believe heavier than air flight is theoretically impossible because bad pilots crash planes.

Re: Four Basic Truths of Macroeconomics

#238

Post by rrrrrrrrrrrryan »

huitzitziltzin wrote: post #229
pessimizer wrote: post #221

Earlier quoted context omitted.

Yet it still gets grouped in as "heterodox."

No. Behavioral economics is absolutely not considered heterodox. Mainstream departments (Chicago, mit) all have behavioral people. 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 dep…

Oh, come now - comparing Marxists to people who "believe computers work via magic" is a little harsh.

Econ departments don't have Marxists for the same reason philosophy departments don't have Buddhist scholars: it's just not where they belong. The Buddhists belong in religious studies, and the Marxists belong in the political science department.

Re: Four Basic Truths of Macroeconomics

#239

Post by huitzitziltzin »

gmtx725 wrote: post #234
huitzitziltzin wrote: post #213

Earlier quoted context omitted.

> Economists are in broad agreement because they're paid to be. This is well-documented historically. This is *complete* nonsense. No one pays me to think or say anything. No one pays anyone in my department anything to take a particular position. For a simple example of what nonsense your claim is: the economist’s definition of rationality is that preferences are (1.) complete and (2.) transitive. That’s it. (See an…

It's not that simplistic, it's not a conspiracy it's a self-selecting self-replicating system. How do economics professors get hired? By impressing other economics professors. And by having the power to win funding for the department. Who are the people that tend to fit those criteria? Mostly, those who already agree with the existing establishment, and those who already have views amenable to the well-resourced bodi…

> How do economics professors get hired? By impressing other economics professors.

This claim is true.

> Who are the people that tend to fit those criteria? Mostly, those who already agree with the existing establishment

This claim is false. If you can empirically support a result which shows that something most other economists believe is likely false and can do so convincingly, you can write your ticket to any department in the country. Some of the most successful graduate students every year do things like this (not all, because it's very hard to do). But the profession is 100% open to this kind of work.

> And by having the power to win funding for the department.

This demonstrates a misunderstanding of how economics departments are funded. Grant funding is a very small part of the departmental budget everywhere. We are not (to take an example where department funding does depend on grants) health policy departments.

Re: Four Basic Truths of Macroeconomics

#240

Post by huitzitziltzin »

gmtx725 wrote: post #232
huitzitziltzin wrote: post #229

Earlier quoted context omitted.

No. Behavioral economics is absolutely not considered heterodox. Mainstream departments (Chicago, mit) all have behavioral people. 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 dep…

my main problem with economics is it makes a philosophical error in that it assumes people and economic agents are inert objects to be studied as you would chemicals or atoms, without the capacity to react and respond to economic "laws" thereby changing them. Reflexivity is a thing.

> it makes a philosophical error in that it assumes people and economic agents are inert objects to be studied as you would chemicals or atoms, without the capacity to react and respond to economic "laws" thereby changing them.

This is literally the foundation of macroeconomics AFTER Keynes. This is (one of several) reasons why Keynesianism was rejected.

Every single macroeconomist in every mainstream department in the country (and everyone in a central bank anywhere) would agree with exactly what you said AND say that it is precisely that fact which makes macroeconomics really hard.

This is why, for example, even the bare-bones simplest macroeconomic model you learn in your first year graduate macro class must include some notion of the agents' expectations.

It would be an error if we didn't do that. But fortunately, it's been at least 50 years since we started thinking about exactly that problem.

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