Four Basic Truths of Macroeconomics • Hacker News Board

Re: Four Basic Truths of Macroeconomics

#241

Post by huitzitziltzin » Tue, Feb 23, 2021, 2:24 PM UTC

neilwilson wrote: post #237

huitzitziltzin wrote: post #217

Earlier quoted context omitted.

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.

The MMT claim, as far as any normal economist understands it, is that the government can print money indefinitely to pay for whatever it wants, because of a somewhat counterintuitive claim about the government being able to insist that people pay taxes in the currency it designates.

As I said, it's really hard to get MMT people to sit down and describe exactly what they are claiming, b/c they have to face up to these counterexamples. Like: "why couldn't Venezuela print money indefinitely to pay for what it wants?"

To which the MMT response is some version of: "Well, I didn't mean that!"

Well ok - WHAT did you mean? They are always slippery and evasive (at best) about what they do mean. They do not engage with conventional macroeconomists for the most part. And that's not because conventional macroeconomists don't try to engage with them! If it were possible to do what they propose, that would be amazing! You would have wide agreement on that within the profession.

I share many of their political goals - I'm on the left too. But I don't see how it is remotely possible to achieve the goals they propose in the manner they suggest.

Re: Four Basic Truths of Macroeconomics

#242

Post by huitzitziltzin » Tue, Feb 23, 2021, 2:26 PM UTC

nojs wrote: post #235

huitzitziltzin wrote: post #223

Earlier quoted context omitted.

> 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”?

Fair point.

Maybe I shouldn't speak for all of us: probably some actually could care less than they do, while maybe others couldn't care less.

I am in the "couldn't care less" camp. Call the prize whatever you want.

Re: Four Basic Truths of Macroeconomics

#243

Post by sumtechguy » Tue, Feb 23, 2021, 2:41 PM UTC

huitzitziltzin wrote: post #219

kqr wrote: post #123

Earlier quoted context omitted.

I personally think a lot of established macroeconomics is bullshit. There's just no mechanism to verify many of the hypotheses, and practitioners rarely suffer from the kind of personal survival pressure that otherwise tends to filter out for people who are right. Not to mention that the entire economy is such a complex system, and my experience with complex systems is that we can't predict them, we like to come up w…

> I personally think a lot of established macroeconomics is bullshit. There's just no mechanism to verify many of the hypotheses Modern academic (and central bank) macroeconomics is literally all about taking macroeconomic models to data. Period. Attend any macro seminar in the field at any university and that’s what you’ll see. In particular: it is directly about “verifying the mechanisms.” Your complaint is perhaps…

Most economic models are very nice in the steady state. If you get any sort of irrational actor or unaccounted variable in the model the model usually goes weird. The whole thing is at least s 20 dimensional graph just for the data. Never mind the hundreds of other things that feed it each of those systems some of which are impossible to model. It is a challenging problem but not really 'dialed in' and able to make decent predictions more than a few moments out. It is usually very good on explaining what happened but usually very ham fisted on predictions. Every once and awhile someone's model will 'get it right' at that point they go on book tours and predict the next disaster which may or may not happen. (source: degree in econ)

Re: Four Basic Truths of Macroeconomics

#244

Post by gmtx725 » Tue, Feb 23, 2021, 2:43 PM UTC

huitzitziltzin wrote: post #239

gmtx725 wrote: post #234

Earlier quoted context omitted.

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 depa…

> 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

It's almost impossible to do that though isn't it? Economics isn't a hard science, it's not like you can run RCTs or experiments. And all actually-existing economic systems are situated within an actually-existing political, social and historical context, meaning we only ever observe a tiny fraction of the possible universe of economic systems. There is no possibility to explore counterfactuals.

> This demonstrates a misunderstanding of how economics departments are funded. Grant funding is a very small part of the departmental budget everywhere

I never mentioned grants, departments still have to be funded somehow, whatever that process is, it will introduce selection biases.

Re: Four Basic Truths of Macroeconomics

#245

Post by cwillu » Tue, Feb 23, 2021, 2:46 PM UTC

p1necone wrote: post #154

Arn_Thor wrote: post #150

Earlier quoted context omitted.

Yes and no.. The smartphone is extremely relevant because access to the internet is essential for modern life. So much necessary activity takes place online, from banking to accessing public services. That needs to be factored in, perhaps not as the cost of a smartphone, but rather the cost of a laptop plus internet. And yet, it doesn't matter if you have a smartphone and internet access if there are no jobs, or if t…

To add to that internet connected device is required, but latest iPhone that costs 15x as much is not really materially more important than a $50 one for looking at job ads/emailing potential landlords. Likewise, a flagship phone 5 years ago might be technically less advanced than a flagship phone today, but that doesn't mean todays flagship phone is any better at looking at job ads today than the other one was 5 yea…

Except that the sites expand to fit the devices in use by those that make them, unless someone goes to deliberate and extensive efforts to prevent it.

Re: Four Basic Truths of Macroeconomics

#246

Post by anarchop » Tue, Feb 23, 2021, 2:56 PM UTC

dang wrote: post #146

anarchop wrote: post #17

The 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.

