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Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

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Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#31

Post by ajg1977 »

lzw wrote: post #26
ajg1977 wrote: post #23

But no mention whatsoever how paying down federal debt instead of stimulus would supposedly have strengthened the economy. The argument for paying down our debt is usually to prevent inflation or keep future borrowing cheap, but despite the plunge in GDP neither of these are anywhere close to becoming an issue. Speaking of GDP - it's not the deficit that's responsible for the US's decreasing GDP/debt ratio, it's the…

You mentioned the evidence that it made things worse, by obama's own numbers, the unemployment rates are much higher than he claimed they would be if we DIDN'T pass the bill. The "stimulus" destroyed jobs, as all government spending does, and it made the economy worse. Further, it is deficit spending that is killing us, as we are incurring unprecedented deficits. Finally, borrowing is already becomming a problem with…

You mentioned the evidence that it made things worse, by obama's own numbers, the unemployment rates are much higher than he claimed they would be if we DIDN'T pass the bill.

How is that evidence it made things worse? It could be evidence that job losses were far more severe than anyone anticipated, but with the stimulus they were still lower than without.

Your following two statements are basically soundbites with no reasoning, or basis in economic theory.

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#32

Post by Experimentalist »

lzw wrote: post #24
drallison wrote: post #18

I think Nassim is standing on shaky ground here, although we do not have the full text of his remarks. I do not think our understanding of real world economics and the way that our economy actually works is adequate to state anything about the impact of one strategy versus another. Academic Economics certainly is not adequate to predict anything in the real world with any degree of reliability. Time series analysis o…

I would like to point out that the understanding of real world economics is developed enough to make very accurate predictions. For instance, I knew in late 2000 or early 2001 that there would be a housing boom, a housing bubble, and a banking crisis when it burst. I was a slacker so it wasn't until 2003-2004 that I started putting money behind this scenario and I profited on the way up and on the way down. (I was wa…

Taleb's criticism of methodology in economics echoes Austrian criticism of economic engineering and the various mainstream economic models.

For example, in the Black Swan, Taleb mentions Hayek, the Nobel Prize winning Austrian school economist.

When asked about a Feyerband comparison (by reporter Felix Salmon, Taleb emailed "to say he considers himself closer to Hayek than to Feyerabend"

http://blogs.reuters.com/felix-salmon/2009/07/21/taleb-and-f...

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#33

Post by Experimentalist »

lzw wrote: post #27
fauigerzigerk wrote: post #17

When a patient has heart failure, you try to stabalize him first. You don't immediately put him on the operating table to do stomach reduction surgery in order to combat the obesity that caused heart failure.

Bad analogy. Here's a better one: When a patient is dying of blood loss, you don't continue to put more leeches on and make charts showing how his cheeks will be rosy if only we add more leeches. The "stimulus" destroys jobs, it is a leech on the economy.

How about this:

When a blind fat man gets depressed, you console him first. You don't immediately put him in a go-kart with a fistful of antidepressants,a bottle of gin and a sword in order to combat the lack of euphoria that caused the depression.

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#34

Post by fauigerzigerk »

lzw wrote: post #27
fauigerzigerk wrote: post #17

When a patient has heart failure, you try to stabalize him first. You don't immediately put him on the operating table to do stomach reduction surgery in order to combat the obesity that caused heart failure.

Bad analogy. Here's a better one: When a patient is dying of blood loss, you don't continue to put more leeches on and make charts showing how his cheeks will be rosy if only we add more leeches. The "stimulus" destroys jobs, it is a leech on the economy.

No, your analogy is bad because it ignores timing and that's what it's all about. Shifting debt around to buy time can make sense. It's what we do when we refinance expensive credit card debt replacing it with a cheaper bank loan.

The government can borrow at 2.5% for 10 years. It can buy time that indivuals or banks cannot buy. If that time is used to let the economy recover a little and then make structural reforms to reduce debt, the idea can work.

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#36

Post by lzw »

ajg1977 wrote: post #31
lzw wrote: post #26

Earlier quoted context omitted.

You mentioned the evidence that it made things worse, by obama's own numbers, the unemployment rates are much higher than he claimed they would be if we DIDN'T pass the bill. The "stimulus" destroyed jobs, as all government spending does, and it made the economy worse. Further, it is deficit spending that is killing us, as we are incurring unprecedented deficits. Finally, borrowing is already becomming a problem with…

You mentioned the evidence that it made things worse, by obama's own numbers, the unemployment rates are much higher than he claimed they would be if we DIDN'T pass the bill. How is that evidence it made things worse? It could be evidence that job losses were far more severe than anyone anticipated, but with the stimulus they were still lower than without. Your following two statements are basically soundbites with n…

Right, just imagine how much blood loss the patient would have experienced if we hadn't used the leeches! His is the kind of nonsense you guys trot out to defend every program... No matter how much damage to the economy, you just claim that things would have been worse otherwise. You never support these claims, of course, but you then go on to claim that those who point out the damage are not supporting their claims, even when they do, and you just, out of the blue make nonsese assertions like "have no basis in economic theory".... Without, of course, defending that asertion. I find this mode of argument particularly anti-intellectual.

