How Effective Is Economic Theory? • Hacker News Board

Re: How Effective Is Economic Theory?

#61

Post by paganel » Tue, Jun 27, 2017, 6:18 PM UTC

nerfhammer wrote: post #53

paganel wrote: post #51

Earlier quoted context omitted.

Argentina has just issued a 100-year bond that was over-subscribed by a factor to 4-to-1 or so. That's a country that defaulted 5 times in the last century, if I'm not mistaken. Trillions of euro-denominated deposits stood at bellow 0% for more than a year. Real wages are continuously going down even though the unemployment figures are pretty damn good. These just off the top of my head writing on my phone.

> Argentina has just issued a 100-year bond that was over-subscribed by a factor to 4-to-1 or so. I'm not aware of an economic theory that says mispricing should be impossible, especially for a price set in advance. > Trillions of euro-denominated deposits stood at bellow 0% for more than a year. As far as I can tell this is referring to the an ECB policy for deposits of other banks to the ECB. This is not a market p…

To paraphrase Marx, in Argentina's case a large enough quantitative change becomes a qualitative one. If you really think that a 100-year "price mismatch" is just that, a glitch, then we are talking about very different things.

That ECB policy was indeed a price, don't know what they want to "discourage" or not, fact is that if you wanted to deposit money to the ECB you had to pay them for the privilege. AFAIK since capitalism set in properly (about 200 years ago) it has almost been the case that you were supposed to receive money as interest when depositing it somewhere (to a king's vault, to ECB, it didn't matter).

Am on mobile, too lazy to look for the real-wage charts. I had just seen one in the FT detailing its evolution for the UK since 2005 or so, with only 3 years out of those 11-12 seeing real wage increases. I used the same source for commenting on Argentina's debt, i.e. last Friday's Financial Times. I used to read zerohedge from time to time, but I don't like their layout, I've mostly stuck with the FT and the Economist for my economy and financial-related info (there was also an interesting economics-related blog under the economist.com domain).

Re: How Effective Is Economic Theory?

#62

Post by nostrebored » Wed, Jun 28, 2017, 4:30 AM UTC

marcosdumay wrote: post #60

nostrebored wrote: post #40

Earlier quoted context omitted.

Do you feel the same way about climate research?

Climate researchers abandon models all the time.

Necessarily, as none of their models work, which is a natural consequence of how complicated the system is, just like macroecon.

Re: How Effective Is Economic Theory?

#63

Post by lliamander » Thu, Jun 29, 2017, 6:37 PM UTC

bobdole1234 wrote: post #55

lliamander wrote: post #46

Earlier quoted context omitted.

> Isn't that just another economic theory? Yes, in the same way we could formulate a medical theory that says "we don't know enough about disease to know whether our treatments are effective, so we aren't going to create a standard diagnostic manual". Prior to the last couple centuries, that would probably have been an improvement. No, in the sense that, compared to most economic theories, you can't really use this t…

I think you're completely wrong there: You're saying that we should have left medical decisions in the hands of the local purveyors? I think most of the gains we've gotten from the advent of evidence based medicine is building the taxonomy of medicine so we could reason about it effectively. That only works in a larger sense, small groups toiling with different nomenclatures end up wasting effort. Much the same way e…

> You're saying that we should have left medical decisions in the hands of the local purveyors?

Not what I was trying to say; I apologize if I was unclear. Rather, my point was that during times past, in many cases it would have been better if doctors had not applied any treatment to patients. Not because doctors were fools, but simply there wasn't enough rigor around assessing the effectiveness of treatments.

So too do I advise this for the field of economics. Not to say that we shouldn't strive for rigor, but until we have it I recommend the "doctors" (i.e. economists) refrain from applying treatments to their "patients" (i.e. the nation via policy prescriptions).

> Soon we'll be in the era of evidence based economism, and we'll see a huge increase in the effectiveness of it's utilization.

An optimistic view that I do not share. I recommend the talk "Science, Knowledge, and Freedom" by Jim Manzi[0]. In short, observations in the "soft sciences" of psychology, sociology, and economics do not generalize across different times and cultures in the way that observations about physics, chemistry, and biology do.

[0]https://www.youtube.com/watch?v=N4c89SJIC-M