Please don't post any more shallow flamewar comments to Hacker News. You set off a massive one with this. Not cool, and not what this site is for. https://news.ycombinator.com/newsguidelines.html

Lol ok thanks for the blasphemy warning dude

Re: Four Basic Truths of Macroeconomics

#247

Post by notahacker » Tue, Feb 23, 2021, 3:15 PM UTC

RobertoG wrote: post #211

notahacker wrote: post #206

Earlier quoted context omitted.

It's hardly surprising that a short news piece summarising the conclusions of an entire field of study does not engage itself with challenging the frameworks used. Nominal wage stickiness, recessions etc has been the subject of an enormous amount of study (and wage stickiness is sufficient, but not actually necessary to cause recessions). And the exception to the rule that increasing the money supply is dealt with by…

What you says is true. It's a little unfair to criticize his description of economics for what he says in a short article, but I'm not criticizing so much what he says here but his point that there are four essential truths of Macro that justify the current framework. >"And the exception to the rule that increasing the money supply is dealt with by the very next sentence from the one you've singled out as a gotcha."…

> There is evidence that the mainstream view is wrong on this, but it's never recognized, not even discussed because it's one of the "truths of macroeconomics" (and because the rest of the building would start to wobble if recognized).

Repeating a falsehood does not make it any less false. QE policy was designed by mainstream economists who did not want to see massive inflation, and as they predicted they did not see massive inflation, for reasons [partly] explained in the second sentence on that topic you have for some reason overlooked. The concept that the relationship between money supply and inflation was contingent on another variable called "monetary velocity" dates back to 1911 and the extent to which monetary stimulus produce growth rather than inflation in recession is the fundamental debate of macroeconomics. QE and Zero Lower Bound debates were not new in 2008 either.

Your assertion that economists' reaction was to "speculate that the world has change while they were not looking" no discussion is a confession of your own ignorance of contemporary macro, nothing more. (There's nothing wrong with being ignorant of contemporary macro - more exciting hobbies than reading macro papers exist - but plenty wrong with dismissing an entire field of study by reading and understanding only the first sentence of a summary paragraph)

I go back to my CAP theorem example. It would be possible to conclude from a one-line summary of CAP theorem that computer scientists cling to theory as an excuse for not working on better sharding technologies or anticipating the possibility of building databases at social media scale. But it would also be laughably wrong.

Re: Four Basic Truths of Macroeconomics

#248

Post by specialist » Tue, Feb 23, 2021, 3:22 PM UTC

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…

> Mont Pelerin Society

Last week, I thought divining an Erdős Number for economics would be amusing.

My casual effort hasn't identified a sole patient zero, prime mover, economic Eve (or Adam). The MPS roster has multiple candidates.

Any suggestions?

https://en.wikipedia.org/wiki/Erdős_number https://en.wikipedia.org/wiki/Mont_Pelerin_Society

Re: Four Basic Truths of Macroeconomics

#249

Post by rhines » Tue, Feb 23, 2021, 3:35 PM UTC

DoreenMichele wrote: post #205

bondarchuk wrote: post #204

Earlier quoted context omitted.

Nobody's saying that you shouldn't spend money on a phone and save it for housing. Rather the opposite. People are saying that literally everything except housing (and healthcare) is so cheap compared to housing (and healthcare) that inflation measures (which typically exclude housing and healthcare) are pretty much useless.

This is the line I was responding to: but if you can't afford to have a roof over your head I'd argue the smartphone is irrelevant. A phone and tablet and internet access were essential to my ability to cope and eventually get back into housing. They aren't irrelevant. If you want to argue we need to do a much better job of making housing something people can afford, I totally agree. If you want to argue that homeles…

I think what they mean is that if you can't afford shelter, it's little comfort to be able to afford a phone. Yes, the phone may be a tool that can help you find shelter, and it may help with coping with your situation and finding other opportunities, but in the end you're still trying to get shelter. If you could afford a home initially, you wouldn't need the phone to help you get one.

So no one here is arguing that homeless people shouldn't have phones or internet or anything like that, rather they're arguing that we'd have better housing opportunities if shelter was what had become so cheap, rather than phones. So measuring inflation based on the prices of non-critical goods is fine if you already own a house, but it fails to reflect reality for people who are struggling to make rent.

Re: Four Basic Truths of Macroeconomics

#250

Post by specialist » Tue, Feb 23, 2021, 3:36 PM UTC

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…

I think this dismissal is unfair.

As someone who is the furthest from being an economist...

The conceptual difference between Keynesian and MMT comes down to:

- How much relative emphasis is placed on federal deficits vs interest rates wrt inflation. Keynesians don't decouple deficits and interest rates.

- Emphasis on monetarian vs fiscal management. MMTs focus on fiscal. Keynesians straddle the two. (Chicago/Austrian schoolers focus on monetarian.)

Said another way, the MMTs are simply pointing out that with 2008 and the aftermath, Keynesian models and predictions were not correct wrt to QE and inflation, and so are floating alternative theories, primarily explicitly adding interest rates to the models.