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#37

Post by lzw »

waterlesscloud wrote: post #30
lzw wrote: post #24

Earlier quoted context omitted.

I would like to point out that the understanding of real world economics is developed enough to make very accurate predictions. For instance, I knew in late 2000 or early 2001 that there would be a housing boom, a housing bubble, and a banking crisis when it burst. I was a slacker so it wasn't until 2003-2004 that I started putting money behind this scenario and I profited on the way up and on the way down. (I was wa…

I voted you up, even though I don't know that I agree with your coming predictions. But I've been thinking about a similar topic tonight, as I read columnists and reporters talking about how complex financial instruments are these days and how no one really understands them. Because the basics of them aren't all that complicated. CDOs, CDSs. ETFs, whatever. None of them are particularly complex concepts. Anyone with…

Currencies are a really interesting thing. After I started to get into commodities and read up on the history of central banks-- the creature from jekyll island is a good book on the subject-- I found I started tobsee money fundamentally differently..... I see the paper in my wallet like i see the huge bundles of worthless notes from Zimbabwe.... Worthless. I know intellectually that I can exchange it, but knowing it's eventual and intrinsicev value changed my relationship with it.

And in doing so, I realized just how strongly I'd been conditioned, emotionally, and thru rationalizations, to see this paper as money.

Not sure if that resonates. One thing I'd like to also put yor ear is the idea of moral hazard. Even when everyone was in denial about the bubble, and trying to not be the greater fool, they had in the back of their heads the moral hazard.... Knwoing if it was really bad, they'd get bailed out by the government. Im not talking about banks, but about real estate agents and home buyers, etc...and they were right!

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#38

Post by Teckla »

lzw wrote: post #36
ajg1977 wrote: post #31

Earlier quoted context omitted.

You mentioned the evidence that it made things worse, by obama's own numbers, the unemployment rates are much higher than he claimed they would be if we DIDN'T pass the bill. How is that evidence it made things worse? It could be evidence that job losses were far more severe than anyone anticipated, but with the stimulus they were still lower than without. Your following two statements are basically soundbites with n…

Right, just imagine how much blood loss the patient would have experienced if we hadn't used the leeches! His is the kind of nonsense you guys trot out to defend every program... No matter how much damage to the economy, you just claim that things would have been worse otherwise. You never support these claims, of course, but you then go on to claim that those who point out the damage are not supporting their claims,…

Congratulations on knocking down that straw man.

ajg1977 didn't say the economy would have been worse without the stimulus. He said that what you presented as evidence was not, in fact, evidence, because it could be interpreted a different way.

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#39

Post by _delirium »

lzw wrote: post #24
drallison wrote: post #18

I think Nassim is standing on shaky ground here, although we do not have the full text of his remarks. I do not think our understanding of real world economics and the way that our economy actually works is adequate to state anything about the impact of one strategy versus another. Academic Economics certainly is not adequate to predict anything in the real world with any degree of reliability. Time series analysis o…

I would like to point out that the understanding of real world economics is developed enough to make very accurate predictions. For instance, I knew in late 2000 or early 2001 that there would be a housing boom, a housing bubble, and a banking crisis when it burst. I was a slacker so it wasn't until 2003-2004 that I started putting money behind this scenario and I profited on the way up and on the way down. (I was wa…

> FWIW, the Austrian Schools predictions go back many years, including accurately predicting the great depression, the fall of communism-- not just that it would fall, but how exactly it would fall and why-- 70 years in advance, etc.

Are there any validated studies of this, rather than just anecdotal evidence? I'd be interested in a detailed retrospective study on predictive accuracy of economists, but I haven't found one. Are their predictions precise enough to be tested, rather than Nostradamus-like? Have they made any big whopping mispredictions that you're omitting from your list, and how frequent are those compared to the correct predictions?

Re: Black Swan' Author Taleb: Stimulus Made Economic Crisis Worse

#40

Post by _delirium »

lzw wrote: post #28
cturner wrote: post #25

Earlier quoted context omitted.

You're asking after 'experimental validation' but vague on detail. It's a difficult topic. Economics is not a sandbox. For macroeconomic topics, you can't create a cluster of equal samples and then test them. And where you have tools to predict what will happen, you may be changing the future due to the feedback loop. If somebody writes a paper demonstrating that a market will go up over a certain period, they may in…

Fortunately, free market economists, such as the Austrian School and the Chicago School are so marginalized by the dominant neo-Keynsians that you can't make the claim that they have had enough influence to make their predictions into self fulfilling prophecies! Wait, no, that's unfortunate, actually. Considering all the lives that have been destroyed as result.

It would take a pretty strange view of academic economics to believe that the Chicago school has been generally "marginalized", while the neo-Keynesian school has been "dominant". At least in U.S. economics departments of the past few decades, they've traded dominance on and off, and I'm not sure either has enjoyed a measurably greater period of dominance. Chicago-school economics was dominant in the 1980s and 1990s, and especially in the late 1980s neo-Keynesianism was almost completely marginalized in academia. It's now made a comeback post-financial-crisis, and currently has the upper hand, but Chicago-school economists haven't exactly disappeared, and are still prominent at many of the top schools.
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